EU Tax: Sisyphus reaching the summit?
A shared new sense of purpose to increase the fairness of the tax system puts EU tax policy into the limelight. Governments have had to take painful budget measures the end of which are not in sight. Tapping into new sources of tax income by fighting tax evasion and introducing new taxes (such as FTT), are now political priorities. However, despite this new momentum, reaching the summit might elude Sisyphus still…decision making remains fraught with obstacles.In the US discussions take place in a different context but are focused on the same issues and flow from the same fiscal situation.
The financial crisis has become a sovereign debt crisis which has developed into a full-fledged economic crisis. After nearly five years of fire fighting, late night crisis meetings and austerity budgets, European politicians are faced with the existential challenge of defending the social contract between governments and voters and regaining trust. Attention has thus turned to finding ways to pay back what has been spent, maximise State revenue and ensure that painful measures are distributed fairly. This means that today taxation is not only an important policy matter but also a political one.
The Difficulties of Negotiating EU Tax Legislation
Taxation policy has historically been the prerogative of national governments in the EU. I is clear why: tax income is the basis for all national policies. The principle of unanimity voting on European tax initiatives has ensured this has been reflected in European internal negotiations. The result is a Europe of 27 with a variety of approaches to tax, some harmonised such as the fundamentals of VAT law, or some with remarkable differences, such as corporate tax rates. But, in an internal market, tax remains a cross-border issue.
Therefore the European Commission has consistently sought to modernise and harmonise methods of application and collection of taxes, often to see their proposals left stranded in Council negotiations. However, a watershed moment might now have taken place.
Unexpectedly Member States of the European Union, the European Parliament and the European Commission share an objective to maximise government revenue and ensure that “everybody pays their share of taxes”. Furthermore, a development from outside the EU is now additionally driving this agenda.