Deepening the EU Single Market and strengthening the Digital Single Market requires tax harmonisation across all of the Member States, as well as additional across-the-board tax cuts to keep the EU competitive in an increasingly crowded investment climate, Luxembourg’s Prime Minister Xavier Bettel said while recently addressing the European Parliament.
“We often talk about tax harmonisation within the EU. But what bothers me is the impression that tax harmonisation for our partners implies tax increases. If we want to harmonise, shouldn’t we be working in the interests of global competitiveness and the interests of the EU taxpayers and talk about tax decreases?” Bettel said.
While addressing his speech before a half-empty plenary session room in Strasbourg, Bettel, nevertheless, stressed that he is not calling for ‘tax dumping’, but is instead looking to increase the EU’s global competitiveness.
According to current EU legislation, the question of raising and setting taxes, with some exemption concerning VAT and excise duties, refers to the national competence. Brussels has so far tried to take a tougher approach toward the certain Member States who try to lure in big digital companies and corporations by offering them lower tax rates or tax dodging schemes.
The European Commission and several Member States engaged in a heated debate over the issue of tax rate harmonisation in November of last year. At the time, the EU’s tax commissioner Pierre Moscovici said the Commission considered using extraordinary powers to strip the EU Member States of their veto power on tax matters to break their resistance over legislation that had previously been blocked.
Hungarian Prime Minister Viktor Orban and his Irish counterpart Leo Varadkar, the heads of state of the two countries with the lowest corporate tax rate in the EU, expressed strong opposition against any effort to harmonise corporate and other tax rules within the bloc, saying any such move would severely damage competition in the single market.