EU commissioner yearns for tax harmonisation by another name

When is tax harmonisation not tax harmonisation? When a European commissioner says so, perhaps.

Former Italian premier and now Europe's economy commissioner Paolo Gentiloni gave a speech on tax to an Irish audience on Monday for an online event organised by the Institute of International and European Affairs think tank.

He had a few warm words for the Republic, including the obligatory pat on the head about having an educated workforce, a friendly business environment, and so on and so forth. Then he got down to brass tacks: laying out a case for effective tax harmonisation within the European Union while simultaneously denying the truth of what he was clearly laying out.

‘Loopholes and mismatches’

Gentiloni decried “loopholes and mismatches” between the tax systems of various EU member states. He said this was leading to “aggressive tax planning” and he denounced the “difference in national tax systems” which he said was damaging the EU’s single market and was a “barrier” to cross-border trade. He suggested such barriers should be “reduced”.

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Logically, the only way you can reduce differences between national tax systems in Europe is to make those systems more similar, which is to say, to harmonise them to some extent. The commissioner suggested that some of the proposed new rules on tax would be implemented via a directive “to ensure uniform implementation”. Again, what is this but a form of tax harmonisation by another name?

Centralised decisions

When he faced questions afterwards, the commissioner explicitly denied that he was calling for any form of tax harmonisation. He said he didn’t want to see “centralised decisions” on tax.

Yet, in almost the same breath, he also said he hoped that agreement on new rules for corporate tax could be reached at the G20 club of rich countries, which sounds suspiciously like centralised decision making.

National tax sovereignty is an EU principle. Gentiloni acknowledged the tension between the outcome he seeks and the fact that tax is meant to be a national competency in the EU. He billed current proposals as a “balance” between the single market and tax sovereignty.

Some principles, it seems, can be compromised.