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EU Tax Is Back
A prominent French politician has called (once again) for the harmonisation of corporate tax rates across the European Union.
Writing in EU policy journal Europe's World, UMP Deputy and Vice-President of France's National Assembly Marc Laffineur said the EU's budget must be reformed urgently, bringing to an end "special cases" such as the British rebate. Of the other "special case" of the Common Agricultural Policy, which subsidises French farmers to the tune of 10 billion euros a year, M Laffineur is rather less keen on urgent reform, arguing that "there is a common interest in ensuring that our agriculture should be highly-productive so as to guarantee food security for Europe's citizens."
"No one is contemplating the dismantling of CAP", he added. Doubtless the aid agencies who claim that CAP does so much damage to developing world farmers do not fall into the EU's category of "civic society" NGOs it funds and consults.
Funny how other nations' special cases are self-interested and "uncommunitarian", while France's are important and part of the "common interest."
On to funding the EU. M Laffineur writes that the European Parliament is moving towards a 1 percent tariff on GDP of member states. The next stage, he says, will be financial independence for the EU:
"National contributions will be gradually replaced by the Union's own resources. Various proposals have been put forward on how to raise this new money. But few of them are technically, politically and financially acceptable or feasible. The two most recently proposed sources are VAT and corporation taxes.
"Corporate taxation seems to me to be preferable for three reasons. First, companies are the main beneficiaries of the single market, which provides economies of scale, and freedom of transactions, travel and capital. Second, there would be fewer communication problems. Last, and most important of all, because tax competition between EU member states has become a serious obstacle to building a united Europe."
Tax competition is a particular bugbear of the French (and Germans, for that matter. Oh, and the Belgians). French leaders, including Nicolas Sarkozy, complain that eastern European nations lure companies away from the tax-heavy west with low corporation taxes - paid for, in part, by generous EU subsidies. The French and Germans, in effect, are paying for the east to take their jobs, the argument goes.
One Belgian official went so far as to argue that EU funds should be withheld from Eastern European nations until they raised their tax levels in line with those in the west.
Low-tax advocates retort that not every western European nation has high corporation tax levels. Britain's Prime Minister Gordon Brown has made clear that he sees varying tax rates as essential to competition within the EU's internal market: Indeed, taxation was one of the British government's "red lines" while the rejected EU constitution was being drafted.
Sarkozy said in 2006 that an EU-wide corporation tax should be introduced by a majority vote.
There are several problems in this analysis. Should the EU gain powers over corporate taxation, at what level should taxes be set? Should they rise to French levels, or sink to Estonian levels? Should they be level across the continent, or should they vary to allow for different economic conditions across the 27 member nations? How much of a slice will the EU take from corporation tax? All of it? Just a percentage? And how will national governments make up for the subsequent shortfall in their loot?
M Laffineur partly answers the last question earlier in his article. Referring to the signing of the Lisbon Treaty, he says, "When they signed the Reform Treaty in Lisbon, last December, the 27 member states signalled their willingness to make the sort of sacrifices that will create a Union that is not just a free-trade area but an ambitious political project".
There's your answer: National governments won't need to make up the shortfall as they'll have a lot less to do as the "ambitious political project" takes shape.
Yet Britain's PM continues to argue that there is nothing political about the Lisbon Treaty that represents any great constitutional change.
These pro-Europeans really ought to stop translating their papers into English!
