The man nominated to become European Union Taxation Commissioner said today he does not plan to propose legislation to harmonise corporate tax rates in the 25-nation bloc.
"For the time being I don't see any community action on corporate tax rates. This should be let to the decision of each member state," Mr Laszlo Kovacs told a confirmation hearing in the European Parliament.
Mr Kovacs, a former Hungarian foreign minister, failed to win approval at a previous hearing as energy commissioner, prompting Commission President Jose Barroso to move him to a different portfolio when he dropped Italy's controversial nominee Mr Rocco Buttiglione and Latvia's Mr Ingrida Udre.
Mr Kovacs defended differential corporate tax rates between eastern and western Europe, saying there was little empirical evidence of a "race to the bottom", and corporate relocation to the east was not principally driven by tax rates.
Other factors such as training, the legal framework and labour availability and costs were more important, he said.
"I believe that tax competition is not bad by definition. I support a degree of tax competition among member states," Mr Kovacs said, setting out the EU executive's orthodox line.
However, the EU should take steps to eliminate harmful tax competition, fraud and tax evasion, he said.
Mr Kovacs, a former Communist party politburo member before 1989, opened his confirmation hearing with a political statement to respond to attacks by conservatives who have accused him of being a former militia chief with links to the secret police.
"In my background, there is nothing to hide and nothing to be ashamed of," he declared.
"Before the transition in Hungary and indeed in Eastern Europe, yes, I was a member of the single party in Hungary. . . . But I was not a member of the Workers' Militia. I had no relations with any of the secret services."