Wednesday

21st Oct 2020

Public shaming could help EU to pass tax laws

  • Mario Monti with European Commission president Jean-Claude Juncker (Photo: European People's Party - EPP)

Member states can be made to move on issues of common tax policy through a combination of political deftness and public shaming, says a former EU tax commissioner.

Italian senator Mario Monti, the commissioner responsible for tax issues in the late 1990s, on Monday (1 June) advised members of a special European Parliament committee looking into tax breaks for multinationals that those hoping for more EU tax policies need to use "reassurance" and "embarrassment".

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • Tax issues continue to be bound by unanimity rules, meaning all member states have to agree. (Photo: The Council of the European Union)

Looking back to 1995, when the commission started in earnest to think about how to tackle tax issues - where member states have a veto right - he said: "We dropped the flag of harmonisations and we raised the more modest flag of co-ordination. Semantics- maybe. But much less threatening. Much more reassuring."

And to prevent finance ministers from wielding their vetos "we put into place the embarrassment part of the strategy".

Monti noted that, at that time, youth unemployment was also a problem yet countries had tax regimes in place that were more favourable to corporations rather than helping the labour market.

"Finance ministers could not carry on saying that they were fighting unemployment and yet refuse to tackle the issue of tax co-ordination," he noted.

Monti also noted that policy-makers tend to fixate on a country's "red lines", but that they apparently immoveable positions are always open to negotiation.

Illustrating how the dynamics in a group change, he said that Belgium in the late 1990s wanted to introduce a savings tax directive because it "hated the notion" that Belgian wealthy people put their savings in Luxembourg.

The Grand Duchy, for its part, was "complaining loudly" about Belgium giving tax breaks to multinationals.

In 1997, EU states agreed a tax package that included going towards a savings tax bill; a bill on taxation of interest; and the beginning of co-ordination of corporate tax.

This kind of package meant "you may attract apparently ‘unattractable’ countries," said Monti, referring to Belgium and Luxembourg.

He called the package the “building block” for the subsequent developments in tax co-ordination.

LuxLeaks

Tax has moved back onto the political agenda again following revelations last year about how tax schemes in Luxembourg allow hundreds of multi-nationals to pay almost no taxes - money that would have otherwise gone into government coffers.

The revelations were made more explosive by the fact that governments across Europe have been slashing public spending to cut debt levels.

The European Commission responded by opening an investigation into whether these and similar set-ups in other member states breached state aid rules.

It is also bringing forward a law on the automatic exchange of information on these so-called 'tax rulings' and is relaunching a previously moribund law on creating a common corporate tax base.

But tax issues - as in the 1990s - continue to be bound by unanimity rules, meaning all member states have to agree.

However, Monti indicated that the circumstances today - including anger over multinationals avoiding tax - could lead to another breakthrough in tax issues, this time toward the EU raising its own taxes.

"I believe the synergies intellectually, technically, politically between the handling of national taxation policies, the extent of their coordination and the future of the shape of the EU budget will also be a promising subject," he said.

Monti is chairing a group looking into EU tax-raising powers (also known as 'own resources') which is due come with a final report next year.

EU considering mandatory corporate tax base

The European Commission has said it will reintroduce a previously shelved plan for a common corporate tax system in a bid to clamp down on tax avoidance by multinationals

EU in new push for common corporate tax base

The European Commission Wednesday announced plans meant to put an end to secretive 'sweetheart' tax deals for multinationals and nudge member states towards common corporate tax rules.

Investigation

Violating promises and law, von der Leyen tests patience

Under EU Commission president Ursula von der Leyen, transparency was supposed to be a "guiding principle". Instead, the European Commission is asking Kafkaesque questions in response to an access to documents request, and failing to meet its legal deadline.

Future of Europe: EU Council urged to propose a chair

Since the German presidency promised the Conference on the Future of Europe would start under their leadership, the European Commission and MEPs hope the event will be launched soon. But there is one issue: who will chair the conference?

Nine-in-ten EU regions face revenue plunge, report finds

The decrease of revenues in 2020 of subnational authorities in France, Germany and Italy alone is estimated to be €30bn for the three countries, a new report by the European Committee of the Regions says.

EU Parliament sticks to demands in budget tussle

The parliament wants €38.5bn extra for key programmes, which is less than their previous request of around €100bn. Negotiations continue on Thursday, but the budget and recovery could still get stuck on the rule-of-law issue.

News in Brief

  1. Ireland first EU state to re-impose full lockdown
  2. EU countries agree farm policy reform
  3. EU corona-bonds attracted huge demand
  4. France seeks Putin's help on counter-terrorism
  5. Cyber attacks 'targeted health system during pandemic'
  6. Greece asks EU countries to halt military exports to Turkey
  7. Covid-19: Spain considers curfews in hardest-hit areas
  8. Study: Air pollution costs Europeans €1,276 per year

Rightwing MEPs bend to Saudi will after Khashoggi death

Saudi dissident and journalist Jamal Khashoggi was killed two years ago on 2 October. Since then, mainly centre-right, conservative and far-right MEPs have voted down any moves to restrict, limit or ban the sales of weapons to the Saudi regime.

EU parliament vows not to cave in to budget pressure

The parliament's majorty dismisses the German EU presidency's proposal on the rule of law conditionality, which has emerged as the main political obstacle to agree on the next long-term EU budget.

Stakeholders' Highlights

  1. UNESDAMaking healthier diets the easy choice
  2. Nordic Council of MinistersUN Secretary General to meet with Nordic Council on COVID-19
  3. UNESDAWell-designed Deposit Return Schemes can help reach Single-Use Plastics Directive targets
  4. Nordic Council of MinistersNordic Council meets Belarusian opposition leader Svetlana Tichanovskaja
  5. Nordic Council of MinistersNordic Region to invest DKK 250 million in green digitalised business sector
  6. UNESDAReducing packaging waste – a huge opportunity for circularity

Latest News

  1. 'Big majority' of citizens want EU funds linked to rule of law
  2. EU declares war on Malta and Cyprus passport sales
  3. EU Commission's Libya stance undercut by internal report
  4. Backroom deal will make CAP reform a catastrophic failure
  5. EU money used by neo-Nazi to promote Holocaust denial
  6. Over 80% of Europe's habitats in poor or bad condition
  7. EU's Brexit move could end deadlock in talks
  8. EU's migrants more at risk from coronavirus

Join EUobserver

Support quality EU news

Join us