In an announcement at the beginning of this month, the European Commission of president Jean-Claude Juncker is starting a consultation on ending unanimity on a number of tax questions within the European Council.
Before the festive Christmas days, the European Commission quietly issued a call for comments on “how EU decision-making on certain tax issues could be streamlined by removing the need for unanimous agreement by all countries”. Respondents have until 17 January to reply. This has swept the issue under the carpet for some time where media attention is traditionally low.
As a result, hardly any debate is going on in Luxembourg’s public life. Is the Grand Duchy ready to accept to have its fiscal policy made in Berlin, Paris… Brussels? Or is the real reason that the issue is very much on the table, but is supposed to be kept low-key from the general public?
Politically, there is no opposition either, because liberals, social democrats and environmentalists are represented in Luxembourg’s government, and the Christian Social People’s Party (CSV) is likely to receive pressure from the European People’s Party, its European family party.
The reality is this: if France gets its way on fiscal issues, there will be no competitive tax planning to be done in this country in the future. Whoever thought that president Macron would break with the irresponsible deficit spending of his centre-right and socialist predecessors, should be freed of the illusion following the Elysée’s reaction to the yellow vests. Our neighbouring countries have accumulated a staggering amount of debt, and an out-of-control public spending bill, toppled with the inability to do any type of significant reform.
The truth is that if Luxembourg’s public policy was anywhere near that practiced in France or Belgium, we’d be bankrupt. And now Luxembourg, one of the countries left to still respect the convergence criteria on deficit spending and public debt which were set up by the Maastricht Treaty, is supposed to take lessons from our French-speaking neighbours? What’s next, should we adopt Greek-style pre-2008 pensions schemes, Italian car manufacturer skills and investment advice from the former CEOs of Lehman Brothers?
And yes, it is true that even under qualified majority voting, coalition needs to be made and Germany and France cannot decide on their own. But political practice also shows us that Germany and France are most skilled at managing the legislative process through the European Parliament in their favour, and that they always reach the necessary trade-offs if their aim is to single out a particular country.
The government under prime minister Xavier Bettel has no choice but to defend unanimity voting rules on tax matters to the teeth. And the Grand Duchy won’t stand alone in this fight: Ireland, Malta, the Netherlands, the Czech Republic, and Denmark, can all be expected to show scepticism towards letting themselves be overruled on tax matters. Particularly with the last three, Bettel has close political ties, as their leaders are in the same political family, ALDE.
This is not an act of selfishness as some might be inclined to call it. Tax competition is essential for the future of the European continent, because it assures that levels of taxation remain reasonable. Despite all ambitions, the OECD will not be able to harmonise taxation in the way that the European Commission is demanding it. As a result, high harmonised rates set in Brussels would lower the competitiveness of Europe and cost millions of jobs. A lack of tax competitiveness is an inherent threat to the social fabric of European nations.
So here’s to the prime minister: say “no” to this European Commission, so we can all hear it.
This article was first published by the Luxembourg Times.
Pictures are Creative Commons.
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