A new decade, new faces, a new agenda. But will it mean new solutions for old problems such as energy taxation needed to tackle climate change or VAT fraud or new taxes to help cover the EU Brexit funding gap or the ever present need for corporate tax reform?
In the face of these issues, it is easy to get cynical and dismiss all the grand aspirations of a new European Commission, new European Council president, a new European Central Bank and a relatively new European Parliament as wishful thinking. After all, with another few years of Brexit to bog the bloc down along with Trumpian transactional populism on the rise – re-election or not – with Putin prowling for ever more power – and China looking ever more imposing, it can be difficult to remain upbeat.
But we have to try. Because if we don’t then, as the late great Tony Joe White blues-rock singer and songwriter said: “who is going to tell the children how the rivers used to flow crystal blue“.
For 30 years climate change has been a scientifically recognized threat. CO2 emission growth from fossil fuels has made it undeniable – except if you live in the White House bubble. The EU has committed to break the back of the fossil fuel era with a new Green Deal that includes carbon taxation. Will it be any more successful than previous attempts? Maybe with a qualified majority vote. But do not expect Eastern European countries or small nations or even Nordic nations such as Sweden to cross that bridge.
And even if such change manifests in the coming years, don’t forget the Yellow Vests. Their stampede began over a slight increase in diesel fuel taxation.
Without a substantive EU carbon tax all the talk of a carbon border tax on imports from climate change do-nothing countries is nothing more academic theory and political hot air.
On the issue of VAT reform – another issue on the agenda for 30 years – the loss of 50 billion euros a year in fraud topped by another 100 billion euro gone due to inefficiencies of one form or another, would scream out for change just as much as shrinking glaciers, diminished ice caps and rising seas do. And there is some hint of progress. Blockchain, real-time invoicing and split payments are tools being put to work. But are they stop gap measures that only beat around the burning bush but do not put the fire out. The coming years will tell.
Every seven years EU countries engage in a penny pinching exercise that would make the Merchant of Venice seem like a big spender. We are in for another of those battles in 2020 as EU countries try to agree on a multi-annual budget for the years 2021 to 2027. And the 10 billion euro Brexit budget hole ensures that the negotiations will get very ugly before they end.
Taxation could help resolve the funding difference between net payers and net recipients that underlines the battle over the 1.1 trillion budget battle (a piddly 1.2 percent of EU GDP). A plastic tax is possibility. The revision of the complex VAT formulas that contribute about 1 percent of the EU budget is another option. An end to free auctions in the EU emission trading scheme is another source, The clocking is ticking.
And then there is a Commission plan to include a contribution from a new Common Consolidate Corporate Tax Base as a “new own resource” to help fund the EU budget. Is this another pipe dream or a practical, realistic option. But for that to happen there needs to be corporate tax reform at the EU level. But the CCCTB has been batted in one form or another almost as long as VAT reform and carbon taxation.
In the coming year we are going to find out if the time is now for EU and global corporate tax reform. That is because Pillar 1 in the the OECD digital tax reform negotiations is nothing less than a stripped down version of the CCCTB. Throw in Pillar 2 plan for a global minimum corporate tax rate and you have the core of what core EU countries led by Germany, Italy and France have been calling for …well… for the past 30 years.
Do new faces, new resolve and a new decade equal new results? Hopefully the answer will be yes by the time the next decade rolls around in 2030.