As France and Germany move closer to aligning tax policy how long
before the rest of the EU follows suit?
According to Les Echos, emphasising President Nicolas Sarkozy·s
call for ·fiscal convergence·, Germany and France have taken the
first steps to coordinating their tax policies.In the UK of course,
there is long-standing opposition to this grand plan but residents
of France, EU citizens and expats alike, should be aware of which
way the wind is really blowing.
Recently and for the first time ever, German Finance Minister
Wolfgang Schäuble joined a meeting of the French Cabinet and at
the end of it, he and his French counterpart Christine Lagarde,
issued a joint statement on fiscal integration. Earlier in March
2010 Christine Lagarde had attended a German Council of Ministers
meeting for similar exchanges. Their moves follow a call by President
Sarkozy for deeper economic integration. He said: "The convergence
between our fiscal systems is an essential element in our economic
integration and the deepening of the European internal market".
The two countries · effectively the drivers of the EU train ·
say the next step will be a review of fiscal systems with regard
to where tax falls and by how much: in France, social charges
account for 42.8% of GDP, against just 39.5% in Germany. The Schäuble/Lagarde
joint communiqué says they signed a letter containing proposals
to strengthen EU budgetary discipline rules (this refers basically
to the 3% cap on budget deficit set out under EU Stability and
Growth Pact (SGP) rules and suspended when the US/UK banking crisis
sparked a global meltdown two years ago).
The ministers seek more political sanctions where there has been
·gross non-compliance· with the SGP deficit cap by any member
state. Reactions to the Franco-German move have been muted with
the exception of the usual and expected disdain emerging from
Jacques Garello director of the French think tank IREF wrote
in Le Figaro on 24 July: "Governments in Paris and Berlin
have adopted the principle of tax convergence, stressing the beneficial
influence this could have on growth in Europe and the health of
the euro. It has already been agreed (by EU member states) that
tax competition is harmful. A tax war among EU member states would
be suicidal, and economic governance of Europe is unthinkable
as long as taxes remain a matter of national sovereignty."
However IREF, an independent policy research institute, is no
uncritical supporter of the move: "While we could well imagine
that a fresh convergence could gain acceptance, this, we believe,
will be in favour of lower taxes and less government intervention.
Competition offers a process of harmonization that is far more
effective than any illusory sovereign or European decree. To achieve
true convergence, nothing beats tax competition",
it writes 11 Aug 2010 on its website..
Adding further fuel to the debate the jointly-run foreign
affairs website of the German and French governments —
has published a paper entitled “French-German European Economic
Among other points made it says: “The sustainability of the single currency can only be achieved through greater economic policy coordination. The coordination and monitoring instruments that underpin stability and major economic policy guidelines… should be better articulated while remaining formally separate.”.
Meanwhile and in a related development, debate is underway about raising more money from tax, for Brussels, even though the move has not been well received. Initial reaction to the idea from French minister Pierre Lellouche, secrétaire d’Etat français aux Affaires européennes, was hardly encouraging. He told Agence France Presse news agency: “We think this idea of a European tax is completely inappropriate. Any additional tax at this time, is unwelcome, rather what we all need now is much greater emphasis on savings.”
However the Eurocrats are pursuing the idea and Polish commissioner in charge of the EU budget, Janusz Lewandowski, has now suggested an EU levy on the financial sector has the best chance of winning support. This was after France had joined the UK and Germany to oppose mooted plans for creating an EU tax. Mr Lewandowski was shot down after he initially floated the idea in the German press.
But according to EUobserver
website he told the Polish press agency, PAP, 10 August: “Talking
about EU own resources and something with the shape of a European
tax is extraordinarily unfashionable. But I see a tendency, that
it is possible in terms of public opinion to defend a tax on financial
transactions or another form of tax on the financial sector. It
would even be popular.” The debate continues on
the Robert Schuman Foundation website: acknowledging that
no national parliament is willing to accept the principle of a
“European tax”, the foundation (created in 1991 as
the main French research centre on Europe) suggests that increasing
the portion of VAT collected by each member state and contributed
to the EU central pot, would probably be the easiest solution.
Another might be the raising of EU eco-taxes on polluting vehicles
and industries. Here however its carbon trading/greenhouse gas
emission tax scheme enters very choppy waters. For not only are
greenhouse gas emission taxes controversial but their entire basis
has been called into question after the debacle during the winter
this year, that suggests the “science” behind global
warming is defective, distorted and even unscrupulously manipulated
for partisan purposes. (Try James Delingpole’s blog at the
UK’s Daily Telegraph for some of the more trenchant sceptical
views on global warming, or “climate change” as it
was hastily re-baptised: here,
Related Post: The global financial crisis
may no longer be on the front pages of the newspapers but anyone
who thinks it has gone away is burying their heads in the sand.
The seminal upheaval in the global economy caused by the reprehensible
and irresponsible behaviour of Wall Street and City bankers and
complicit Washington and London politicians, is a long way from
resolution. “The U.S. is bankrupt and we don’t even
know it” says Laurence Kotlikoff, professor of economics
at Boston University in
this oped piece for Bloomberg’s financial wire.
Related Post: Finally for those whose French
is proficient Liberation newspaper’s Jean Quatremer,
a law lecurer at Paris X-Nanterre and journalist covering European
affairs for the paper, blogs on Coulisses de Bruxelles, UE
(Brussels Scenes) about three possible scenarios for the future
of Europe in the wake of the global crisis, the Greek tragedy,
the controversial EU bailout and the ongoing weakness of the euro.
Might it all collapse he asks? Read it here
and if your French isn’t quite up to it, well try Google's
translator for a rough idea.