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Monday, November 23, 1998 Published at 04:27 GMT

Business: The Economy

Brown threatens veto over tax

The Chancellor, Gordon Brown, says he will veto any attempts by the European Union to force Britain to change its taxes.

BBC's Jonathan Charles: "Clamour for change is growing louder"
Mr Brown was speaking in Brussels after a meeting of EU finance ministers representing left of centre governments in Europe.

They endorsed a manifesto calling for more tax co-ordination.

Mr Brown said taxes are a domestic issue which must remain under the control of national governments.

European single currency
His warning came after a new pact was signed in Brussels on economic policy in the single currency era.

The document, The European Way, includes a commitment to closer economic cooperation with jobs and growth given priority alongside fighting inflation.

It also provides the left leaning governments in Europe an opening to press for harmonisation of taxation across the 15 member states.

Unification wrangle

The debate on how far economic policies should be allowed to merge is likely to be renewed.

Gordon Brown says decisions on taxes will be made by a British chancellor
Mr Brown and Mr Blair are both determined that nothing must threaten low inflation and prudent budgeting.

Others, including German finance minister Oskar Lafontaine, see an opportunity to steer jobs and growth policy using the European Central Bank and to press for a centralised tax regime as the logical next step after the launch of the euro next year.

Mr Brown, in Brussels for the meeting of all 15 EU finance ministers, said: "We have a veto and we will use it of necessary."

His message was directed at Mr Lafontaine who is leading the left push for the central bank to be a tool of EU economic policy.

Mr Lafontaine's enthusiasm for European tax harmony is at odds with his own leader Gerhardt Schroeder, but is supported by the French finance minister Dominique Strauss-Kahn.

First moves

The first pressure for European control of direct taxation came last summer, when Austria wanted talks on setting an EU-wide tax on all savings and investments held in any of the member states.

Mr Brown made it clear he would not agree to anything which would harm the standing of the City of London.

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