The EU Commissioner for Economic Affairs Pierre Moscovici is determined to table a digital tax proposal at EU level, despite warnings from the OECD. In an exclusive interview with EURACTIV, he also warns EU countries for failing to publish the commitments made by tax havens to exit the EU’s ‘black list’.
Pierre Moscovici is EU Commissioner for Economic and Financial Affairs, Taxation and Customs. He spoke with EURACTIV’s Jorge Valero during the World Economic Forum in Davos, