Lisbon will allow the EU to force tax harmonisation?

Sam Vimes

There's an ongoing argument over in AH about lisbon that I'm hoping can be cleared up. you can get the gist of it from this post:

http://www.boards.ie/vbulletin/showpost.php?p=58710370&postcount=1801

Basically, part of article 294 states that in the special case of a group of member states proposing legislation, "paragraph 2, the second sentence of paragraph 6, and paragraph 9 shall not apply."

these are the parts:

2. The Commission shall submit a proposal to the European Parliament and the Council.

The Commission shall inform the European Parliament fully of its position.

9. The Council shall act unanimously on the amendments on which the Commission has delivered a negative opinion.

he's claiming that the the fact that the part about "the council acting unanimously" is said to not apply means that if member states propose legislation instead of the council or the commission then unanimity doesn't apply and it goes to QMV

the problem with this, he claims, is that then Europe will be able to force through legislation harmonising tax because our low corporate tax "distorts market conditions"


As far as I'm concerned the issue has already been answered here:
http://www.boards.ie/vbulletin/showpost.php?p=58470994&postcount=88 (up to post #92) but he doesn't seem willing to accept my (and Scofflaw's) explanation, namely:

the special provisions refer to a case where legislation is proposed by the member states. the three sentences that are said not to apply in that case only refer to the case where the commission has proposed something and so it's simply that they don't make any sense in that context

he has produced as evidence the following article:
http://www.taxanalysts.com/www/features.nsf/Articles/FAD34BD668AAC636852572D80069B29A?OpenDocument

my questions would be:

• is this article referring to that part of the treaty and is it referring to lisbon at all?
• is it correct, ie can a single corporate tax be pushed through without our consent? (that's more of a general question, the important thing is if lisbon will allow it to happen or can it currently be done anyway so it would have nothing to do with the treaty)

so can anyone give me a definitive answer and an explanation of the text that whatisayis will accept?


btw, this interpretation of the text came from his own reading of it. no one else seems to be claiming that the text means what he says it means except possibly the guy in the artlice (if he is in fact talking about that part of the treaty

Hitman Actual

• is it correct, ie can a single corporate tax be pushed through without our consent? (that's more of a general question, the important thing is if lisbon will allow it to happen or can it currently be done anyway so it would have nothing to do with the treaty)

A quick answer summarised from everything I've read on CCCTB, as I'm under pressure but I'm sure other posters will flesh out/clarify what I'm saying:

• CCCTB legislation will be a reality in the coming years- Lisbon doesn't change anything from what can be achieved through the current framework.
• The commission has (more or less) acknowledged that they can only pursue their CCCTB objectives through Article 94 TEC, which requires unanimty. So our veto still stands.
• As the commission knows that they will never get unanimity of MS's, once the legislation fails they intend to pursue CCCTB through the enhanced co-operation procedure. In that, there's still a doubt whether they would get 8 member states to participate (or 9 through Lisbon), as corporation tax is such an issue in many states.
• An important point to add is that herein is a very good reason why we don't want to be part of a two-tier Europe, or a member of a 'fax democracy'. CCCTB will affect Ireland whether we participate or not, so we need to be involved in the negotiations as much as possible.

Scofflaw

Sam Vimes wrote: »

There's an ongoing argument over in AH about lisbon that I'm hoping can be cleared up. you can get the gist of it from this post:

http://www.boards.ie/vbulletin/showpost.php?p=58710370&postcount=1801

Basically, part of article 294 states that in the special case of a group of member states proposing legislation, "paragraph 2, the second sentence of paragraph 6, and paragraph 9 shall not apply."

these are the parts:


he's claiming that the the fact that the part about "the council acting unanimously" is said to not apply means that if member states propose legislation instead of the council or the commission then unanimity doesn't apply and it goes to QMV

the problem with this, he claims, is that then Europe will be able to force through legislation harmonising tax because our low corporate tax "distorts market conditions"


As far as I'm concerned the issue has already been answered here:
http://www.boards.ie/vbulletin/showpost.php?p=58470994&postcount=88 (up to post #92) but he doesn't seem willing to accept my (and Scofflaw's) explanation, namely:

the special provisions refer to a case where legislation is proposed by the member states. the three sentences that are said not to apply in that case only refer to the case where the commission has proposed something and so it's simply that they don't make any sense in that context

I'm sorry to say that's pretty standard. Once someone has got a firm grip of their personal interpretation of treaty sentences, they tend not to let go until you prise it from their cold, dead jaws.

Usually that's because they have a pre-determined result that they know to be true - in this case that the Commission will be able to set tax rates - and therefore it's necessary that the Treaty read the way they want. Even if you do make them understand what's actually there, they'll just pick another piece of the treaty to "support" their "case".

Sam Vimes wrote: »

he has produced as evidence the following article:
http://www.taxanalysts.com/www/features.nsf/Articles/FAD34BD668AAC636852572D80069B29A?OpenDocument

my questions would be:

[*]is this article referring to that part of the treaty and is it referring to lisbon at all?

