European Union

Political group and committee meetings, Brussels

Source : © European Union, 2016 - EP

We offer you the 5 key challenges ahead for Director-General Stephan Quest, fighting windmills seems easy by comparison.

 

Since 1 January 2016, the last piece of the reshuffling of the senior positions of the European Commission, announced in June 2015, is in place, as Stephen Quest has become Director-General for Taxation and Customs Union (DG TAXUD).

Corporate taxation is likely to be the main focus of DG TAXUD in the coming years. International actions on Base Erosion and Profit Shifting (BEPS) outlined by the OECD in October 2015 will be implemented at EU level, with a high level of ambition to confirm the pioneer role of the EU. The dedicated package, expected in early 2016, will provide a roadmap for new initiatives, and bring a new impetus to on-going discussions, the most prominent being the Common Consolidated Corporate Tax Base (CCCTB).

Difficult work lies ahead, to transform political will into legislative actions.

We have identified five challenges that Mr Quest would have to tackle in his very first days at the helm of DG TAXUD.

 

1. Keep EU Member States on board

Not only is unanimity the rule on taxation issues, making progress in negotiations excruciatingly slow, but in 2016 with a UK referendum in sight national sovereignty and sensitivities surrounding this issue will be heightened. On the other hand, corporate taxation has become a key policy area for the Commission, where genuine European progress and deliveries would have to be demonstrated. Finding the balancing point must be at the fulcrum of Mr Quest’s considerations.

On a more granular point: To overcome the stalemate in the CCCTB negotiations, revised proposals are expected in 2016, initially focused on a Common Tax Base, and with the highly debated Consolidation feature added as a second step. Diplomatic skills will be crucial, as any step towards potential tax harmonisation at EU level is seen by many as a breach of State sovereignty. Moreover, some Member States might be tempted to pre-empt BEPS implementation at EU level. Could it be that presenting of the Commission’s anti-BEPS package in early 2016 is a move to keep Member States in line and avoid diverging national approaches to BEPS?

 

2. Manage expectations from the European Parliament

The agenda of fighting tax avoidance and aggressive tax planning has been made a political battlefield by the European Parliament, even more so in the aftermaths of the crisis and the LuxLeaks revelations. Although the Parliament enjoys no decision powers on corporate taxation issues, the temporary committee on Tax Rulings (TAXE) has been active in keeping the momentum on the issue alive in 2015, and its successor, TAXE 2, will continue to do so. A number of recommendations have been put forward, both by TAXE and by the Economic and Monetary Affairs Committee (ECON), to which the Commission would have to give a written answer by spring 2016. Balancing out requests from the Parliament and redlines from the Council is likely to be a complex task, especially for controversial ideas such as a public disclosure of certain corporate tax information on a country-by-country basis.

 

3. Make sure that all Commission services march to the same drumbeat

The above-mentioned public Country-by-Country Reporting (CBCR) provides a good example of an area where different Commission services have to work in cooperation. A dedicated consultation is placed under the remit of the Accounting and Financial Reporting Unit of the Financial Services Directorate General (DG FISMA), and public CBCR was even put forward by the Parliament during the discussion on the Shareholder Rights Directive, managed by the Directorate General on Justice and Consumers (DG JUST). Furthermore, considering that the BEPS implementation will have an impact on all EU operating companies, it is highly probable that Mr Quest will be a focal point for questions from all Commission services.

 

First day on the job: Mr Quest’s realistic optimism on tackling new challenges

 

4. Ensure public support beyond the Brussels-sphere

Sensitive by nature, taxation is only supported by tax payers when considered fair and appropriate. Conscious that a Common Corporate Tax Base without Consolidation might impair the well-being of EU-operating companies, the Commission has suggested the creation of an interim cross-border loss offset mechanism, which Mr Quest would have to flesh out. Taxation Commissioner Moscovici has stated on a number of occasions his conviction that businesses should support a CCCTB, which would simplify their EU operations. However, if key selling points for the EU initiative become too granular and technical and compromise in Council too muddled, the recently strengthened broader legitimacy of the Commission as to taxation will be in peril. In parallel, a sense of fiscal unfairness felt by EU citizens and reported by civil society organisations, would have to be managed by Mr Quest.

