French worries about corporate tax rate anarchy in Europe have resurfaced, just in time for the informal meeting of EU Economic and Finance Ministers scheduled for this weekend.

In a new variation on a familiar theme, the French Finance Minister this week proposed penalising new Member States if they entice businesses to relocate there by setting low tax rates. He called for the EU to cut their regional aid.

He regards low tax rates as a sign of wealth. And he says countries with low rates should not expect to benefit from EU structural funds - which have to be diverted towards them from poorer regions in "old" Europe.

Sensitivities over competition in corporate tax have a long history. Member states with high rates fear losing business activity to member states with lower rates. But now the arguments for imposing order on anarchy are becoming increasingly ingenious - as the Sarkozy suggestion demonstrates.

With uncharacteristic bluntness, the European Commission quickly dismissed this latest ploy as "muddled thinking". The Commission continues to view competition on corporate tax rates as healthy rather than harmful, and rejects the link between wealth and tax-rate levels. It is prepared to entertain only the concept of harmonisation of the base on which corporate tax...

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