A spectre of discontent is haunting Europe. Brexit and the yellow vests are symbolising the anger of citizens at the EU. The feelings of dissatisfaction are fuelled by the paradox that global companies are hardly paying any taxes within the EU, whereas the citizens are increasingly confronted with higher burdens, notably with more VAT, longer working years and rises in indirect taxes.
At the same time, the EU has achieved unprecedented results. It has created an area of freedom, security and justice for its citizens, which is unique in the world. The unintended consequence of this achievement is that global companies reap the fruits without contributing to its maintenance. However, profit maximisation of private companies is not a goal of the EU. The European Union has been established with a view to serve its citizens and member states, not the other way around.
The cause of this steadily aggravating problem is that the right to raise taxes in the EU is a prerogative of the member states. Apart from a few minor exceptions the Union has no authority to levy taxes of its own. The member states are adamant to maintain their prerogative in this field, even though they are increasingly unable to collect the taxes of the global companies. On the contrary, they tend to lower their tariffs in order to lure the multinationals into building factories and offices on their soil and/or are turning a blind eye to practices of tax evasion & avoidance. The anger and indignation of the citizens are therefore entirely justified. Why should they be obliged to pay taxes, when the global companies and their shareholders are practically exempted from doing so?
Anomalies like these can be remedied in the EU by applying the principle of subsidiarity. This primordial principle has been enshrined in article 5 of the Treaty on European Union and provides guidance with respect to the division of responsibilities between the various layers of governance. It holds that a higher layer of governance should refrain from involvement in matters that can be settled at a lower level. Consequently, the EU should not meddle into the affairs of the member states, if they can properly address the issues on their plate. In reverse, however, the principle implies that, in cases in which the member states are not able or willing to deal with fundamental issues, they should transfer the exercise of sovereignty in that particular field to the Union. Concretely, if the member states are unable or unwilling to levy and collect direct taxes from global and/or multinational companies, they should authorize the Union to execute this task on their behalf.
This proposal is neither new nor ideologically motivated. It has been implemented in 2014 in the financial field. The Banking Union, which was introduced in 2014 without changing the Lisbon Treaty, has ensured the survival of the euro as the single currency of the Union. The main challenge for political parties in the run-up to the elections for the European Parliament will be to restore the trust of the citizens in their Union too![number of readers: 264]