 

5. Connect ongoing initiatives with other overarching goals

Taxation is far from being a ‘silo’ policy. Improving tax fairness features in Commission President Juncker’s political guidelines alongside other initiatives in his general agenda towards Jobs and Growth in the EU. Devising a tax system that keeps all the opportunities of the Digital Single Market, the Capital Markets Union or the Energy Union alive will be at the core of Mr Quest’s mission. Thus, a range of almost unanswerable questions – the interaction between the Financial Transaction Tax and the Capital Markets Union being just one – must have already been lying on Mr Quests desk when he arrived in his new job 4th of January.

 

Written by Martin Bresson and Clement Luzeau

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Even at the time the EU signed its “joint action plan” with Turkey at a high-profile summit in November aimed at stemming the flow of refugees into Europe, Turkish leaders were cautious. “Nobody can guarantee anything,” Ahmet Davutoglu, the Turkish prime minister, said even before the ink on the deal was dry. “I wish I could say the number will decline but I cannot because we do not know what will happen in Syria.”

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20 years ago, when television broke the news around midday that François Mitterrand had died aged 79, the collective emotion in France was almost disproportionate. A surprising number of Parisians simply stopped what they were doing, went to their flower shop, bought one red rose and deposited it on the doorsteps of the former president’s apartment. The rose as symbol for the French socialist party was of course also a reminder of the manner in which Mitterrand had orchestrated his victory in 1981, with the famous televised staging of his tribute to the great men of the left in the crypt of the Pantheon.

I know quite a few people who 35 years later consider that 10 May 1981 was one of the finest days of their entire lives. Seeing the left win the presidential elections was something they never had dared hope for. It was the promise of ‘another tomorrow’ as Barbara sang, the ‘Yes, we can’ moment in contemporary French history. It is probably the memory of that moment that brought so many people to tears on 8 January 1996.

A lucid regard on François Mitterrand’s heritage, however, will reveal a more ambivalent picture, to say the least. Yes, there were the sweeping reforms of 1981/82, with the highly symbolic abolition of the death penalty and the refreshing liberation of the media, the long-awaited social anti-austerity measures, and of course the 5th week of paid holidays for everybody. But these were very quickly followed by the so-called ‘rigour turn’ in early 1983, apparently imposed by the European Monetary System – an economic U-turn which may ring a bell with Alexis Tsipras forced to embrace European austerity policies he had just held and won a referendum against.

Other politicians in other democracies would have kicked out in no time after having turned their back on their promises in less than two years of office. Mitterrand stayed on in the Elysée for another 12 years (!). And that’s exactly where his heritage becomes so poisonous for the France of the 21st century. An extraordinarily gifted power politician endowed with an overdose of Weberian charismatic domination and Machiavellian leadership qualities, Mitterrand has left a series of open wounds to French society and politics that are far from healed 20 years after his death. Three of them are particularly serious.

First, in publishing The Permanent Coup d’Etat in 1964, the trained lawyer Mitterrand had clearly shown that he had fully understood the pitfalls of the Fifth Republic with its constitution and presidential regime tailor-made for de Gaulle. He certainly would have had the political clout to reform things, shorten the 7-year mandate, redefine and clarify the respective roles of the president and the government, push for an effective decentralisation rather than a half-hearted creation of fake regions, perhaps even abolish the presidential elections, this curse of French political life. Instead he clang to power over more than a decade (despite a cancer he concealed from the public), cultivated the ‘presidential monarchy’ he had pretended to despise, and seemed to take delight in humiliating right-wing prime ministers during the two periods of ‘cohabitation’ he imposed on the French public in 1986-88 and 1993-95 respectively. Mitterrand could have changed a system that inevitably leads to massive and dangerous frustration, and he did not. That’s even worse than being a lame duck.

