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Brussels - September 20, 2011 Brussels - September 20, 2011 No Social Europe without tax harmonization. By Pierre Defraigne Honorary Director General at the European Commission Executive Director of the Madariaga - College of Europe Foundation. 1.
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By Pierre Defraigne
Honorary Director General at the European Commission
Executive Director of the Madariaga - College of Europe Foundation
1. the European Social model is an elusive concept : good for the image of Europe in the world , but with little operational content within the EU 2. Social models remain indeed national, and the drive towards the Single Market and the single currency, has exacerbated competition among them through regulatory arbitrage by transnational firms and financial markets3. the cause lies in the ‘institutional inconsistencies’ of economic governance within the EU and yet more within the eurozone
Institutional inconsistency stems from a skewed division of labour between the EU and its MS (distribution of competences dominated by a pro-market bias):
but with a perverse omission : taxation remains a matter of national sovereignty and tax harmonization is limited to the needs of the single market (indirect taxes) and is still decided through unanimity based on the myth of national tax sovereignty ruined by mobility in a global economy; Lisbon Treaty though allows for a bypass: enhanced cooperation
a provisional stopgap : enhanced cooperation on corporate tax base for the eurozone (arm twisting for some countries)
a real solution consistent with the level of integration and with the emergency imposed by the crisis (public deleveraging and jobs creation in a context of sluggish growth) : the optimum taxation area
a huge economic block with a savings surplus , fully integrated market-wise and monetary wise with converging collective preferences on macroeconomic policies and the social model such as the eurozone
the Eurozone would be endowed with the full-fledged armoury of a balanced and effective policy i.e. a triple sovereignty: monetary, tax, and financial sovereignty
taxation power on mobile factors ( capital and transnational firms) would be exercised by the federal level through co-decision and the product of the tax distributed between a eurozone federal budget ( research, defense, trans european infrastructures, and guarantee for eurobonds) and national budgets ( according to Member States’ contribution to firms’ value added)
tax territories would be forbidden within the whole EU-27
capital flows with the rest of the world would remain free , but subject to surveillance ( this would be the real benefit of a Tobin Tax with an homeopathic rate : tracking under-taxed under-regulated flows with non cooperative off shore places)
making a G20 tax agreement would be an alibi and the threat of capital flight is not a serious one ( size of the eurozone economy and huge domestic savings)
The battle for fair taxation in Europe is a way to preserve and modernize our social model, at the European scale, is a way to build-up a badly needed European citizenship.