Now Britain Faces Single European Tax System

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Plans to create a single European system for tax and social security are being privately prepared in Brussels by a powerful alliance of countries, including France and Germany. They envisage control over income tax being pooled by national governments inside the single currency area.

The plans, contained in papers seen by The Independent, but which are unlikely to have been submitted yet to the British government, are part of the strategy for a new "flexible" Europe. In practice, they are likely to kill off any remaining chance of Britain joining the single currency in the foreseeable future. The plans will be widely viewed in Britain as an attempt by France and Germany to alter radically the fundamental character of the union and the Euro-sceptics will now have new cause to argue that Britain's entire relationship with the European Union should be renegotiated.

Opponents of the single currency have always suggested that it would eventually mean a single European economic policy, covering tax and social security. The new proposals reveal that Paris and now Bonn agree and are seriously contemplating forging ahead with what will be, in effect, a single hard-core economy. This thinking is so far ahead of what Westminster has contemplated that it makes British membership of monetary union (EMU), under a Conservative or a Labour government, very unlikely. Last night a Downing Street spokesman said he was unaware of any such decisions. "Any treaty changes relating to tax policy would require unanimity," he stressed. By contrast, France and Germany are spearheading the drive to ensure that powers to build a common economic policy are written into a "flexibility" chapter in the next treaty on EU reform, due in June. An official EU report, summarising how member states view a multi-speed Europe, specifically mentions economic and monetary union as a key area, where some states will want to move faster than others. …