Luxembourg’s next government, following the current three-party coalition comprising the DP, the LSAP and déi Gréng, will need to deal with several major European Union (EU) issues certain to have a major effect on the Grand Duchy. And because the European elections in May will come after Luxembourg’s parliamentary elections next month, for voters, the decisions are to be made now.
The parties next representing Luxembourg in the European Council, whichever they may be, will be asked to weigh in on such subjects as the digital tax, which is now being debated after a proposal by the European Commission. Under this proposition, tech giants such as Facebook, Apple, Google and Amazon would be taxed on “significant digital presence” as opposed to their country of domicile.
This would hurt countries with competitive tax policies, which is why the likes of Denmark, Malta and Ireland continue to oppose it. Finance minister Pierre Gramegna takes a more nuanced approach by claiming that a solution needs to be found at the level of the Organisation for Economic Co-operation and Development – not really what could be described as a ‘hardcore’ stance for Luxembourg’s interests.
From an overall perspective, the digital tax is only a first step in a long walk towards EU tax harmonisation. The EU’s intention is to deconstruct national differences on corporate income tax levels, and it’s easy to imagine that its goal is the unification of all tax rates across the Continent. It should come as no surprise that this would be devastating for the Grand Duchy, and that anyone responsible for defending its interests should oppose it.
Another topic that will have diplomatic importance is the European Council decision on the sanctioning of Hungary. The European Parliament recently called for an investigation into the country’s record on civil rights, triggering Article 7 of the Lisbon Treaty. This will place the burden on the Council to decide – by a three-fourths majority – whether Budapest will be stripped of its voting rights. Any decision to sanction the country, however, could backfire regarding business relations with the Central European nation.
Equally important will be decisions regarding immigration. As Italy pushes for what it considers to be a more reasonable distribution of migrants, while Central European nations such as Hungary or Poland oppose it, Brussels struggles to find a clear majority on the issue. It is unclear, however, if the diplomatic mission of a future prime minister will be that easy, given that Germany and France also do not speak the same language on this topic. Both Emmanuel Macron and Angela Merkel face internal political pressure that could threaten their positions, which is why Luxembourg will probably be expected to refrain from making grand declarations on what other countries need to do.
Lastly, an important factor for the next government will be its stance on Macron’s reform plans. The French president has been very vocal about new posts he intends to create, such as a eurozone finance minister, and he has expressed his support for the further development of a European army. France is also likely to impose larger burdens on companies by making the case for social standards within the EU. Will Luxembourg’s next government take the approach of Macron, as a visionary for the future of the EU? Or will it take the approach of Dutch prime minister Mark Rutte, who argues for decreased competences?
This article was first published by the Luxembourg Times.
Pictures are Creative Commons.
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