No, and no. The article doesn't mention Lisbon - reasonably, because there's nothing in Lisbon that has any real bearing on CCCTB. The CCCTB working group was set up after Nice, and has been beavering steadily away ever since.

Sam Vimes wrote: »

[*]is it correct, ie can a single corporate tax be pushed through without our consent? (that's more of a general question, the important thing is if lisbon will allow it to happen or can it currently be done anyway so it would have nothing to do with the treaty)

Hm. First, the CCCTB isn't a tax rate - it's a tax base, which is to say it doesn't determine what rate is paid, but what it's paid on. Currently that's very opaque - in Ireland, the tax rate may be 12% on 68% of the income, whereas in the UK it may be 30% on a slightly different 65% of the income. The CCCTB would mean that each individual country's rate would apply to the same say 65% of income in both countries.

Second, the mechanism by which it is claimed CCCTB would be "brought in by the back door" is enhanced cooperation. Enhanced cooperation was introduced at Nice - the only effect of Lisbon is to raise the bar slightly on the number of countries required to form an enhanced cooperation group - from 8 to 9. Anthony Coughlan argued at the Nice referendum that enhanced cooperation would allow harmonised tax rates, so this is, in fact, not an argument about Lisbon at all - it's recycled material from the Nice referendum. Still, it's sufficiently complex and scary sounding that I expect it to come up at the next couple of referendums.

Third, and most importantly, the control of domestic direct taxation is not an EU competence. That means there is not ever a Council session which votes on it, and there are no Commission proposals in respect of it. The only way in which the EU gets involved in direct taxation is where the domestic taxation rules have cross-border implications:

Under Community law Member States are largely free to design their direct tax systems so as to meet their domestic policy objectives and requirements. However, national tax rules designed solely or primarily with the domestic situation in mind may give rise to incoherent tax treatment when applied in a cross-border context. An individual or corporate taxpayer in a cross-border situation may suffer discrimination or double taxation or may face additional costs through having to comply with several different rules.

Source

Here's a nicely definitive statement from the EU:

Your national government decides how much tax you pay – not the European Union. What the EU does is ensure that national tax rules are consistent with the Union’s overarching goals of job creation and that they do not give businesses from one country an unfair advantage over their competitors in another country. EU tax policy is about upholding the principles of the single market and free movement of capital.

Governments raise tax to finance their expenditure. Different member states have different spending priorities and the EU does not stand in the way of those priorities providing member states stay within reasonable spending limits. If they overspend and go into too much debt, they could jeopardize the economic growth of other EU countries. However, providing they are prudent in their economic policy, they have considerable discretion on how to spend their money and, therefore, what taxes to raise to fund their spending.

It is our governments, therefore, which set tax rates on company profits and personal incomes, savings and capital gains. The EU as a whole merely keeps an eye on these decisions to see they are fair to the EU as a whole. It pays particular attention to company taxation because of a risk that taxes could create obstacles to the smooth movement of goods, services and capital around the EU’s single market. Member countries are bound by a code of conduct to prevent them providing tax breaks which unfairly distort investment decisions, for example.

Source

The assumption that the EU can use "distortion of competition" to set harmonised tax rates rather misses a fundamental point - different tax rates are the competition. A single harmonised rate means there is no competition to distort.

The EU has never ruled on a direct tax rate.

Sam Vimes wrote: »

so can anyone give me a definitive answer and an explanation of the text that whatisayis will accept?

btw, this interpretation of the text came from his own reading of it. no one else seems to be claiming that the text means what he says it means except possibly the guy in the artlice (if he is in fact talking about that part of the treaty

Unfortunately, having read a couple of whatisayis' posts, he's not going to change his mind on the substantive point. He has decided that the EU will set a harmonised tax rate, and it's now up to you to prove the negative - and the only possible proof of the negative is that it hasn't happened - a proof that applies only to the past.

In a nutshell, though, he's legally wrong because the EU doesn't have the power to set direct tax rates. He's politically wrong because the member states will not accept the EU indirectly setting their direct tax rates - which is why they haven't been allowed the power to do so, and it's the member states that run the EU, not vice-versa. Finally, he's wrong because there's nothing in Lisbon that materially changes the situation.

cordially,
Scofflaw

Sam Vimes

Thanks a lot Scofflaw, excellent as always

I suppose all I can do now is tell him to read your post and then refuse to discuss it any further with him. And if he tries to convince someone else of it I'll just link them to this thread

K-9

I think this has all been pointed out to him before.

I think he was last trying to argue CT could come under QMV, despite us pointing out it wasn't. Basically we didn't have a veto.

His current position is it may happen if enough countries want it.

Scofflaw

Seanies32 wrote: »

I think this has all been pointed out to him before.

I think he was last trying to argue CT could come under QMV, despite us pointing out it wasn't. Basically we didn't have a veto.

His current position is it may happen if enough countries want it.

Which sounds good until you realise that CT doesn't come under the EU at all. So the idea that it might come under QMV is completely false.