The second poison he injected into French politics is the Front National. He obviously only had contempt for a vulgar racist like Jean-Marie Le Pen and took pleasure in his immense intellectual superiority, but he understood very quickly in the early 1980s that this fringe party was about to benefit from the widespread disenchantment with unemployment and growing unease with immigration. For Mitterrand, the emergence of the Front National actually came quite handy. Instead of employing his tremendous authority against it, he instrumentalised the FN for his own power purposes, in order to weaken his Gaullist or Centrists opponents. In 1986, he softened the Socialists’ defeat in the legislative elections by introducing representation and thus allowing the FN to take away 35 seats from the moderate right-wing parties (and gain political legitimacy on the way). Moreover, it does not seem exaggerated to claim that Mitterrand’s manner of clinging to his presidential power, his cunning manipulation of the media and public opinion, as well as the numerous grey zones in his biography contributed to pave the way for the general disillusionment with politics and the renaissance of ugly populism.

The third poison is not entirely of his own making, but it has a lasting impact beyond the borders of France. When in 1990 German reunification threatened to become a reality out of the blue, Mitterrand all of a sudden forgot the Franco-German birthday speeches and his presumed ‘friendship’ with Helmut Kohl, and revealed himself obsessed with German ‘power’ and French ‘rank’. In a series of desperate diplomatic travels he tried to hinder or slow down the process. And when this did not work, he pushed Kohl into publicly sacrificing the D-Mark on the altar of a precipitated common currency, as a token of German commitment to European integration. He was not alone in doing so, and he was already gone when the final details of monetary union were negotiated. But he bears his part of responsibility for the incomplete and immature aspects of the Eurozone that are now causing so many troubles.

The anniversary of the death of a remarkable statesman is always an occasion for nostalgia, especially when his name is linked to days where some things still seemed possible. But it is also an opportunity to look behind the myth-making and story-telling, of which François Mitterrand was an accomplished master.

Albrecht Sonntag, EU-Asia Institute
at ESSCA School of Management.
Follow us on Twitter: @Essca_Eu_Asia

The post The poisonous heritage of François Mitterrand appeared first on Ideas on Europe.

Niccolò Machiavelli (1469-1527)

Yet again the European Union is sleepwalking into a diplomatic disaster. According to China’s interpretation of article 15 of its WTO accession protocol signed in December 2001, after 15 years (hence in one year’s time) it will automatically acquire market economy status (MES). For years this was the consensus view in Europe too. Not any more. For two reasons. Washington is starting to reject this interpretation in an electoral year in which being tough on China is popular, and China’s overcapacity (evidenced by the recent fall in steel prices) is starting to trigger a protectionist reaction in the Old Continent.

In this context many officials in Brussels and the national capitals are having second thoughts to the point that there is now a legal battle between those that think that China will obtain MES automatically, and those that believe that although paragraph 15(a)(ii) will expire, the rest of article 15 remains, which means that China will continue to have to prove that it is a market economy to avoid anti-dumping duties.

This matter could be seen as too legalistic and economically trivial. It affects only 2% of EU trade with China. The issue is important, however, for several reasons.

It shows that the EU is divided, even in trade relations, which are supposed to be competence of the European Commission. Italy – the country that launches the most anti-dumping investigations against China – is the only member state that has openly declared that China should not be given MES. The rest of the members are reluctant to position themselves. This lack of unity among the Europeans is a constant and highlights that the relationship between the EU and China remains asymmetric (as it has been for decades), but now it is in China’s favour, as we argue in a recent report written with other leading European think tanks.

Contrary to what is commonly assumed, China is not in the business of ‘divide and conquer’  in Europe. It does not need to. The Europeans are already divided. So much that I was told that officials at the European External Action Service (EEAS) are reading the late 15th Century and early 16th Century Discourses of Niccolò Machiavelli where he lamented that the Italian city-states were culturally and economically incredibly sophisticated but they were too small and divided to compete with the empires in-the-making (and nation-states in-formation) that were Spain, England and France at the time. This led him to write:

‘we [in Italy] have become prey of anybody who has wanted to overrun this land’ (Discourses, II.4).

The post-1945 EU is a bit like Florence, Milan and Venice after the Peace of Lodi in 1454. It has overcome pernicious parochialism and managed to become a regional quasi-state but ‘its members are distinct and each has its own capital; which makes it difficult for them to consult and to make decisions’ (ibid). This is a disadvantage in a globalised world where the great powers are no longer mid-sized European states, but rather continental-sized economies such as the US, China and India. This is the main reason why the Europeans do not know how to deal with the rise of China. On the one hand, they want to protect their national and sectorial interests, but on the other the Chinese market is too big, and therefore too attractive, to alienate China by not granting it MES.

