[WATCH] Alfred Sant sounds warning on EU tax harmonisation through the backdoor

Former Maltese prime minister Alfred Sant has warned of ‘tax populists’ using EU competition policy as an excuse to usher in tax harmonisation across the bloc

Labour MEP Alfred Sant
Labour MEP Alfred Sant

Labour MEP Alfred Sant has sounded the warning on what he describes as “tax populists” using the EU’s competition policy to bring taxes across the bloc on an equal footing.

Sant said competition policy was being deployed by the European Commission to “oversee and correct” tax policies in member states when this was still a matter of national competence.

“It would be a pity if EU competition policy comes to be driven according to the urgings of tax populists who are pushing for harmonisation of tax policies and have no problems with using competition policy to achieve this,” Sant warned during a recent plenary sitting of the European Parliament.

Larger EU states like Germany and France have long been pushing for a degree of tax harmonisation on the basis that lower corporate taxes in some EU jurisdictions was enabling companies operating in their country to pay fewer taxes by shifting profits elsewhere. Taxation is broadly a national competence and moves towards harmonisation have been resisted by smaller countries like Malta, Ireland and the Netherlands. But with the UK’s departure from the EU, the smaller countries are set to lose a key ally on the subject.

Any changes to taxation policy will have to be approved by unanimity at Council level but last year the European Commission floated the possibility of forcing through tax legislation by qualified majority, citing a never-used emergency clause in the Lisbon treaty.

Sant, who served as the Socialists and Democrats rapporteur on the annual report on competition policy, told the European Parliament that these attempts could serve to screen another reality.

Tax flexibility within member states under conditions of full transparency should be considered an integral part of the competitive situation Alfred Sant

“At a time when European economies are again growing well, working and middle class people as well as pensioners are not being compensated for the sacrifices they had to make during the years of austerity. They will not be consoled by being told that in the interests of competition, taxation within the union should be harmonised,” he said.

He noted that competition policy was taking a greater importance in the EU’s profile and expressed hope this was not happening for the wrong reasons.

Competition policy is meant to ensure that free market rules apply to the benefit of consumers all over Europe, Sant added, noting that in practice the focus has frequently been on questions relating to state aid than on matters arising from corporate competitive strategies.

“In this, it has been difficult to avoid one-size fits all approaches that failed to discriminate sufficiently between north and south, island and metropole, peripheral and central… tax flexibility within member states under conditions of full transparency should be considered an integral part of the competitive situation and is vital for the prosperity of smaller member states in the single market,” Sant said.

The annual report was approved with 445 votes in favour, 104 votes against and 38 abstentions. Sant voted in favour of the annual report.

Read also: After targeting Malta, Brussels now admits it is probing all member states over VAT on luxury yachts

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