Still, like I said, you really can't convince someone by reference to evidence when that's not what their view is founded on - there's a 952-page thread on Creationism in the Religion forum to prove it.

cordially,
Scofflaw

K-9

Scofflaw wrote: »

Which sounds good until you realise that CT doesn't come under the EU at all. So the idea that it might come under QMV is completely false.

Still, like I said, you really can't convince someone by reference to evidence when that's not what their view is founded on - there's a 952-page thread on Creationism in the Religion forum to prove it.

cordially,
Scofflaw

YEP, though Conspiracy Theories is probably more apt.

whatisayis

Scofflaw wrote: »

Which sounds good until you realise that CT doesn't come under the EU at all. So the idea that it might come under QMV is completely false.

Still, like I said, you really can't convince someone by reference to evidence when that's not what their view is founded on - there's a 952-page thread on Creationism in the Religion forum to prove it.

cordially,
Scofflaw

I think this post sums up exactly why the vote was defeated. The assumption that anyone who voted No either didn't know what they were voting on, were members of Libertas, Sinn Fein et al or were members of some fundamentalist religion etc. etc... no doubt some obviously were but
not all. It is also possibly quite true that some people voted Yes because they didn't know what they were voting on, were afraid Ireland would be kicked out of the EU (which I think is going to be the main thrust of the Yes campaign in this round), or simply believed that if the government said they should vote Yes, then they should. So, I don't resort to catergorising people based on their views on the treaty.

To get back on topic. If you had read all my posts you would see that I quite categorically stated that the CCCTB seeks to consolidate the tax Base, not Rates. That's one of the reasons its called the 'CCCTB' not 'CCCTR'. Stating that "He has decided that the EU will set a harmonised tax rate" is based entirely on your own assumption.

One question for you:
If "CT doesn't come under the EU at all" why did we increase the standard corporate tax of 10% to 12.5%?

K-9

whatisayis wrote: »

I think this post sums up exactly why the vote was defeated. The assumption that anyone who voted No either didn't know what they were voting on, were members of Libertas, Sinn Fein et al or were members of some fundamentalist religion etc. etc... no doubt some obviously were but
not all. It is also possibly quite true that some people voted Yes because they didn't know what they were voting on, were afraid Ireland would be kicked out of the EU (which I think is going to be the main thrust of the Yes campaign in this round), or simply believed that if the government said they should vote Yes, then they should. So, I don't resort to catergorising people based on their views on the treaty.

I don't know where you get that from in that post?

whatisayis wrote:

To get back on topic. If you had read all my posts you would see that I quite categorically stated that the CCCTB seeks to consolidate the tax Base, not Rates. That's one of the reasons its called the 'CCCTB' not 'CCCTR'. Stating that "He has decided that the EU will set a harmonised tax rate" is based entirely on your own assumption.

One question for you:
If "CT doesn't come under the EU at all" why did we increase the standard corporate tax of 10% to 12.5%?

Unfair advantage and competition again I think.

Most Companies where at a disadvantage, some had Zero rates, some 10% and others 32%.

You seem to be convinced they will change it though.

http://www.lawandtax-news.com/html/ireland/jirlatdctx.html

oscarBravo

whatisayis wrote: »

I think this post sums up exactly why the vote was defeated. The assumption that anyone who voted No either didn't know what they were voting on, were members of Libertas, Sinn Fein et al or were members of some fundamentalist religion etc. etc... no doubt some obviously were but
not all.

Non-sequitur. You claim that Scofflaw's post sums up why people voted "no", and follow up by talking about people's assumptions about why people voted "no".

Are you saying that people voted "no" because of the assumptions other people made about why they were voting "no"? Because that doesn't make any sense whatsoever to me.

If "CT doesn't come under the EU at all" why did we increase the standard corporate tax of 10% to 12.5%?

I could equally ask: if income tax isn't an EU competence, why did we introduce a 1% income levy this year?

The question makes about as much sense as yours: none.

Scofflaw

I didn't actually mention people voting No. Someone could have voted Yes and been equally wrong about CCCTB. Overall I don't think it was a very big issue for the electorate.

I've pointed out that you're incorrect about CCCTB and corporate tax because you are, and I've pointed out that you're going to cling to it dogmatically because you are doing so.

To get back on topic. If you had read all my posts you would see that I quite categorically stated that the CCCTB seeks to consolidate the tax Base, not Rates. That's one of the reasons its called the 'CCCTB' not 'CCCTR'. Stating that "He has decided that the EU will set a harmonised tax rate" is based entirely on your own assumption.

And your posts, and, for example, this summary by Sam Vimes:

the problem with this, he claims, is that then Europe will be able to force through legislation harmonising tax because our low corporate tax "distorts market conditions"

So you are claiming that the EU will be able to harmonise our tax rates.

One question for you:
If "CT doesn't come under the EU at all" why did we increase the standard corporate tax of 10% to 12.5%?

