The European Union (EU) is pushing ahead with its most ambitious plans to date to eliminate tax competition between member states and roll out a single market for products and services. While the commission focuses on levelling prices for products and services across the 28 member state bloc, a European Parliamentary committee is concentrating on bringing the nation’s tax regimes in line.
It also plans to force the regimes to share all their data with the rest of the bloc.
On Wednesday the Commission published a document setting out its strategy for “Upgrading the Single Market” with the intention of ending “discrimination of consumers”. The Commission has committed itself to fighting “unjustified different treatment of customers on the basis of residence or nationality in terms of access, prices, or other sales conditions.”
It cites its former work on preventing “geo-blocking” – the restricting of access to a website to people located outside a particular geographical area. In the UK, the most notable example is the BBC’s online Watch Again content, which cannot normally be accessed outside of the UK. The Commission has brought in regulation to end “unjustified” geo-blocking by mid-2016 as part of its Strategy for a Single Digital Market.
However, critics have pointed out that forcing companies to operate in a pan-Europe market risks squeezing smaller businesses, unable to bear the costs of trading on a large scale, out of the market completely.
Phil Sherrell and Christina Pennock, international media lawyers with the London office of firm Bird and Bird have outlined what the geo-blocking rules could mean for the media marketplace saying: “The European landscape is rich with numerous pay TV, free-to-air channels and public sector broadcasters competing on local, national or regional scales for viewers and bidding for content.
“However, few operate multi-nationally. The removal of geo-blocking could result in rights owners being forced to grant rights on a pan-European basis because broadcasters may be unwilling to invest in acquiring ‘exclusive’ rights for their territory if their customers can obtain the same content online from a broadcaster based in another country.
“If licences were only granted on such a basis, there is a risk that only the largest media organisations would be able to afford to purchase the relevant rights, which may lead to a small number of global players exercising significant market power, at the expense of national media groups or independent organisations.”
Meanwhile, a Parliamentary Committee is concurrently planning to put an end to tax competition between member states. They are open about their plans to prevent large companies from engaging in tax efficiency measures.
According to AccountancyAge, the committee is particularly keen to see a European-wide corporation tax rate imposed, ending competition between the states. At a press conference in Strasbourg on Tuesday French MEP Alain Lamassoure, a member of Nicolas Sarkozy’s centre right Les Republicains, predicted such a measure would create healthy competition in administration rather than a race to the bottom in tax rates.
Other measures within its radar include new rules to ensure that profits and dividends are taxed before being moved to non-EU jurisdictions, and protection for whistle-blowers reporting aggressive (but legal) tax avoidance.
MEPs also want all tax rulings to be made available to tax authorities in all member states, including past rulings that may still influence current payments. It also wants the information to be made available to the European Commission’s competition directorate general so it can decide whether certain tax rulings break EU state aid rules, and block them.
The Committee has organised a meeting in Mid-November to meet with multinational corporations and discuss the proposals ahead of a Parliamentary vote in December. However, while the meeting is technically voluntary, the Committee has ordered parliamentary managers to block companies who do not attend from lobbying MEPs.
Taken together, the new regulations amount to a significant offensive on competition within and between the EU nations.
Diego Zuluaga, International Research Fellow with the Institute for Economic Affairs told Breitbart London: “A growing problem with the EU Single Market is that it is leading to ever greater centralisation of regulation at a European level.”
He said the intentions of the intentions of the Commission are noble, “but we often end up with misguided policies as a result.” While praising the Commission’s efforts to reduce onerous regulations within Member States and its work on reducing protectionism, he added “other times the reasoning is much less sound.
“For instance, with the abolition of geo-blocking and roaming charges, the EU is trying to “level the playing field” between countries, ensuring that no EU consumers pay more – or have access to less content – than others.
“But of course, conditions are different in different countries – mobile connections are more expensive in some, content providers are not active in certain markets, and so on. Banning differential pricing amounts to denying economic reality.
“And, because we’re talking about economic reality, the costs will have to be borne by somebody, namely consumers as a whole through higher prices.”
Likewise, Mr Zuluaga said the Commission’s tax policies are “wrong-headed.” He points to a number of recent tax proposals which suggest that “tax competition, which is a fundamental tool to give governments an incentive to spend taxpayers’ money wisely and pursue efficient policies, is under attack.
Dismissing the idea of the common tax base, which will only “further complicate the corporation tax system,” Mr Zuluaga instead recommends the Commission encourage tax competition “as a way to encourage pro-growth, pro-investment tax policy – such as Ireland’s.”
He added: “Ideally, it should push for a gradual phase-out of corporation tax and its replacement by a tax on shareholder income, if its aim is actually to tax profits. This will also remove the loopholes, tax breaks and other irregularities that make corporation taxes particularly inefficient and harmful.”
“UKIP small business spokeswoman Margot Parker MEP said: “Competition between companies and markets is good for consumers and business growth alike.
“The big state and high tax regime is loved by Brussels and loathed by business and consumers.
“It brings to mind Ronald Reagan’s adage: ‘If it moves, tax it; if it keeps moving, regulate it; and if it stops moving, subsidise it.’”