The chill winds of tax competition are sweeping across Europe. Spain, which this week confirmed its plan for a sharp cut in corporation tax rates to bring it in line with its competitors, is the latest country to rethink its tax system.

The aspiration of governments to increase growth and to attract investment has already resulted in a wave of corporate tax reductions across the continent during the last eight years. But last year’s accession of 10 new countries to the EU - most of which have very low rates of corporate tax - has intensified competitive pressure on older member states.