And that's what this claim is as well, of course. You're referring, I think, on the one hand to the 10% manufacturing tax which will finally be phased out in 2010, and on the other to the 12.5% corporation tax rate which was reduced from 32% over the period 1999-2003.

I'm not sure why you've chosen to compare those two things, but if you were going to claim that the EU made us raise our "corporation tax rate" from 10% to 12.5% you're once again in the realms of gross inaccuracy. We reduced our corporation tax rate from 32% to 12.5% in 2003, and are moving companies currently on the 10% manufacturing tax to the 12.5% corporation tax.

In short, my problem with your claims is that you're assuming your conclusion, and seeking evidence for your position by making tendentious interpretations of bits and pieces of EU treaties,and inaccurately claiming historical evidence that doesn't exist.

In between, of course, you're accusing me of things I haven't said.

regards,
Scofflaw

K-9

Scofflaw wrote: »

And that's what this claim is as well, of course. You're referring, I think, on the one hand to the 10% manufacturing tax which will finally be phased out in 2010, and on the other to the 12.5% corporation tax rate which was reduced from 32% over the period 1999-2003.

I'm not sure why you've chosen to compare those two things, but if you were going to claim that the EU made us raise our "corporation tax rate" from 10% to 12.5% you're once again in the realms of gross inaccuracy. We reduced our corporation tax rate from 32% to 12.5% in 2003, and are moving companies currently on the 10% manufacturing tax to the 12.5% corporation tax.

You'll probably see the Companies under the 10% rate campaigning for the 12.50% rate to be reduced to 10, Lisbon or no Lisbon.

Scofflaw

Seanies32 wrote: »

You'll probably the Companies under the 10% rate campaigning for the 12.50% rate to be reduced to 10, Lisbon or no Lisbon.

And Lisbon or no Lisbon, if that's what the government decides to set it to, that's what it will be.

cordially,
Scofflaw

whatisayis

Scofflaw wrote: »

You're referring, I think, on the one hand to the 10% manufacturing tax which will finally be phased out in 2010, and on the other to the 12.5% corporation tax rate which was reduced from 32% over the period 1999-2003.

I'm not sure why you've chosen to compare those two things, but if you were going to claim that the EU made us raise our "corporation tax rate" from 10% to 12.5% you're once again in the realms of gross inaccuracy. We reduced our corporation tax rate from 32% to 12.5% in 2003, and are moving companies currently on the 10% manufacturing tax to the 12.5% corporation tax.

In short, my problem with your claims is that you're assuming your conclusion, and seeking evidence for your position by making tendentious interpretations of bits and pieces of EU treaties,and inaccurately claiming historical evidence that doesn't exist.

In between, of course, you're accusing me of things I haven't said.

regards,
Scofflaw

If you feel I have inadvertantly accused you of things you haven't said then I apologise.

You are quite correct when you say I am referring to the changes in our corporate tax rates since 1999. These changes were a direct result of an action by the EU commission in 1998 in which they advised Ireland that the then current corporate tax of 10% for manufacturing was unfair competition due to the higher rate of 32% applied to the services industry. Although the EU had previously ruled that this was not state aid, they decided in 1998 to rule that it was in fact state aid which allowed them to act. Rather than abolish the 10% rate, Ireland, in a very clever move if I may say, reduced the rate for non-manufacturing industry to 12.5% to be actioned by 2003 and included a provision that allowed any pre-1998 manufacturing agreements to retain the 10% until 2010.

So, in my opinion, the EU can and do act on a states corporate tax. Does anyone seriously think that, if the EU had not intervened, Ireland would have reduced the higher rate of 32% to 12.5% and limited the 10% for manufacturing to 2010?

whatisayis

Sorry, forgot to include a link for the above post.

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:1998:395:0019:0023:EN:PDF

sink

whatisayis wrote: »

So, in my opinion, the EU can and do act on a states corporate tax. Does anyone seriously think that, if the EU had not intervened, Ireland would have reduced the higher rate of 32% to 12.5% and limited the 10% for manufacturing to 2010?

I seriously do think that as it's was a smart economic policy and fit the ideological agenda of a junior party newly elected to the government, the PD's.

The EU can act against discriminatory tax polices such as giving one industry a preferential tax rate or giving preferential tax rates to individual organisations. This works in our favours as it allows Irish companies to establish operations right across the EU without risk of being discriminated against by national governments aiding indigenous industries. And guess what we agreed to this as the benefits far out weigh and perceived loss in sovereignty real or not.

What the EU can't do is act to change our direct tax rates, once they are not discriminatory.

K-9

whatisayis wrote: »

If you feel I have inadvertantly accused you of things you haven't said then I apologise.

You are quite correct when you say I am referring to the changes in our corporate tax rates since 1999. These changes were a direct result of an action by the EU commission in 1998 in which they advised Ireland that the then current corporate tax of 10% for manufacturing was unfair competition due to the higher rate of 32% applied to the services industry. Although the EU had previously ruled that this was not state aid, they decided in 1998 to rule that it was in fact state aid which allowed them to act. Rather than abolish the 10% rate, Ireland, in a very clever move if I may say, reduced the rate for non-manufacturing industry to 12.5% to be actioned by 2003 and included a provision that allowed any pre-1998 manufacturing agreements to retain the 10% until 2010.

