On the sidelines of the spring meetings of the IMF and the World Bank, the European Commissioner for Taxation, Pierre Moscovici, met EUROPE on Saturday 21 April to take stock of topical taxation issues such as the American tax reform (see EUROPE 12003), the taxation of the digital sector (see EUROPE 12006) or making the award of European funding conditional on fiscal convergence measures (interview by Élodie Lamer).
The IMF welcomes the American tax reform. The OECD considers that it will serve to implement the BEPS action plan on the aggressive tax optimisation of multinationals. The EU is worried; does it have any allies over this dossier?
Pierre Moscovici - The judgment we can take away over the tax reform is as follows: it will have a short-term macroeconomic impact that is not necessarily negative, as it will stimulate American growth, which is already strong. Obviously, this will have an impact on world and European growth.
This raises two questions. Will American growth be sustainably stimulated? Opinions differ. Will it create significant macroeconomic imbalances as the American deficit and debt rise? We will have to look at this very closely.
Then we come to the impact on BEPS and the WTO rules. We have solid grounds to consider that the WTO rules could be affected. I will be reporting on this to the Ecofin Council.
Are the Americans open to a solution?
They are open to an exchange on the matter.
Did you defend the European proposed tax on digital activities?
I saw the Trade Secretary, Wilbur Ross, and the Secretary for the Treasury, Steven Mnuchin.
There is a shared awareness that the problem is at international level, as it is not enough to tax companies on their physical presence and the question of digital presence has to be resolved.
We have agreed to continue work in the framework of the G20 to secure progress as quickly as possible.
Then, I got the impression from my American opposite numbers that they can understand why we started our own procedure, as the EU is a single market and we need to avoid fragmentation, which generates extra costs and complications for businesses (see EUROPE 11986, 11983).
Obviously, questions were asked about the targeted nature of the measure and its commercial impact. But there is no link to the measures to be taken on aluminium and steel. The tax is not anti-American, it is not a retaliation in any way.
The tax targets all businesses in the digital sector. Not four, but 150 companies, half of which are American and one third European.
Do you fear American retaliations?
I am keeping my eyes open, but we mustn’t miss the point.
We are also hoping to work in the context of the G20 and our view is that a structural solution is best.
But this should not be an excuse not to make progress in the short term, because we need to do so in order to avoid fragmentation of the single market, generate income for the public coffers and tackle the iniquity that arises from the situation of little or no taxation for digital businesses.
We shouldn’t be too worried by the idea that it would be a new matter for a trade dispute. The proposal is neither protectionist nor targeted. The EU’s aim is to lead the way for the rest of the world by showing leadership.
How will you convince the more reluctant member states - such as Ireland and Luxembourg - to support the tax on digital activities?
Before we start thinking about carrots and sticks, I think there should be some explanatory work and answers to the questions, for instance on the mistaken question about delocalisations.
The tax will not lead to delocalisations, businesses in the digital sector cannot move in a context in which the European market is so important to them. And there are arguments about the impact on the work of the OECD and on trade.
I also note that some of the so-called reluctant countries have become much less so. There is a solid base of support for this tax. We will see over the course of the discussions whether we need to find specific responses. The Commission proposal is always the basis for a compromise.
There is a lot of talk about enhanced cooperation for this tax. What conclusions would you draw from the experience of the financial transactions tax?
You can never rule out moving towards enhanced cooperation.
However, I believe that the Community method is greatly preferable and that it this stage, we need to put all our energy into trying to get this tax adopted by all 27, or 28 before the end of this year. Then we will see, but it will most probably be my successor rather than me.
When I prepare a fiscal proposal, I am well aware that it will be difficult, that it will take time, that there are fiscal cathedrals.
In this case, we have a fairly simple, well-balanced proposal. I realise it is difficult, but it is really worth a try.
At this point, do you have assurances that the temporary exemption from the American taxes on steel will be made permanent?
No. I feel that there is a shared awareness that commercial aggressiveness is not the solution. We have to find a starting point, which is what negotiators do. The coming week will be extremely important, but we cannot make undue concessions over a problem that is largely artificial.
The EU is not the problem.
The newspaper Le Monde has reported that ‘golden visas’, which are sold by countries such Malta, were being used to get around the automatic exchange of information on bank accounts. What can be done at EU level?
This practice, which cannot be condoned, is aimed at other ends than getting around the automatic exchange of information.
At this stage, I do not believe that there is a massive distortion, but there is no question that the automatic exchange of information is being circumvented. Therefore we have to be extremely vigilant.
How can you prevent the definition of tax policies from lagging behind tax optimisation practices?
We have to be ceaselessly proactive. We are applying the OECD’s BEPS action plan and we are doing more. Every scandal, and here’s another one, calls for a reaction and also, frequently, anticipation. I believe that this case has allowed the EU to show that it is capable of taking leadership.
The forthcoming post-2020 multiannual financial framework (MFF) will be presented on 2 May. If the Commission planning to make the awarding of funds conditional on tax convergence?
Personally, I do not see any harm in this.
This applies to the MFF and the country-specific recommendations, compliance with fiscal standards and a rejection of aggressive tax planning. I would like it to be included in the next country-specific recommendations and forthcoming budgetary decisions.
You promised an initiative on the possibility of qualified majority for taxation issues…
The idea has not been forgotten. (Original version in French)