"I'm surprised that anyone should be surprised". The European Commission's decision to engage in the process regarding the fifteen national company tax systems, considered to be State aid (see yesterday's bulletin, p.11), has deeply displeased a certain number of governments. The day before already, Didier Reynders, President of the EcoFin Council and the Eurogroup, had deployed the large artillery, accusing the Commission of jeopardizing completion of the "tax package" (of which the code of conduct on company taxation is part) through its intention of isolating one aspect and directing it towards legal disputes, instead of the political debate between Member States. Does the Commission really want to the tax package to be a success? Reynders wondered.
Commissioner Monti's response was polite and almost smiling in its form, but scathing as to substance. "The real question", he declared, "is to know whether the Council and its President believe in the tax package. As for the Commission, it believes in it, as well as in the comprehensive nature of this package". He recalled that it was agreed, and recognized by the Council itself in its resolution of December 1997, that the Commission should continue to exercise the responsibility that the Treaty bestowed on it to prohibit State aid that distorts competition, independently of progress on the tax package. He then concluded: "I'm surprised that anyone should be surprised at the initiatives the Commission took on Wednesday".
Governments may give their reasons. Mario Monti nevertheless considered as both understandable and licit the efforts made by Member States aimed at justifying and defending State aid they are being attacked for. In the field of concerted agreements, mergers and monopolies, no political pressure is admissible, as the Commission's interlocutors are companies and no authority of a Member State, or a third country, may interfere. But for State aid, the interlocutor is the national administration concerned, which obviously has the right to defend its corner, as does a company which has received a statement of complaint. Regarding aid, one cannot even speak of political pressure, but the normal defence of a national measure on the part of the entity that introduced it.
The harmful "66 regimes" are still in place… This quarrel is only comprehensible when situated in the overall context of the tax package, also comprising the issue of the tax on savings and certain other taxes and fees. The "company tax" chapter provides for the dismantling of tax systems that introduce unfair tax competition to the benefit of national companies, to the detriment of those of other Member States. The famous "Primarolo Group" identified 66 of these types of systems, that Member States had to abolish or amend. Work was undertaken in a positive atmosphere within the group, but the results they arrived at are taking their time to see the light of day: all the systems identified are still in place…The impression is that each Member State is resigned to accepting their neighbour's "unfair" system on condition of being able to keep their own; a kind of tacit compromise that suits everyone, except equity and the smooth running of the greater European market. The Commission considered that it was its duty to intervene, and intends pursuing its action, respecting a certain balance, both geographic (all Member States are, or will be, concerned in the process) and fields targeted (it has begun with the financial and insurance sectors, others will follow).
Unnecessary pressure. All this confirms that: a) the intergovernmental system only slows things down and leads to compromises that are not always compatible with the European interest; b) Mario Monti's independence of judgement and insensitivity to political pressure is not only valid for relations with third countries (see this section in yesterday's EUROPE) but also for Member States. The already latent conflict surrounding the Commission's attitude regarding State aid risks hardening. At the level of principles, governments share the Commission's stance (they have on several occasions acknowledged that the level of aid was excessive and had to be reduced), but as soon as it comes to case by case decisions, the difficulties begin. In Germany, notably, the Laender dispute interventions by Brussels and demand much more autonomy. It's a conflict difficult to manage, in which the highest national authorities are involved and that will go as far as the negotiations on the new review of the Treaty. Even those Member States most in favour of a "strong Commission" and a strengthening of its powers (like Belgium and Luxembourg) sometimes join together in this matter with others. But Professor Monti has proven that he is no man to give in to pressure.
(F.R.)