The harmonization problem

The Finance Ministers from Norway, Sweden, Finland, Denmark, Iceland, Estonia, Latvia, Lithuania, Poland and Germany have held annual meetings each year since 1996 to discuss economic and financial reforms in the region. Germany has generally advocated faster-paced coordination of tax polices within the 15-member European Union—an organization to which most participants of the Tallinn meeting belong or are striving to join. But Latvia, Estonia and Lithuania sounded a note of caution about any mandated tax changes. Estonia, in particular, has closely cherished its simplified flat tax system and has lower excise taxes than most EU nations. Estonian Finance Minister Siim Kallas said harmonization should not lead to more complicated tax structures or higher taxes. direct taxes, the rule of thumb is that the stabilization of tax rates will occur at the highest levels," he told his fellow ministers in a speech Friday. But Germany's representative, State Secretary Cajo Koch-Weser, said EU tax reform seemed to be lagging and better coordination among countries was crucial. Many of the discussions were behind closed doors. A final communiquй said talks also touched on how to clamp down on tax evasion and on how some countries were using tax policy to favor domestic industries.