Because of their divisions, the Europeans have played the MES card very badly. For years China has begged for this recognition and the EU could have used it as a political bargaining chip. Now it is too late. The Europeans are in a cul-de-sac. If the EU does not grant China MES in December 2016 after years saying that it will do so, they would be categorized in Beijing as hypocrites, with a possible diplomatic or economic backlash. Contrary, if the EU does finally grant China MES, it would fail Italy, important business associations such as AEGIS Europe and the European Chemical Industry Council, trade unions such as IndustriAll, a great part of European public opinion who does not believe that China is a market economy, as well as the US, an important ally which will not grant China MES anytime soon. Washington shows the advantages of a politically united, continental-sized economy. While in the treaty-constrained, legalistic EU, granting MES would require changing EU law (meaning the Commission, the Council and the Parliament need to approve it, a cumbersome process), in the US the executive branch has full discretion in this matter.

So what would Machiavelli suggest in this situation? Most likely, he would opt for a nuanced approach. First he would divide the problem in its legal, political and economic dimensions. On the legal side, the sensible thing to do is to grant China MES. In this way the Europeans would demonstrate that they respect international law, and what they have signed 15 years ago, even though now it might go against their interests. This can be done immediately in one year’s time. The alternative is to continue applying anti-dumping duties, wait for China to sue the EU before the WTO and then accept the resolution of the dispute settlement mechanism. The danger of Chinese retaliation is higher in the latter option so perhaps it is better to go for the former.

However, politically the EU needs to use this opportunity to show that it is united. Under international law China might have MES, but that does not make it a market economy. Thus, ideally, all three institutions: the European Commission, the Council and the Parliament should issue a joint ‘political’ statement declaring that although some progress has been done over the past 15 years, China is not a full market economy according to the five criteria used by EU. The evidence is very clear on this.

This show of unity would please the constituencies in the Old Continent that are more critical with China and surprise Washington and Beijing, which always think that the Europeans cannot get their act together. Consequently, it could turn the MES into a bargaining chip for the EU again, especially if finally the WTO decides that article 15 – even without paragraph 15(a)(ii) – continues to oblige Chinese firms to prove that they operate in a market economy. In any case, on the economic front, the EU should make clear that it will continue to use all the anti-dumping and anti-subsidy tools at its disposal, and even propose and apply innovative ones, to protect its industries while there is no level playing field with China.

This might provoke a protectionist reaction from Beijing. The risk exists. But with the threat of Chinese overcapacity only increasing, sending a clear message to China is no doubt what Machiavelli would do (if he was appointed counsellor to the EU). If China wants to deepen trade and investment relations with Europe under the One Belt and One Road (OBOR) initiative, and see more Chinese companies buy European ones and obtain public contracts, it needs to open up its market to European products and investments. Ultimately, it is a give-and-take.

This post was simultaneously published on the website of the Royal Elcano Institute.

EU-Asia Institute at ESSCA Ecole de Management, Angers
www.essca.fr/EU-Asia / @Essca-Eu-Asia

The post Should the EU grant China Market Economy Status? What Machiavelli would say. appeared first on Ideas on Europe.

Source : © European Union, 2016 - EP

European Council meeting will take place on 18-19 February 2016 in Justus Lipsius building in Brussels. 

 Application deadline: 10 February at 12.00
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• Under certain conditions it is possible to organise a group registration/collection of badges for journalists working for the same media. Select group registration at the beginning of the accreditation process and follow the instructions.

On 7 January 2016, the Council appointed Mr Kęstutis Lančinskas, a senior Lithuanian police official, as head of the European Union Advisory Mission Ukraine. Mr Lančinskas will replace Mr Kalman Mizsei and is expected to take up his duties in Kyiv on 1 February 2016. 

The European Union Advisory Mission for Civilian Security Sector Reform Ukraine, EUAM Ukraine, was formally launched on 1 December 2014, with a mandate to support Ukrainian state agencies in the reform of the security sector. The mission is one the central elements of the EU's enhanced support to the Ukrainian authorities after the Maidan uprising in December 2013. It follows the signing of an Association Agreement between Ukraine and the EU in 2014, which includes the establishment of a Deep and Comprehensive Free Trade Area (DCFTA). The DCFTA came into effect on 1 January 2016. 

