MEPs from the European Parliament’s Subcommittee on Taxation (‘FISC’) discussed with several experts on Tuesday 1 December how to better combat harmful tax practices, which distort competition in the single market.
Mario Monti, former EU Taxation Commissioner at the time of the adoption of the EU Code of Conduct for Business Taxation, gave MEPs his tips for making progress on taxation, despite the deadlock on unanimity.
One of the levers, he says, is to adopt a package approach. “I remember vividly that Luxembourg was against a directive on savings taxation, and was in favour of a more rigorous tax treatment of coordination centres. Belgium was against this more rigorous tax treatment of coordination centres but was in favour of taxation of savings, so that we constructed a package that contained sweet pills and bitter pills for everybody and in the end, everybody agreed”, he explained.
In his view, there is even more scope for action in the area of taxation today than there was in his time. One of the reasons is that the UK, which was very reluctant on many aspects of the fight against tax competition, is no longer at the negotiating table, he stressed.
Another element that changes the dynamics is the link between progress in taxation and new own resources.
Martijn Nouwen, Director of the Institute for Tax Transparency at the University of Amsterdam, focused on the EU Council’s Code of Conduct Group on Business Taxation and its effectiveness.
Although it has enabled progress, in his view, it has also pushed Member States to engage in new forms of tax competition and has ultimately contributed to creating a race to the bottom.
Dr Nouwen also gave his opinion – much appreciated by the European Parliament – on the use of Article 116 of the TFEU, which would allow the Commission to present a legislative proposal by qualified majority if it finds a distortion of competition in the single market (see EUROPE 12429/17).
He believes that, while this possibility exists legally, it is actually difficult to implement politically. “Member States might vote against the proposal, to avoid the anti-distortion weapon to be turned against themselves in the future”, he explained.
Responding to MEP Niels Fuglsang (S&D, Denmark), who wanted to know whether a mechanism similar to the rule of law could be envisaged in the area of taxation, Mr Monti said it would be “going a bit too far”.
Nevertheless, he said he would welcome, in the context of the country-specific recommendations, if the requests to mitigate certain harmful tax regimes are not respected, that the Commission should “think twice before disbursing the funds foreseen for this new era of community cooperation after the pandemic”. (Original version in French by Marion Fontana)