Here it is at last: the debated proposal for a Directive on a common system of financial transaction tax. This type of tax was initially proposed by the economist James Tobin.
The idea is to tax a great number of financial instruments – including instruments which are negotiable on the capital market, money-market instruments (with the exception of instruments of payment), units or shares in collective investment undertakings (which include UCITS and alternative investment funds) and derivatives agreements. The tax rates will be set by Member States, but must not be less than 0.1% of the taxable amount in most cases.
According to the Commission the new tax will have progressive distributional effects, i.e. its impact will increase proportionately with income, as higher income groups benefit more from the services provided by the financial sector.
The Commission has put forward an important proposal for the reformation of the so-called Generalised System of Preferences (GSP) which grants specific tariff preferences to developing countries in the form of reduced or zero tariff rates or quotas.
Key elements of the proposal include:
1. Concentrating GSP preferences on fewer countries. A number of countries would no longer be eligible to benefit, including:
- Countries which have achieved a high or upper middle income per capita, according to the internationally accepted World Bank classification (such as Kuwait, Russia, Saudi Arabia and Qatar).
- Countries that have preferential access to the EU which is at least as good as under GSP – for example, under a Free Trade Agreement or a special autonomous trade regime.
- A number of overseas countries and territories which have an alternative market access arrangement for developed markets.
2. Reinforcing the incentives for the respect of core human and labour rights, environmental and good governance standards through trade by facilitating access to the GSP+ scheme which grants additional, mostly duty-free preference to vulnerable countries.
3. Strengthen the effectiveness of the trade concessions for Least Developed Countries (LDCs) through the “Everything but Arms” (EBA) scheme.
4. Increasing predictability, transparency and stability.
European citizens should think more about their demands when talking about the EU. Here’s why.
These are not the best of times for the European Union. There’s a financial crisis; an immigration crisis; a crisis of trust, and who knows what else. In a nutshell, the EU is in trouble.
What is more difficult to comprehend is the malignancy and the “I-told-you-so” attitude of so many politicians, commentators and European citizens. The poignancy of the negative feelings is really remarkable. That is why I would like to do something unusual for this blog and address these skeptics. My objective is to provide a merciless, subjective and heavily normative critique of the complacency of those that seem to prefer a European future without a European Union.
In order to do that, I need to make an important observation. Homo Sapiens has not evolved substantially during the last 60 years. That being said, the claims that a new war on the European continent is impossible seem strange. It was not the tanks and airplanes that destroyed Europe during World War II, it was the people in them. What is more, our physical and genetic ancestors have waged war on one another for at least two millennia on this continent. In fact, the only longer peaceful episode in recent history has been the period of European integration. It’s true that NATO and the dynamic of nuclear deterrence also played a part. But it was the cooperation of European elites within the European Community that cemented this security pact.
Nowadays many believe that wars are part of the history, but not of the future. Others think that wars may be a useful instrument of foreign policy. What unites them is the lack of any wartime experience. This virus of complacency and ignorance is widespread. It has caught up with politicians, journalists, and all kinds of experts. The McDonalds rule is their flag, although it has already been broken. This virus makes them think that states are well equipped to solve emerging problems using the classic instruments of intergovernmental cooperation. The problem with their narratives is that this type of cooperation has recently failed spectacularly – with the UN Climate Change Conference failing to agree on new rules for climate change mitigation, WTO failing to agree on the completion of the Doha round, and the G-20 failing to agree on anything except for the summit menu. These are not just incidents; these are symptoms of the limitations of the classic forms of international cooperation.
Someone might argue that if the EU were so successful, it wouldn’t have experienced its recent crisis. That is true. The EU is not perfect, and we are now bearing the fruits of the lax rules of the Economic and Monetary Union. But it is much better than any other form of cooperation especially given the small economies of many Member States. This issue of economic efficiency is usually not discussed by euroskeptics. The truth is that without the European Union economic life in Europe would definitely slow down, and businesses know that. This is the problem of some anti-EU parties: their constituencies will actually suffer from any possible withdrawal from the Union. That is why they prefer to grumble about the EU without taking a meaningful step towards resolution of their grievances. Referendums should be held in each and every Member State that feels the need to take a different path to prosperity. The United Kingdom should be particularly encouraged to conduct a referendum on its EU membership. The European Union is not a club of convenience; its success depends on the high motivation of its members.
