The New European Agenda

Jul 29, 2019

Sunday Business Post, 28 July 2019 
It is a peculiarity of the European system that once a project is started within the Commission, it never seems to go away.  Once a file has been opened, it will still be batted around in the European Commission, various councils of ministers and the European Parliament long after everyone has lost interest.  One of the few occasions when a European project gets dropped is when a new Commission takes over.  The incoming Commission President sets out his or her stall and matters are taken from there.

Following some frenetic political horse trading, the new commission president elect is Ursula von der Leyen who was formerly a minister within Angela Merkel's government.  She has published her agenda and political guidelines for the next European Commission which will run for a five-year term from November 2019 to 2024. 

Within that agenda Brexit features just twice.  Once, in the well-publicised observation that if more time is required to conclude the Withdrawal Agreement with the UK, the new Commission President will support a further extension “if good reasons are provided”. 

The second reference barely qualifies as a Brexit reference at all.  It cites the Brexit negotiation process as a good example of how to ensure that the European Parliament is appraised of all discussions conducted by the various commissioners on behalf of the EU. 

The message could not be clearer.  It is time to move on and the Brexit process now merely has precedent value.  As far as the new Commission is concerned, the Brexit file is closed (at least for the present).  It was quite extraordinary how a dilemma which soaked up so much time and energies of the political establishments across Europe for the last three years could be quite so summarily dispatched.

One file however which the new commission president does not propose to close is the one concerning the Common Consolidated Corporate Tax Base.  This project is now so old it could be given the keys to the house.  It was all about establishing a common set of rules for companies across Europe to calculate their taxable profits (which is a good idea) and then to divvy out the actual tax yield between the countries where the multinational group operated (which is a bad idea).  It’s a bad idea not least because multinationals don't operate as tidily compartmentalised entities operating solely within the confines of Europe. 

I suspect that its inclusion in the incoming Commission’s political guidelines has caused some surprise because the sense around the European diplomatic corps was that the Common Consolidated Corporate Tax Base idea was dead.  It was being eclipsed by the OECD work on cross-border taxation, and particularly by the current work on the taxation of companies operating in the digital economy.  Its inclusion is all the more surprising because one of the countries which might lose most from a fully functioning EU company tax regime is Germany, which of course is where the new Commission President hails from.  Possibly its inclusion reflects the objectivity which is so essential for the Commission President's job?

However it isn’t the only taxation priority for the new Commission, which apparently will major on the concept of fair taxation.  Fair taxation must be one of the most nebulous concepts in the entire lexicon of political economic management.  It means different things to different people and to different businesses and in different circumstances at different times.  In my experience the only characteristic of fair taxation which people agree on is that it involves the tax being paid by someone else, and preferably not by a voter. 

In this too the new Commission President is being consistent, because her aspiration for the tax system solely concerns the taxation of companies.  She makes no reference whatsoever to the taxation of individuals, those same individuals who overwhelmingly pay the bulk of tax right across the European Union.  Does Von der Leyen consider that the income tax or VAT or inheritance tax systems are already uniformly fair? 

For anyone already concerned at the continuing encroachment of European rules on taxation (which remains a national competence), there is much on the Commission’s political agenda to make them uneasy.  Von der Leyen proposes to make more use of the clauses in the EU Treaties that allow proposals on taxation to be adopted by co-decision and decided by qualified majority voting (rather than unanimity).

Taking the agenda at face value, the approach of the new European commission to taxation will be virtually identical to that of the Juncker commission, only more so.  Because of the particular political circumstances involving Von der Leyen’s appointment, her agenda had to be many things to many people.  The political imperatives stifled the opportunity for imaginative approaches.  Even as things stood, she only managed to secure her position by the narrowest of margins in the European Parliament. 

A bit more imagination might have been interesting, but thanks to Boris and Donald, times are surely already interesting enough.  If we are always better off dealing with the devil we know, this tax agenda is a devil the Irish are already well familiar with.

Dr Brian Keegan is Director of Public Affairs with Chartered Accountants Ireland