French finance minister Nicolas Sarkozy is set to propose to his EU colleagues next Friday that the bloc's new members with lower than average tax rates be barred from receiving structural aid funds.
In an interview on France's national television, TF1, Mr Sarkozy said that "one can't allow in Europe some countries to say 'we're sufficiently rich to lower our taxes' but at the same time ask the countries of 'Old Europe' to pay structural funds that we could use for our regions".
Mr Sarkozy did not refer to any new member state in particular.
EU finance ministers are set to meet this Friday for an informal meeting in The Netherlands. The new EU budget for 2007-2013 and the reform of the Stability Pact will be on the agenda. Malta is being represented by Tonio Fenech, Parliamentary Secretary in the Ministry of Finance.
According to statistics published by Eurostat in July, Malta has one of the lowest tax burden ratios in the EU.
The average overall tax burden for the EU 25 in 2002 was estimated at a 40.4 per cent tax-to-GDP ratio. The tax-to-GDP ratio measures the overall tax burden as the total amount of taxes and social security contributions as a percentage of GDP.
Eurostat found substantial differences between member states. Sweden records the highest tax-to-GDP ratio (50.6 per cent in 2002), followed by Denmark (48.9 per cent), Belgium (46.6 per cent) and Finland (45.9 per cent).
The lowest ratios were observed in Ireland (28.6 per cent), and new entrants Lithuania (28.8 per cent), Malta and Latvia (31.3 per cent each) and Cyprus (32.5 per cent).
The French Finance Minister said he would be proposing to his counterparts that new member states whose tax rates were lower than the EU average would no longer be eligible to receive structural funds.
Although France and Germany strongly support a form of tax harmonisation across Europe, other member states oppose any form of tax alignment, with Britain at the forefront. Any tax reforms in the EU will have to be agreed under the unanimity rule.
Outgoing EU Budget Commissioner Michaele Schreyer said earlier this year that new members were not funding their tax advantages with EU funds, but warned them that they would have to abide by the bloc's rules and raise matching funds for EU structural aid.
Tens of billions of euros are available to EU members every year for development projects designed to alleviate economic differences between the bloc's regions. For the next budget proposals it is estimated that most of the structural funds will go directly to new member states.