We have (after a slight wobble) a new European Commissioner for Economic and Financial affairs, Taxation and Customs Union. Pierre Moscovici, until very recently France’s Minister of Finance, takes up his new position on the first of November; he is a key appointment for the Jean-Claude Juncker European Commission.
But, as has been widely reported, M. Moscovici very nearly didn’t make the cut. In scenes virtually unprecedented in the history of EU Commission hearings (normally, the incoming President proposes a team – a kind of cabinet – of Commissioners who are then formally approved after sedate Q&A sessions with the European Parliament), M. Moscovici was interrogated and vilified by the Parliamentarians. The trouble for Moscovici is that France hasn’t exactly been blazing an economic trail in the last few years, and as Moscovici was the relevant minister from 2012 to this April, he seems to have a few questions to answer. To make matters worse, France itself is rebelling against what it feels to be the German-centered economic policy of the EU – austerity forever – and published, just in time for the hearings, a new budget that flouts the agreed rules for Member State deficit levels. One of M. Moscovici’s first tasks as Commissioner may be to fine France several billion euros for a deficit that was partly run up on his watch!
The FT’s report of the hearing, which seems to have been turned into a show-trial by Moscovici’s opponents, makes for harrowing reading:
“We cannot forget your performance, your failure as minister of finance,” said Siegfried Muresan, a Romanian MEP and veteran of the EPP leadership, citing France’s slow growth and high unemployment. “We do not want this to happen to the people of Europe under your watch.”
Ouch. So, given his baggage, why is Moscovici Juncker’s man? And, what does his appointment imply for tax and VAT policy in the EU?
Any new EC President needs to build a very broad coalition if he or she is to have a chance of effecting change. Juncker himself is of the centre-right, but knows that he will require Socialist support for most measures. And the President also has to satisfy outbreaks of national pride among member states; powerful countries expect big jobs. Moscovici fits the profile on both counts: left-wing and French. There may also have been a complex deal being done. It has been reported that Juncker pushed for Moscovici on the understanding that the Socialists would permit the highly controversial Spanish right-winger Miguel Arias Cañete to become Climate and Energy Commissioner.
[Junker] knows that he will require Socialist support for most measures.
And what of VAT? Later this week I’m heading to Brussels to hear Donato Raponi, head of the Commission’s VAT section, give a talk on ‘new Commissioner, new Strategy?’ I could be surprised, but I’m guessing the answer will be ‘no’.
Indeed, Juncker indicated his commitment to the current plan for VAT reform in his September letter to Moscovici. Juncker saw Moscovici
Continuing to improve the functioning of the internal market in indirect taxation and developing the definitive VAT system at EU level, as well as seeking to finalise negotiations on the Financial Transaction Tax and the Common Consolidated Corporate Tax Base.
‘Definitive’ is an interesting choice of word, as it sounds exact and rigorous while saying nothing whatsoever about particular policy choices. Juncker has a history of resistance to European VAT harmonization – as Prime Minister of Luxembourg he blocked changes (supported by all other member states) that would have compromised the Duchy’s competitive VAT policies. He is an unlikely champion for the ‘Standard Return’. Nonetheless, there is no suggestion in the letter that he is about to reverse the Commission’s direction of travel on indirect tax.
Juncker has a history of resistance to European VAT harmonization…
And yet. One has to wonder just how much M. Moscovici’s heart will be in VAT reform. As I have written about before, the one area of tax policy in which the Hollande administration has adopted a competitive approach is VAT. In fact, France has been taken to the ECJ by the European Commission for its unilateral reduction in the VAT rate on e-books – a policy dreamed up while M. Moscovici was Finance Minister.
But what really struck me was Moscovici’s written response to the European Parliament’s questions about his priorities for his new role. The Commission asked Moscovici:
As the Commissioner in charge of the EU’s tax policy, what further measures do you envisage to enforce and effectively implement the Action Plan to strengthen the fight against tax fraud, evasion and money laundering, as well as the recommendations on aggressive tax planning and on tax havens? Concerning the automatic exchange of information in the field of taxation (AEOI), Member States have now expressed a clear wish to go beyond current levels of cooperation, in order to avoid the fragmentation of the internal market. How will the Commission ensure a consistent EU-wide approach and coordinate actions between Member States? What are your views on the need for convergence of tax systems in the EU?
Moscovici’s answer was extensive and detailed. He talks at length about the CCCTB (Common Consolidated Corporate Tax Base): ‘the need for fairer corporate taxation remains a burning issue and will be on top of my agenda’. He refers to the evils of ‘tax fraud, tax evasion, and tax planning’. “Companies’ manipulation of intangibles to minimise their tax base has to be fully addressed. I intend to hold a frank debate with Member States on these issues”.
In fact, most of his answer is about ‘corporate tax havens’ and ‘aggressive tax planning’. He intends, by 2015, to call member states to account for their actions in these matters. He also looks forward to the adoption of the Financial Transaction Tax (the tax on the city). It is all socialist red-meat, the continuation of Hollande’s ‘fairness’ agenda.
But about VAT, he says nothing at all. Nothing. He does not even mention it. There are vague and unspecific references to the ‘convergence of tax systems’ (which he believes, unlike his predecessor, ought only to happen on a unanimous basis), but the fact is that the new Europe’s Commissioner for Taxation did not mention VAT in his application for the job.