Harmful tax measures in the EU are dealt with under the rules of the Code of Conduct for Business Taxation (Code). The Code covers business taxation measures which affect the location of business activity in the EU. The national measure referred to appears to concern taxation of individuals which is prima facie not covered by the scope of the Code.

However, a possible inclusion of such measures in the scope of the Code has been discussed in a Council Working Party in line with the Economic and Financial Affairs Council conclusions of 7 December 2010 (Document 17380/10 FISC 149). The working party took the view that personal income taxation, as a general rule, falls outside the scope of the Code but that certain aspects of such taxation may be taken into account if their interaction with other tax measures creates harmful results for business taxation.

The national regime referred to in the question does not appear to produce such results and it would therefore not be within the scope of the Code.

The Commission has proposed reforms of the Code in order to modernise it and make it more effective with some useful results so far. However, so far there has been no consensus on widening the scope of the Code beyond the area of business taxation.

Taking into account the substantial progress achieved in the last few years on the basis of Commission initiatives in terms of exchange of tax information, there is no apparent risk of tax avoidance due to the measure concerned. Furthermore, taking into account that Member States are free to decide national tax rates, there is no deviation from the principle of sincere cooperation.