The European Union is not at a crossroads. It is a well-functioning and unique mechanism for political integration. It’s up to its users – the European citizens, to use it properly. It will deliver results only if we command it to do so. That is why from now on I would like to hear more demands, and less chaotic criticism when discussing the EU.
Posted in EU Reform, Foreign and Security Policy, Human Rights, Institutional Affairs, Internal Market, Justice and Internal Affairs
Tagged COP16, Europe Day, European Union, G-20, history, intergovernmental cooperation, war, WTO
Directive 2011/35/EU concerning mergers of public limited liability companies has been published in the Official Journal. The directives sets rules for merger by acquisition, merger by formation of a new company, and other operations treated as mergers. The main objective of the directive is that the shareholders of merging companies be kept adequately informed.
France and Italy have signaled their desire to push for a reform of the Schengen framework for border control. One of the most important proposals is the procedural right to temporarily re-establish border controls between two countries. The European Commission is scheduled to present its own plans for amending the Schengen rules next week (4 May).
The Schengen border security legal framework is now part of the EU acquis. Any revision of the Schengen framework goes through a codecision procedure, where the European Parliament is a co-legislator with the Council (see art. 77, para. 2 TFEU). More, the Commission is the only body that can propose legislation on border checks, asylum and immigration (see a contrario art. 76 TFEU). Whatever France and Italy propose is of no relevance; the Member States do not have a right of initiative on these matters.
On all these accounts I am quite skeptical that Italy and France will succeed to push an amendment of the Schengen framework that seriously undermines the principles of the current regime. Any significant policy overhaul must be accompanied by a careful impact assessment and discussions not only among governments of Member States, but also with relevant stakeholders. It will take more than a bilateral summit to do that.
UPDATE: There is a good analysis by four economists in VOX on the impact of the proposed reform. They conclude that it is unlikely that the introduction of the Consolidated Corporate Tax Base would bring significant benefits to the EU in aggregate in terms of employment, GDP or efficiency.
The plans for a common consolidated corporate tax base are not new. However, the Commission has now stepped forward to formally propose the text of a new directive that should introduce a common corporate tax base in the EU. This is one of the measures recently identified in the Pact for the Euro.
The proposal will allow companies that have business activities in different Member States to consolidate their financial results, and to offset the profits in one country against the losses in another, and pay taxes on the net amount only. This is supposed to decrease compliance costs especially for SMEs. However, a recent report by Earnest&Young shows that there will be an average increase of 13% in compliance costs. The report also showed that the impact of the CCCTB apportionment factors was to move taxable profit into Member States with higher tax rates, thus increasing the total tax burden. Some Member States are also opposed to the idea. Unanimity is needed in the Council for adopting such legislation.
The European Commission has published in the recent days two communications that touch on important aspects of the sustainable economic development of the EU.
The first is a communication on renewable energy and the progress towards the 2020 targets. The communication presents an overview of the renewable energy industry in Europe, its prospects to 2020 and addresses the outstanding challenges for the development of the sector. The Commission points out that renewable energy constituting 62% of 2009 energy generation investments in the EU. Member States projections show that renewable energy will grow at a faster pace in the years up to 2020 than in the past. Combined Member States expect to more than double their total renewable energy consumption from 103 Mtoe in 2005 to 217 Mtoe in 2020. If all the production forecasts are fulfilled, the overall share of renewable energy in the EU will exceed the 20% target in 2020. The Commission suggests that whilst annual capital investment in renewable energy today averages €35bn, this would need to rapidly double to €70bn to ensure the EU achieves its goals.
The second is a communication on the commodity markets and raw materials. This communication was delayed due to the French request to include measures to improve the transparency of financial and commodity markets. The document makes an overview of developments on physical markets of oil, gas, electricity, agricultural commodities and raw materials. The Commission outlines the growing interdependency of financial and commodity markets and then outlines policy measures for the separate physical markets. The communication then outlines the Raw Materials Initiative and describes the 14 critical raw materials – those who have a particularly high risk of supply shortage and are particularly important for the value chain.
Posted in Agriculture and Fisheries, Budget and Finance, Energy, Enterprise, Environment, Foreign and Security Policy, Internal Market, Telecommunications, Transport
Tagged commodity markets, critical raw materials, Europe 2020, Financial Markets, renewable energy, strategy, sustainable development, targets