So, in my opinion, the EU can and do act on a states corporate tax. Does anyone seriously think that, if the EU had not intervened, Ireland would have reduced the higher rate of 32% to 12.5% and limited the 10% for manufacturing to 2010?

I think some parties had it as policy, could be wrong though.

sink

FYI there are exceptions to the rule. Discriminatory direct tax rates are allowed on a regional basis if it qualifies under the EU's regional development policy. This is to precipitate economic growth and job creation in underdeveloped areas such as rural west Ireland. It allows IDA to attract foreign direct investment to these areas through offering 0% corporation tax for the first several years. It also allowed the Polish government to do the something similar with Dell, giving them a cash incentive to relocate it's European manufacturing base to a underdeveloped region of Poland (Although this is still under investigation by the Commission).

Scofflaw

If you feel I have inadvertantly accused you of things you haven't said then I apologise.

No problem.

sink wrote: »

So, in my opinion, the EU can and do act on a states corporate tax. Does anyone seriously think that, if the EU had not intervened, Ireland would have reduced the higher rate of 32% to 12.5% and limited the 10% for manufacturing to 2010?

I seriously do think that as it's was a smart economic policy and fit the ideological agenda of a junior party newly elected to the government, the PD's.

The EU can act against discriminatory tax polices such as giving one industry a preferential tax rate or giving preferential tax rates to individual organisations. This works in our favours as it allows Irish companies to establish operations right across the EU without risk of being discriminated against by national governments aiding indigenous industries. And guess what we agreed to this as the benefits far out weigh and perceived loss in sovereignty real or not.

What the EU can't do is act to change our direct tax rates, once they are not discriminatory.

Hmm. So the idea is that because the EU can rule that applying a preferential rate to a particular industry sector or industry within a country is a distortion of competition, they can also rule that the tax rates of a country per se are a distortion of competition?

While it seems a little harsh to describe that as superficially plausible, I think the description is apt. The issue with the 10% manufacturing tax was that it constituted state aid to a specific sector - a condition which cannot apply to a corporation tax rate set across all sectors. Indeed, the Irish solution, of applying a rate very close to the 10% manufacturing rate across the board instead of the then applicable 32% rate in response to the Commission ruling, demonstrates that a low tax rate is not, of itself, discriminatory.

If we look at the article under which this decision was taken - Article 92 as it was then, and 87 as it is currently, we find that the powers of the Commission are based on the following:

"Save as otherwise provided in this Treaty, any aid granted by a Member State or through State
resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market."

It is not sufficient to show that because the Commission can impose judgements on direct taxes within those agreed limits and under those agreed and specified provisions, it thereby has powers of wide and unspecified competence over direct taxes. Nor can one say that because the Commission has been given the power to determine that a tax constitutes discriminatory state aid to particular sectors, that it thereby gains the power to determine that any overall national rate is generally discriminatory.

There are an apparently endless series of such arguments being made - that because the Commission has the power to rule a particular use of something discriminatory, it has general powers over it, and will shortly rule the thing itself discriminatory in its apparently endless and insatiable quest to eliminate national sovereignty for its own benefit. Nearly all of these arguments rely on the latter being assumed true.

So I have to repeat my earlier point, which is that direct taxation is not a competence of the EU (the 'tax veto' applies to VAT, not direct taxation) - and add that the ability to rule that a particular variable regime is discriminatory state aid does not make direct taxation a competence of the EU. There is, therefore, no mechanism by which the Commission is empowered to conclude that any national direct taxation scheme is discriminatory - as long as that rate does not favour specific sectors or undertakings within the state, or discriminate on the basis of nationality.

In much the same way the Equality Authority has the power to rule on whether terms or incidents of employment are discriminatory - but that does not make the Equality Authority the arbiter of employment legislation outside that specific area of competence. They can rule that requiring non-national employees to work longer hours than Irish employees is discriminatory, but cannot rule on the number of hours required as long as the requirement applies to both nationals and non-nationals alike.


cordially,
Scofflaw

Tristram

Lisbon will allow the EU to force you to eat brussel sprouts at Christmas.

Scofflaw

Tristram wrote: »

Lisbon will allow the EU to force you to eat brussel sprouts at Christmas.

