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Brexit and the City
02 February 2012

Tim King: Emerging from the doldrums?


Growth is back on the agenda. But are EU leaders serious about tax reform as well, asks King in his European Voice article.

...I detect in the manoeuvring round this week's European Council the whiff of a breeze that might just lift the stultified spirits of frustrated political consultants. It may only be a very light breeze – hardly enough to propel a barge-load of lobbyists along the waterways of Strasbourg – but better than nothing. It would seem that the crisis has, as crises are supposed to, created opportunities.

The EU's leadership – both in the European Council and the European Commission – are painfully aware that the Union is at risk of being perceived as a purveyor of austerity – a Grim Reaper that takes a scythe to public finances, but never sows. They are therefore desperate to portray the EU as contributing to growth – and therein lies the opportunity.

What was striking in the statement put out by the Council on Monday night (30 January), with the catch-line “growth-friendly consolidation and job-friendly growth”, was that the Council threw its weight behind the action plan for e-commerce, which the Commission had published only two weeks earlier. What intrigues me, though, is how far the European Union's leaders are prepared to go in living up to another of their calls for action, couched in coded language because the topic is so sensitive. Building on language used in December, the Council calls for “progress in structured discussions on the coordination of tax policy issues and the prevention of harmful tax practices in the context of the Euro Plus Pact”.

In less coded language, the question is whether the Member States are prepared to scale back their traditional stout resistance against any incursion into their jealously-guarded prerogatives on tax.

It could be that the depth of the economic crisis is so great that the Member States will recognise that they could make some significant contributions to improving the environment for entrepreneurs and the chances of job creation by reforms to taxation.

It might even be that finance ministers will recognise that there is a contradiction between defending fiscal autonomy as sacred when it comes to reduced rates of VAT, while surrendering large chunks of fiscal autonomy as part of the eurozone's fiscal compact or the European semester. Those ringing condemnations of a common consolidated corporate-tax base and energy taxation are going to sound a little less convincing than they once did.

Full article (EV subscription required)



© European Voice


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