Pasquale Tridico MEP from Five Star Movement (The Left, Italian) was elected chair of the European Parliament’s Subcommittee on Tax Matters (FISC) on Tuesday 23 July (see EUROPE 13459/19). An economist and former president of Italy’s National Social Security Institute, he wants to promote transparency and accountability to citizens, harmonise tax policy and establish a minimum income. (Interview by Anne Damiani)
Agence Europe: When you were elected, you said: “At a time when politics unfortunately leaves too much room for interpretation or confusion sometimes, we have the opportunity here to work concretely and effectively”. What did you mean by that?
Pasquale Tridico: Taxation is a very technical issue, and politicians generally talk about very easy subjects and are more concerned with their image than with technical matters, which are not always easy to explain. When we talk about taxation, we first need to ensure we understand the balance between the sustainability of public finances and services to citizens. You can say loud and clear: “Let’s lower taxes” or “Let’s introduce a flat tax”, use slogans that some people will probably like, but then you need to be accountable for what you have said and you can only do that if you know the causes and consequences of these issues.
That’s why my work in this sub-committee will be focused first and foremost on understanding the new trends in the economy. We live in a time when capital is mobile; with multinationals, there is tax evasion and avoidance. The rules are different. When firms feel they are paying too much tax, they just go abroad.
In the last century, capital and labour were the main factors of production. We were happy to tax them and to see that they produced significant results. Thanks to this result, we were paying for our services, public spending and so on. Today, we have more than just capital and labour. Labour is considered to be over-taxed (see EUROPE 13425/3). Much of our wealth is generated by technology, by the digital economy. And this new factor of production is not adequately represented. In Europe, we are going to ask for a common register for digital companies, to find out how much revenue they generate. This will enable us to understand whether they are avoiding tax or paying tax regardless of the Member State in which they receive profits or where they are based.
You mention the international tax reform, which aims to establish a global minimum tax rate on companies (see EUROPE 13422/16). Do you think that Pillar One on the taxation of digital companies will succeed?
The Multilateral Agreement depends to a large extent on the behaviour of the United States. We know that Facebook, Google and Amazon are not European. If we have to draw up a regulation on digital taxes and we don’t manage to capture these giants, then the second pillar will be much less effective.
So far, we’ve had Biden and things have been able to move forward. Of course, we’ll be keeping an eye on developments, but this is an important turning point. But harmonising tax rules across the world’s largest economies is very important in order to avoid unfair competition.
On the day you were elected head of FISC, you also said that “the subcommittee has scope to improve tax harmonisation”. What is your strategy considering the fact that tax policy is decided unanimously by the EU Council?
My strategy is based on the power of ideas, meaning that we’re going to use a lot of research and evidence. We know that within the euro area, and in particular, within the European Monetary Union, capital mobility is a very important issue. But without common rules, Monetary Union is weakened. So we cannot ignore the evidence in the scientific literature, which shows that the lack of harmonisation and common rules weakens growth, leads to unfair competition and, in the long term, makes economic development less sustainable.
As far back as 1992, when we decided to create the euro area and the common currency with the Maastricht Treaty, we knew what the weaknesses of our structure were. We thought the political project was stronger. In the global economy, we need to have a stronger Europe, but this is achieved through common rules.
I’ll be relying very much on these factors to make my case. That’s how I’m used to working at the university, researching, understanding the issues and explaining the solution on the basis of the evidence obtained.
What do you think of the G20 initiative and the European Citizens’ Initiative (ECI) on minimum taxation of great wealth (see EUROPE 13463/5, 13391/15)?
Both initiatives are very good. In particular, the initiative of the G20, which for the first time put forward a proposal from Lula’s government, following the conclusions of a group of researchers working on the subject, calling for a tax on billionaires. The wealth of most billionaires comes from the digital economy, which is precisely the factor of production that is not taxed, that we do not know about, and that, in a way, avoids tax.
It is important that this is happening at G20 level, because several EU Member States sit on it, as well as other powers outside the EU. The ECI shows that there is consistency between what citizens are asking for and what politicians are delivering.
How do you see progress on the current tax files, given that many of them are currently blocked in the Council (see EUROPE B1343826)?
The Council and the European Commission must understand that we need to be accountable to our citizens. To do this, the files must be disclosed, opened and accessible. We are accountable to our citizens, first and foremost if we are transparent with them. ‘Transparent’ means not only in our behaviour, but also in our negotiations with stakeholders and firms.
What values do you wish to promote as Chair and what policies do you wish to push forward?
Transparency and responsibility are two values that we must bear in mind. I’d like to bring a shared vision of Europe. I’m repeating myself, but we know that there are weaknesses within the EU. From the perspective of the integration process, I think that the best thing for Europe in its current form is to harmonise and achieve a common policy. Tax policy is a national issue, but we know that multinationals are not. If we continue to treat tax policy as a national issue, we are missing the most important evidence.
But taxation is only part of the story. Every state needs money to carry out its policies. We collect taxes in order to provide services and create policies. Tax policy is at the root of budgetary policy. We have a budget of 1.1% [of the total gross domestic product of all EU member countries, editor’s note], which is too little. I think that to make Europe stronger, we need to improve and increase its budget. Starting with a budget of at least 5% would be our objective, and creating a social policy, such as a minimum income for European citizens.
A minimum income means fighting poverty on the one hand and, on the other, trying to cope with the destruction of jobs due to technological progress. We know that technologies, particularly artificial intelligence, will be devastating for certain jobs and certain sectors. Social policy would offer some protection. If we believe in European citizenship, we can’t be happy with just reading it on our passports. We must have European social rights, which are those that enable people to feel closer to the institution.