The EUAM aims to strengthen and support reform in state agencies such as the police, other law enforcement agencies and the overall judiciary, particularly the prosecutor's office. This process is ultimately designed to restore the trust of the Ukrainian people in their civilian security services, which have been beset by allegations of corruption and malpractice. 

Today's decision was taken by the Political and Security Committee. 

A Masters graduate of criminal law, Mr Lančinskas held several first secretary roles as part of Lithuania's diplomatic service during the 1990s. From 1998 to 2005, he served as the head of the international cooperation and European integration service at Lithuania's Ministry of the Interior, where he was also responsible for Lithuania's participation in peace-keeping missions, and its accession to the Schengen cooperation.

Mr Lančinskas became deputy police commissioner general of Lithuania in 2005, before taking over as chief of Vilnius County Police in January 2009, a position he has held until now.

As reported in today’s Daily Mirror, the Conservative government has admitted that it has no concrete evidence to prove that so-called ‘benefit tourism’ exists.

And yet, Prime Minister David Cameron has vowed to ‘crack down’ on benefit tourism to reduce the numbers of EU migrants coming to Britain.

Mr Cameron wants EU migrants in Britain to wait four years before they are eligible to claim benefits – longer than British workers currently have to wait.

His proposal would break an EU foundation principle: that when EU citizens move to another EU county for work, they will enjoy the same benefits as the natives of the host country.

In a Parliamentary question, former Labour leader, Neil Kinnock, requested “all factual evidence” held by the Department for Work and Pensions that proved migrants were lured to Britain because of benefits.

The response provided by the DWP was analysed by expert Jonathan Portes, a Senior Fellow at the National Institute of Economic and Social Research.

He concluded, “This answer doesn’t show any connection at all between people coming here and wanting to claim benefits. If they wanted evidence of benefit tourism, they could commission a study – the government knows that perfectly well.”

As I have reported on numerous occasions, no evidence has emerged of any serious problem of so-called ‘benefit tourism’.

In fact, even prior to Lord Kinnock’s intervention, on three occasions the European Commission asked the British government for evidence of ‘benefit tourism’ – and three times the government wasn’t able to provide any.

Only 2.2% of welfare claimants in Britain are EU migrants – just 114,000 out of a total of just over 5 million benefit claimants.

The evidence is that welfare systems don’t generally drive immigration, according to Mr Portes. Nobody from the rest of Europe comes to Britain to claim benefits; they come here for employment.

Britain currently has more job vacancies than can be filled by the native workforce. That, in a nutshell, is why we need migrants. The country has a chronic skills shortage and without migrants helping to fill that gap, Britain – and Britons – would be poorer.

According to Bank of England boss, Mark Carney (himself a foreign worker), Britain has one of the strongest jobs market in the world, and it’s mostly British workers who are taking up the jobs. But foreign workers are also needed, he said, and they are contributing to Britain’s increase in productivity.

A major study by University College London showed that EU migrants coming to Britain in the last decade made a net contribution to the Treasury of around £20 billion, during a time when British natives were taking out more than they were putting in.

So this is the question: why is the Conservative government concentrated on fixing problems that don’t exist (e.g. ‘benefit tourism’, ‘too many migrants’) and ignoring problems that do exist (e.g. poor people relying on food banks; flood victims not getting sufficient support)?

* Join the discussion about this article on Facebook.

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Related stories by Jon Danzig:

• Does the Prime Minister know what he’s doing?
• Fact: Most migrants come to work or study
• Why Britain needs migrants

To follow my stories please like my Facebook page: Jon Danzig Writes

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#BenefitTourism: Why try to ‘fix’ a non-existent problem? Please share my Facebook report: https://t.co/SETycIIZWF pic.twitter.com/uuoHjRsndM

— Jon Danzig (@Jon_Danzig) January 7, 2016

The post Benefit tourism: why ‘fix’ a non-existent problem? appeared first on Ideas on Europe.

