proposal that has serious business implications for Bermuda thriving financial services industry -- has broken into the fore between the UK and member states.

This week UK Prime Minister Tony Blair vowed Britain will "stand alone'' and use its veto to oppose any move to impose common tax rates across the board on EU members. By implication, the UK would then have to put pressure on Bermuda to comply with the EU's drive to wipe out what it calls harmful tax competition.

Lest Bermuda and other offshore territories take succour from an already murky situation developing overseas, UK Chancellor of the Exchequer Gordon Brown said Britain would support the EU in its drive to eliminate "unfair tax, tax havens and tax evasion'' according to a Bloomberg News report.

He went on to clarify that tax harmonisation -- the imposition of common tax rates and practices among EU members -- was different from the move against tax havens.

"You have to distinguish between tax harmonisation which increasingly people right across Europe reject, and action to deal with tax havens and evasion, harmful and discriminatory taxation,'' Mr. Brown said.

Along with other dependent territories Bermuda has already submitted details of its tax policies to the EU for the organisations Economic and Financial (EcoFin) Council, which ended a meeting on the subject last month.

The EU is mainly seeking to end cross-border tax differences between member countries and wipe out what is considered unfair competition for business between them. Luxembourg's favourable tax regime is one such example.

The EU will use the information to prepare a report next year on "harmful tax measures''. In the works is a proposal that the EU's offshore centres impose a minimum 20 percent tax on investors or provide information to other member states on interest income from savings.

Bermuda does not have any corporate tax or tax on investment income.

According to a report filed by the EcoFin Council on its Internet site the members accepted the first interim report of the group set up to determine a code of conduct on business taxation.

The report covers activities between member states, financial services and offshore companies. The meeting endorsed the next stages of the group's work which include "making an initial assessment of the measures in the further categories and of the reports from member states with dependent territories.'' During the meeting EU tax commissioner Mario Monti presented a progress report on the taxation of income from savings and a common system of taxation for interest and royalty payments between associated companies.

Mr. Monti is behind a draft directive proposing the minimum 20 percent tax on investors offshore. At the meeting Mr. Monti asked the code of conduct group to complete the assessment of taxation measures by the end of June next year.

During the meeting the EcoFin Council backed Mr. Monti and affirmed that taxation of savings should apply at an international level, including in associated and dependent territories.

However the Council proposes the first stage of contacts will focus on Switzerland, Liechtenstein, Andorra, Monaco and San Marino. The Council also proposed to "focus attention on a minimum of effective taxation of savings income at the international level''.

Tax havens also face scrutiny from the Organisation for Economic Cooperation and Development (OECD). Member countries of both organisations are attempting to prevent the flight of money from their jurisdictions to places that impose less tax or no tax, especially on capital gains from investments. (EU).

Prime Minister Tony Blair Graphic file name: BLIAAIR BUSINESS BUC