The European Parliament has made a tremendous work on tax issues. The digital tax failed because member states lack political will.
The European Parliament has a long tradition of extending its powers by grabbing new topics, and then asking the European Commission and member states to be more ambitious about it. It has been the case for environment, women’s rights, rule of law, social issues. Despite its right-wing majority, the EP tends to be one of the most progressist parliaments. But it always takes time.
Over the last 5 years, outgoing MEPs have achieved a tremendous work on taxes.
Four special committees : an unprecedented move
For the first time, four special committees have been set up since 2014. The first one on Luxleaks scandal, TAX 1, made it clear a lot of member states had abused the tax ruling systems. It gave the European Commission strong arguments to sue Ireland, the Nederlands or Luxembourg for unfair state aids.
Another committee called PANA started after the Panama Leaks revealed hundreds of Europeans had hidden revenues in Panama. At the same time another special committee, called Tax2 entered into force to follow-up on the topic. The entire Parliament then asked for a stronger regulation to limit tax evasion
Finally, TAX 3 focused on how to adapt taxes to a digital environment, and fight against harmful practices like VAT fraud.
Each time the committees worked hard : they travelled everywhere, asked to meet local politicians, and came back with some answers. They included most political parties, and came up with a report that convinced a vast majority of the MEPs. All that work was also done with the support of the European Commission.
A consultative power on tax
The EP perfectly knows it only has a consultative power when it comes to taxes. But an agreement found at the EP level is nevertheless the most democratic solution governments can find on the subject, as MEPs are directly elected by citizen.
It seems that finance ministers couldn’t care less . Take the issue of the digital tax.
The EP has voted last december for a digital tax to implemented as the EU level. Working on the Commission proposal, they added digital services in the list of digital companies, so that Netflix could also be a targed. They also suggested to lower the turnover threshold.
“The EU should be a trendsetter”, Dariusz Rosati, a Polish EPP MEP argued.
But the Council of the European Union has already scraped the project.
France has walked away from an EU agreement, and said the tax could be organised at the OECD level. French minister Bruno Le Maire now wants a tiny digital tax to be applied as soon as possible, and in France only.
“Relying on the OECD, it’s like hoping to get a majority with 36 countries where 27 countries failed”, twitted Alain Lamassoure, head of the TAX 3 committee, according to whom a lot of time is being wasted in the process (for the benefit of digital companies).
It’s all the more disappointing as the ACCIS project of a common tax base for all companies active in Europe has been on the table for more than 10 years, and is technically ready since 2017, the MEP added.
What this endless tax issue shows is the reluctance of governments to go forward on the subject despite political pressure, whereas the European Parliament tries to stand for European citizen expectations.