MEP warns that tax harmonisation undermines competitiveness of small EU economies

Former Prime Minister and MEP Alfred Sant has warned the European Parliament that moves towards tax harmonisation undermine the competitiveness of small peripheral economies of the European Union. 

Speaking ahead of voting against a report entitled ‘Rules against certain tax avoidance practices,’ Sant said that the control of taxation policy is the only real tool left by which small EU member states can retain flexibility for competitive purposes. 

“My vote against this report follows on similar votes on the same subject in past months. I fully understand the need to control the wide range of practices by which taxes are being evaded by individuals and companies, large and small, as revealed by Luxleaks and the Panama papers scandal,” he said, adding that he supports all measures meant to increase transparency in taxation affairs.

“But such measures should not end up infringing the existing right of EU member states to retain sovereignty over their tax systems,” he said.

“It seems to me that the proposals made in this report open the door fully to further follow-ups that can only lead to tax harmonisation within the EU. With this I cannot agree, for it would serve to increase the growing structural divergences between the central EU economy and the small peripheral economies of the Union.”

Sant explained that for these smaller economies, taxation policy (which they still control) is the only real tool left by which to retain flexibility for competitive purposes.

“All others they have given up (customs protection, budgetary flexibility in public budgeting, the setting of VAT and excise, state aid policy, exchange rate). Moves towards harmonisation of income and profit taxes will only further undermine their competitiveness,” he added.

The report was approved 486 voting in favour, 88 against and 103 abstentions.