Well, my wife does that already.

cordially,
Scofflaw

whatisayis

Scofflaw wrote: »

So I have to repeat my earlier point, which is that direct taxation is not a competence of the EU

According to the website of EC Customs and Taxation Unit:

Unlike indirect taxes, the EC Treaty does not specifically call for direct taxes (income and corporate taxes) to be harmonised. However, Article 94 of the EC Treaty provides for approximation of such laws, regulations or administrative provisions of the Member States as directly affect the establishment or functioning of the common market. In any event, national tax rules must respect the fundamental freedoms provided for the EC Treaty.
Since the founding of the European Communities, company taxation has received particular attention as an important element for the establishment and the completion of the Internal Market.

http://ec.europa.eu/taxation_customs/taxation/company_tax/gen_overview/index_en.htm

Scofflaw

whatisayis wrote: »

According to the website of EC Customs and Taxation Unit:

Unlike indirect taxes, the EC Treaty does not specifically call for direct taxes (income and corporate taxes) to be harmonised. However, Article 94 of the EC Treaty provides for approximation of such laws, regulations or administrative provisions of the Member States as directly affect the establishment or functioning of the common market. In any event, national tax rules must respect the fundamental freedoms provided for the EC Treaty.
Since the founding of the European Communities, company taxation has received particular attention as an important element for the establishment and the completion of the Internal Market.

http://ec.europa.eu/taxation_customs/taxation/company_tax/gen_overview/index_en.htm

Scofflaw wrote:

So I have to repeat my earlier point, which is that direct taxation is not a competence of the EU (the 'tax veto' applies to VAT, not direct taxation) - and add that the ability to rule that a particular variable regime is discriminatory state aid does not make direct taxation a competence of the EU. There is, therefore, no mechanism by which the Commission is empowered to conclude that any national direct taxation scheme is discriminatory - as long as that rate does not favour specific sectors or undertakings within the state, or discriminate on the basis of nationality.

cordially,
Scofflaw

whatisayis

Scofflaw wrote: »

There is, therefore, no mechanism by which the Commission is empowered to conclude that any national direct taxation scheme is discriminatory - as long as that rate does not favour specific sectors or undertakings within the state, or discriminate on the basis of nationality.
cordially,
Scofflaw

In presenting this Communication the Commission draws a link between the creation of a simplified corporate tax base and the Lisbon Agenda. The Lisbon Strategy is intended to play a key role in achieving competitiveness, growth and jobs in the EU. Eliminating tax obstacles, such as high compliance costs for cross-border operations and transfer pricing in the internal market, can contribute to these goals. The CCCTB, according to the Commission, promises a number of advantages. It would, for example, significantly reduce the compliance costs of companies operating across the internal market, resolve existing transfer pricing problems, allow for the consolidation of profits and losses, simplify many international restructuring operations, reduce some of the complexities arising from the co-existence of the classical and exemption approaches to international taxation (without extending into the personal tax field), avoid many situations of double taxation and remove many discriminatory restrictions. In addition, the CCCTB would contribute to greater efficiency, effectiveness, simplicity and transparency in company tax systems and remove the hiatuses between national systems.

Scofflaw

whatisayis wrote: »

In presenting this Communication the Commission draws a link between the creation of a simplified corporate tax base and the Lisbon Agenda. The Lisbon Strategy is intended to play a key role in achieving competitiveness, growth and jobs in the EU. Eliminating tax obstacles, such as high compliance costs for cross-border operations and transfer pricing in the internal market, can contribute to these goals. The CCCTB, according to the Commission, promises a number of advantages. It would, for example, significantly reduce the compliance costs of companies operating across the internal market, resolve existing transfer pricing problems, allow for the consolidation of profits and losses, simplify many international restructuring operations, reduce some of the complexities arising from the co-existence of the classical and exemption approaches to international taxation (without extending into the personal tax field), avoid many situations of double taxation and remove many discriminatory restrictions. In addition, the CCCTB would contribute to greater efficiency, effectiveness, simplicity and transparency in company tax systems and remove the hiatuses between national systems.

Scofflaw wrote:

So I have to repeat my earlier point, which is that direct taxation is not a competence of the EU (the 'tax veto' applies to VAT, not direct taxation) - and add that the ability to rule that a particular variable regime is discriminatory state aid does not make direct taxation a competence of the EU. There is, therefore, no mechanism by which the Commission is empowered to conclude that any national direct taxation scheme is discriminatory - as long as that rate does not favour specific sectors or undertakings within the state, or discriminate on the basis of nationality.

cordially,
Scofflaw

whatisayis

Scofflaw wrote: »

as long as that rate does not favour specific sectors or undertakings within the state, or discriminate on the basis of nationality.
cordially,
Scofflaw

whatisayis wrote: »

Eliminating tax obstacles, such as high compliance costs for cross-border operations and transfer pricing in the internal market, can contribute to these goals. The CCCTB, according to the Commission, promises a number of advantages. It would, for example, significantly reduce the compliance costs of companies operating across the internal market, resolve existing transfer pricing problems, allow for the consolidation of profits and losses, simplify many international restructuring operations, reduce some of the complexities arising from the co-existence of the classical and exemption approaches to international taxation (without extending into the personal tax field), avoid many situations of double taxation and remove many discriminatory restrictions. In addition, the CCCTB would contribute to greater efficiency, effectiveness, simplicity and transparency in company tax systems and remove the hiatuses between national systems.

While I do occasionally enjoy a game of ping pong, can you tell me what point that you are making that I seem to be missing?

