Mr Oskar Lafontaine, Germany's Finance Minister, has insisted Europe's social democrat-led governments had a responsibility to "co-ordinate" taxation to the benefit of ordinary workers, rather than capital or business. The trend towards lower taxes in areas like company profits must be reversed, he said, in comments yesterday which will not find favour with the Minister for Finance, Mr McCreevy, who meets Mr Lafontaine in Bonn today.
In a bid to take the sting out of his row with the UK over tax policy, Mr Lafontaine said that "at the request of our English friends", he would talk in future about tax "co-ordination". But he insisted taxation had to remain a European theme.
Mr McCreevy is addressing a business lunch in Frankfurt today and will then travel to Bonn for his first bilateral discussion with Mr Lafontaine, ahead of the weekend EU summit in Vienna. Ireland, like Britain, is strongly opposed to any moves to align corporate taxation across Europe.
Mr Gerhard Schroder, the German Chancellor, has thrown his support behind Mr Lafontaine, declaring that tax co-ordination in the European Union was the logical consequence of a single European currency.
Last week, Britain threatened to use the national veto to block EU moves towards harmonised rates.
The Government here, meanwhile, insists that Ireland has reached a final agreement with the European Commission to move our corporate tax rate to 12.5 per cent by 2003. However this agreement, together with the incentives offered to companies to set up in the IFSC, continues to attract criticism from elsewhere in the EU.
Speaking at his Social Democratic party's Europe conference in Saarbrucken, Mr Lafontaine, went further than before in casting European tax "co-ordination" as an ideological goal of the new German government.
Europe had already seen a "co-ordination" of taxes in recent years but "in the completely wrong direction", he said.
Taxes paid by immobile workers on consumption and wages as well as social security contributions were "always co-ordinated in an upwards direction". But taxes on "mobile factors" in the economy, such as assets, capital and company profits "always go down". "Correcting this totally mistaken trend is a task, not just for the German government," Mr Lafontaine said.
"It is a task for every party in Europe which describes itself as social democratic."
Europe's left-of-centre governments had a mandate to guard workers' interests, he argued. Mr Lafontaine added: "We have to start attempts at the European level at correlating and co-ordinating monetary, wages and fiscal policies so that overall demand is increased and more jobs are created again."
