Dr Florian Neumeier, Director of the Research Group on Taxation and Tax Policy at the Ifo Institute in Munich, spoke on Monday 10 January to the European Parliament's Subcommittee on Fiscal Affairs (FISC). He reported on his research into harmful tax competition in the area of income and wealth taxation.
He believes the establishment of “ground rules” would make it possible to “avoid aggressive measures and preferential tax regimes, which have no long-term economic benefits”. Indeed, taxpayers are very mobile and responsive when it comes to taking advantage of the tax competition that exists in income and wealth tax. They therefore have no hesitation in changing region or even country to benefit from more advantageous taxation.
There is evidence that the “unilateral and uncoordinated introduction of preferential tax arrangements can indeed be considered harmful”, as they have a negative impact on the revenue and tax base of other countries.
These practices also have economic consequences: the countries affected by this emigration may lack capital or skilled labour. Faced with this pressure, the other countries may then choose to follow suit; this will result in a “zero-sum game” and therefore in fiscal and budgetary losses for all Member States. However, this loss would amount to 3.2 billion per year, or less than 0.1% of Member States' tax revenues, according to estimates by the EU Tax Observatory.
In order to avoid a shortage of skilled labour in some countries and thus harming “political cohesion”, Dr Neumeier recommends an alignment between capital and labour incomes. He also encourages taxation based on immobile criteria, such as housing or goods, which cannot avoid taxation.
To view Dr Neumeier’s presentation to MEPs: https://bit.ly/3HOLVi5 (Original version in French by Anne Damiani)