General : This month it has been 30 years since Spain and Portugal joined the EU. At the time the EU was still known as the European Economic Community and after the accession of Portugal and Spain consisted of 12 member states.

Source : © European Union, 2016 - EP

General : This month it has been 30 years since Spain and Portugal joined the EU. At the time the EU was still known as the European Economic Community and after the accession of Portugal and Spain consisted of 12 member states.

Source : © European Union, 2016 - EP

Any second now…

Christmas is always a tricky time for politicians: on the one hand, everyone’s packed up for a break after a long autumn, but on the other, there’s usually something that needs urgent attention, like a flood. However, on balance this Christmas past has been generally quite quiet on the referendum front, before bursting back on front pages this week.

Tempting as it is to write about Cameron’s decision to give the Cabinet a free vote in the referendum, there’s little to be said. There has never really looked to be a good alternative position to take on this, especially given the folk-memory of the 1975 campaign, where the free vote produced all kinds of positive effects for Wilson. Faced with a front bench strongly determined in its views, Cameron’s best hope is that none of the senior team will want to take a very visible lead role with the Leavers, in case it damages their prospects for the Tory leadership contest that must be held in the next couple of years.

Likewise, much as the mini-drama of Nigel Farage’s ‘assassination attempt‘ (to be clear, someone trying to kill him, rather than vice versa) trundles on, it merely underlines the marginal position that UKIP find themselves in of present. The poor state of Carswell-Farage relations does not help in this, but more generally the party has yet to find its groove in the way that it did during 2014-15: that might not be so important in the referendum context, but certainly matters for the next cycle of local elections, where a strong performance is going to be essential.

Which brings us to one of the more marginal developments, namely the Labour reshuffle: shuffle being the operative word, given its (lack of) speed.

The broadly accepted reading of the reshuffle was that Corbyn wanted to exert some authority over his shadow cabinet, removing those who had spoken against him or his policies. However, after the protests at the removal of Michael Dugher at Culture, the whispers about replacing Hilary Benn as Foreign Secretary seemed to stop, along with any clear direction about what to do. Finally, Benn stayed in post, but Pat McFadden was taken out of the shadow Europe minister role, followed by a couple of other junior roles resigning in protest. Together with the changes at Defence, to bring a more Trident-unfriendly team, it has been foreign affairs that have taken the main hit of change.

Even if European policy has not been singled out as a point of contention in all of this – instead, Trident and security issues have been the bones of argument – then that policy is likely to suffer. Indeed, the willingness to replace McFadden, who was widely seen as being effective in his role, with Pat Glass, chair of the pro-EU group in the party, suggests no issue with working towards a Remain position in the referendum, but rather a lack of intra-party mobilisation on the referendum at all. The debate about whether Benn has been ‘muzzled’ by Corbyn has principally focused on security, but the scope for disagreement after the end of the EU renegotiation is also considerable.

In short, Labour look like a party that is studiously avoiding the referendum right now. And that matters if Cameron is serious about trying to wrap up a deal in February.

Whether he can achieve that is very up in the air. The Polish suggestion that they could accept limits on free movement in return for support for a NATO base was probably more about Polish concerns about rebuilding some support in the EU after the installation of the PiS government, and indeed everyone seemed to step away from the reports when pressed, but it potentially opens up a new phase of discussions. Given the need for unanimity, every other member state has a strong incentive to name a price for agreement and that incentive only increases as other make their demands.

As White Wednesday noted yesterday, odds on a summer 2017 vote have shortened considerably of late, so many punters remain to be convinced that speedy resolutions are at hand. Given the track record of the government to date, such a delay is not at all unthinkable, even if it comes with some very dubious benefits.

Whatever’s happening, there is a sense that things are picking up some speed: both sides are getting into the swing of campaigning, with videos, joint op-eds and the rest. To that list I will also add my own news, namely that during 2016 I will be a Senior Fellow of the ESRC’s “UK in a Changing Europe” programme, working on the campaign materials around the referendum, as well as more generally trying to help inform the public debate. There’s a lot planned, so I’ll keep you updated about events as we do.

And remember, it all has to be over by Christmas. 2017.

The post Gear-shifting the referendum? appeared first on Ideas on Europe.