Scofflaw

whatisayis wrote: »

While I do occasionally enjoy a game of ping pong, can you tell me what point that you are making that I seem to be missing?

Well, my point was that the Commission doesn't have competence over direct taxation. It has competence to resolve any issue that impinges on the common market within certain specified limits.

The last few things you've posted entirely agree with that, and certainly don't seem to advance an argument that national tax rates can be made to fit within the distortions of the common market that the Commisison can rule on.

Unless of course you are making some other point that I am missing?

cordially,
Scofflaw

whatisayis

Scofflaw wrote: »

Well, my point was that the Commission doesn't have competence over direct taxation. It has competence to resolve any issue that impinges on the common market within certain specified limits.

The last few things you've posted entirely agree with that, and certainly don't seem to advance an argument that national tax rates can be made to fit within the distortions of the common market that the Commisison can rule on.

Unless of course you are making some other point that I am missing?

cordially,
Scofflaw

I think maybe we are discussing two different things here. I completely agree that the EU cannot set any states tax rates, and never claimed otherwise. What I am saying is that corporate tax (a direct tax) can be construed as impeding the goals of the internal market and therefore can be legislated on by the EU. When CCCTB is introduced, either by unanimity or enhanced cooperation, it will have an impact on Irelands corporation tax revenue. Whether the current proposal is put forward as distortion of competition, state aid or an impediment to the Lisbon Strategy I don't know. As Laszlo has said that it can be introduced already under EC 94, I now don't know whether the claim of enhanced cooperation is a canard. The only significance I can see in the Lisbon Treaty is that all references to the 'common' market have been replaced by the 'internal' market and perhaps the Lisbon strategy guidelines and/or the CCCTB proposal only reference the 'internal' market which would not exist in current treaties.

Scofflaw

whatisayis wrote: »

I think maybe we are discussing two different things here.

It's the thread title and the OP that's confusing me...let me just ignore them for a moment, and we'll see where we get to.

whatisayis wrote: »

I completely agree that the EU cannot set any states tax rates, and never claimed otherwise.

Great.

whatisayis wrote: »

What I am saying is that corporate tax (a direct tax) can be construed as impeding the goals of the internal market and therefore can be legislated on by the EU.

Within the definitions of distortion, sure. I'm not sure "impeding the goals" is actually the criterion, though.

whatisayis wrote: »

When CCCTB is introduced, either by unanimity or enhanced cooperation, it will have an impact on Irelands corporation tax revenue.

If it is introduced by unanimity, I assume that would be the case. It cannot actually be introduced by enhanced cooperation without Ireland's agreement, since:

"Authorisation to proceed with enhanced cooperation shall be granted by a decision of the Council acting unanimously"

per Article 329 TEU Lisbon.

Further, enhanced cooperation has limits:

"Such cooperation shall not undermine the internal market or economic, social and territorial cohesion. It shall not constitute a barrier to or discrimination in trade between Member States, nor shall it distort competition between them."

(Article 326 TEU Lisbon)

and

"Any enhanced cooperation shall respect the competences, rights and obligations of those Member States which do not participate in it."

(Article 327 TEU Lisbon)

So enhanced cooperation can only result from unanimity in the first place, and in the second is not a carte blanche.

whatisayis wrote: »

Whether the current proposal is put forward as distortion of competition, state aid or an impediment to the Lisbon Strategy I don't know. As Laszlo has said that it can be introduced already under EC 94, I now don't know whether the claim of enhanced cooperation is a canard. The only significance I can see in the Lisbon Treaty is that all references to the 'common' market have been replaced by the 'internal' market and perhaps the Lisbon strategy guidelines and/or the CCCTB proposal only reference the 'internal' market which would not exist in current treaties.

Ah - I think I see what you're getting at (although I've been wrong before!). You mean that CCCTB could be implemented regardless of Ireland's view on it?

The answer is no - "Authorisation to proceed with enhanced cooperation shall be granted by a decision of the Council acting unanimously"

per Article 329 TEU Lisbon. That's our veto over CCCTB being introduced by enhanced cooperation. It doesn't matter whether or not the necessary 9 countries can be found - enhanced cooperation is only allowed if everyone agrees to allow it.

It cannot be introduced as curing a distortion of the market - at no point has anyone suggested that it has that property, because it does not constitute any form of state aid to an industry or sector.

In fact, if we consider it fully, then if different tax bases between states could be characterised as distortions of competition, CCCTB definitely could not be introduced by enhanced cooperation, since by doing so the Commission would itself be creating a distortion of competition.

To come back to my earlier point, differences in tax rate are not of themselves distortions of competition. Neither are tax bases, unless they are discriminatory. The 10% manufacturing corporate tax rate was discriminatory in exactly the terms laid down in the treaty - that it favoured a certain sector. The Commission had no problem with the extension of a 12.5% rate to the entire corporate tax net, on the other hand, because it is not discriminatory between sectors or different nationalities.

Look at Article 326 again:

"Such cooperation shall not undermine the internal market or economic, social and territorial cohesion. It shall not constitute a barrier to or discrimination in trade between Member States, nor shall it distort competition between them."

