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EMU and the handover of tax-raising powers

EMU and the handover of tax-raising powers EMU and the handover of fax-raising powers Bill Cash, IVI$ I disagree with Frans Vanistendael.1 He believes that " EMU would not 'necesntate a substantial transfer of spending power from the Member States to the Union'. The MacDougall Report of 1977 disagreed that 'a and so did Hans Tietmeyer in 1997. He s a ~ d European currency will lead to member nations transferring their sovereignty over financial and wage policy as well as in monetary affairs. I t is an illusion to rhink rhar states can hold their autonomy over taxation policy'. I t would also be an illusion to think that a central tax policy would lead to lower taxation. As a report published by UNICE, the European Employers' Federation has recently shown, Europe is characterized bv ovemhelmine levels of taxation. The " average production worker in Europe works until late July before he has p a d his year's contribution. Ministw of Finance officials in Italv are not sure of how many taxes they are collecting in their country. A spokesman says there are 'a minimum of 62 and a on maximum of 300 taxes d e ~ e n d i n e how vou count'. Europe shows no signs of reducing its tax burden, although this would dramatically improve its overall competitiveness. High tax leads to a flourishing black economy in Europe, depriving governments of revenue and a vicious circle results. Instead of harmonizing taxes, the European Union should be thinking of ways to lower them. Taxation is thus a powerful bone of contention. The words of the early nineteenth-century American judge, John Marshall, that the power to tax is the power to destroy, are still relevant. The poll tax in Britain led to riots in the streets in the 1990s: unaccountable taxation imposed by Europe may have the same effect. An unaccountable European Central Bank which has the power to determine taxes is bad news for democracv. Democracv in the British Isles develo~ed around the slogan, 'No taxation without representation'. Vesting tax-raising powers in the central bank or in any European institution without transparency would be a dangerous step backwards. How might this representation be achieved? The E u r o ~ e a nParliament does not control the EU. nor does'it have popular credibility. Fixed terms a; the European Parliament reveal its true status as a talking s h o ~and electlon turn-outs show that ~ e o ~still see . le national representation as the most important political forum, rightly or wrongly: The most straightforward answer lies in existing nat~onalparliaments. They are c o m ~ o s e dof direc~lvelected members. accountable for tLe spending the; authorize. Neither ;he European Central Bank, nor directly the Council of hlinisters has the same popular mandate Qualif~ediclajorlty Lotlng (QhlV) would mean taxarion based on the European status quo, not the competitive example presented by the US and the UK to a lesser extent Moreover decision-making in the Council is opaque, conducted behind closed doors and hardly in the spirit of the reauirement that 'decisions be taken as closelv as posslble to the citizen' hiinlsters In Council are unaccountable for the strange bargains and compromlses whlch result from Oh1V h o r is the Councll accountable to the European Parliament. The cornerstone of all democracy 1s the ability of the ~ e o w l eto elect re~resentatives to decide on the issues of government on their behalf. Democracy creates an outlet for dissatisfaction: failure to meet voters' expectations leads to that representative's deselection. Placing taxation in the hands of the " unelected removes this important valve. It is interesting how the article mistakenly argues that the centralized monetan. system m the United States can be copied overnight ;n Europe. As House Speaker Newt Glngrich has recently pointed out, America has had a sense of nationhood. as a ~olitical entity, long before it had a strategy to consolidate its wealth. It was only after a War of Independence, a written Constitution and the election of a resident and a Congress that a unified currency was introduced. Europe lacks a similar sense of a common European vision. By introducing supranational taxation before such a feeling exlsts, it is moving in the opposite direction to the US model. I , I In his article 'Red~strtbutionof tax law-mak~ng power In EhlL? puhhshed on p 74 of this journal EC TAX RFVIEW 1998/2 http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png EC Tax Review Kluwer Law International

EMU and the handover of tax-raising powers

EC Tax Review , Volume 7 (2) – Jun 1, 1998

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Abstract

EMU and the handover of fax-raising powers Bill Cash, IVI$ I disagree with Frans Vanistendael.1 He believes that " EMU would not 'necesntate a substantial transfer of spending power from the Member States to the Union'. The MacDougall Report of 1977 disagreed that 'a and so did Hans Tietmeyer in 1997. He s a ~ d European currency will lead to member nations transferring their sovereignty over financial and wage policy as well as in monetary affairs. I t is an illusion to rhink rhar states can hold their autonomy over taxation policy'. I t would also be an illusion to think that a central tax policy would lead to lower taxation. As a report published by UNICE, the European Employers' Federation has recently shown, Europe is characterized bv ovemhelmine levels of taxation. The " average production worker in Europe works until late July before he has p a d his year's contribution. Ministw of Finance officials in Italv are not sure of how many taxes they are collecting in their country. A spokesman says there are 'a minimum of 62 and a on maximum of 300 taxes d e ~ e n d i n e how vou count'. Europe shows no signs of reducing its tax burden, although this would dramatically improve its overall competitiveness. High tax leads to a flourishing black economy in Europe, depriving governments of revenue and a vicious circle results. Instead of harmonizing taxes, the European Union should be thinking of ways to lower them. Taxation is thus a powerful bone of contention. The words of the early nineteenth-century American judge, John Marshall, that the power to tax is the power to destroy, are still relevant. The poll tax in Britain led to riots in the streets in the 1990s: unaccountable taxation imposed by Europe may have the same effect. An unaccountable European Central Bank which has the power to determine taxes is bad news for democracv. Democracv in the British Isles develo~ed around the slogan, 'No taxation without representation'. Vesting tax-raising powers in the central bank or in any European institution without transparency would be a dangerous step backwards. How might this representation be achieved? The E u r o ~ e a nParliament does not control the EU. nor does'it have popular credibility. Fixed terms a; the European Parliament reveal its true status as a talking s h o ~and electlon turn-outs show that ~ e o ~still see . le national representation as the most important political forum, rightly or wrongly: The most straightforward answer lies in existing nat~onalparliaments. They are c o m ~ o s e dof direc~lvelected members. accountable for tLe spending the; authorize. Neither ;he European Central Bank, nor directly the Council of hlinisters has the same popular mandate Qualif~ediclajorlty Lotlng (QhlV) would mean taxarion based on the European status quo, not the competitive example presented by the US and the UK to a lesser extent Moreover decision-making in the Council is opaque, conducted behind closed doors and hardly in the spirit of the reauirement that 'decisions be taken as closelv as posslble to the citizen' hiinlsters In Council are unaccountable for the strange bargains and compromlses whlch result from Oh1V h o r is the Councll accountable to the European Parliament. The cornerstone of all democracy 1s the ability of the ~ e o w l eto elect re~resentatives to decide on the issues of government on their behalf. Democracy creates an outlet for dissatisfaction: failure to meet voters' expectations leads to that representative's deselection. Placing taxation in the hands of the " unelected removes this important valve. It is interesting how the article mistakenly argues that the centralized monetan. system m the United States can be copied overnight ;n Europe. As House Speaker Newt Glngrich has recently pointed out, America has had a sense of nationhood. as a ~olitical entity, long before it had a strategy to consolidate its wealth. It was only after a War of Independence, a written Constitution and the election of a resident and a Congress that a unified currency was introduced. Europe lacks a similar sense of a common European vision. By introducing supranational taxation before such a feeling exlsts, it is moving in the opposite direction to the US model. I , I In his article 'Red~strtbutionof tax law-mak~ng power In EhlL? puhhshed on p 74 of this journal EC TAX RFVIEW 1998/2

Journal

EC Tax ReviewKluwer Law International

Published: Jun 1, 1998

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