Competition between them - between the member states. Explicitly there in the treaties as something that is not to be interfered with by an EU mechanism. It's a minor point, but some people argue that tax harmonisation will be possible because the differences between member states are a distortion. We can see clearly here that those differences, that competition, is regarded as a thing to be preserved and defended - not removed on the spurious grounds it is a distortion. The member states of the EU are entitled to compete within the common market - no EU official shall set a bound to the marketability of a nation, etc.

Likewise, the differences in the tax bases of corporate tax between countries are not discriminatory as long as they apply to all sectors and undertakings equally. Yes, they affect cross-border trade and financial flows, and certainly the (current) Commission would like to get rid of those differences. However, it is not within their powers to rule inter-state differences as discriminatory, because there is no basis for doing so in the treaties - indeed, to put such a capability in the hands of the Commission would be equivalent to surrendering alll tax autonomy.

(There are, of course, people who will latch onto a remark like the last one and say "of course! That's exactly what the EU is doing - taking sovereignty away from the states to itself". Those people miss the point - that the EU is a creation of the states, and remains subject to them. If the member states actually felt that the EU had somehow escaped their control and turned on them, they could immediately dissolve it - it has no armies, no police, and no funding without them. In a sense, the tragedy of the EU is that it is such a dependent creature.)

Anyway, assuming I am correct as to the point you're making, the answer is no - the Commission has no power to rule inter-state differences in tax rates or bases as discriminatory, because the power to do so is not in the treaties. Further, CCCTB cannot be introduced by enhanced cooperation without Ireland's consent, because Council unanimity is required to allow enhanced cooperation to proceed. Finally, the reason you can't find anything of relevance in Lisbon is because there isn't anything in Lisbon of relevance to CCCTB - the argument that Lisbon allows CCCTB is a recycled argument from Nice, and bears no relation to the Treaty.

cordially,
Scofflaw

whatisayis

Scofflaw wrote: »

Within the definitions of distortion, sure. I'm not sure "impeding the goals" is actually the criterion, though.

I probably should have said impeding the goals of the Lisbon Agenda which is to be actioned by 2010 one goal of which is the completion of the internal market. Its integrated guidelines are based on "knowledge, competitiveness, growth and employment"

"C. whereas the removal of any obstacles which hamper the proper functioning of the internal market in the bases of company taxation is an important element in the competitiveness of European enterprises, according to the new 'integrated guidelines',"

"4. Affirms the need for reform of the bases of company tax for companies operating in the internal market, in furtherance of the new Lisbon Strategy, so as to ensure equal treatment for enterprises, administrative simplification and cost reduction and to promote greater investment, corporate competitiveness, growth and job creation;"

(Unless otherwise referenced all quotes can be found in this link which is the Parliament Resolution re CCCTB.)

http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P6-TA-2005-0511+0+DOC+XML+V0//EN

Scofflaw wrote: »

It cannot actually be introduced by enhanced cooperation without Ireland's agreement,

"11. Considers that the objective of introducing a CCCTB at European level could also be achieved through the mechanism of enhanced cooperation if Member States are unable to reach unanimous agreement."


"The Treaty of Nice facilitates the establishment of enhanced cooperation: the right of veto which the Member States enjoyed over the establishment of enhanced cooperation has disappeared (except in the field of foreign policy),"
http://europa.eu/scadplus/nice_treaty/cooperations_en.htm

Scofflaw wrote: »

It cannot be introduced as curing a distortion of the market - at no point has anyone suggested that it has that property,

"G. whereas factors giving rise to distortions of competition must be countered and whereas a properly functioning internal market must create the conditions for enterprises to enjoy a level playing field,"

So the Commission, the European Parliament and The EU Tax Commissioner all think that CCCTB needs to be introduced to the internal market to achieve the objectives of the Lisbon Strategy and also that it can be introduced by enhanced cooperation. Can they all be wrong?

Hitman Actual

whatisayis wrote: »

So the Commission, the European Parliament and The EU Tax Commissioner all think that CCCTB needs to be introduced to the internal market to achieve the objectives of the Lisbon Strategy and also that it can be introduced by enhanced cooperation. Can they all be wrong?

Wrong about what? Your last paragraph is common knowledge to anyone who follows EU affairs. But unless I'm missing something, I don't see anything in your post that contradicts anything that Scofflaw has said.

Also, be careful about confusing the Lisbon Strategy and the Lisbon Treaty. The EC/EU has always operated with 5-10 year strategies, the goals/objectives of which they hope to achieve; however, they have never, ever, achieved all the goals therein. The strategies are not a legally-binding framework of what must be achieved, they're simply a sort of very forward-looking business plan. And while in this case, the Lisbon Treaty may contain (I assume) a lot of elements which help to achieve the goals of the Lisbon Strategy, the Strategy can't change what is contained in the Treaty.

Regarding CCCTB, Scofflaws post #29 really clarifies the issue brilliantly, imo.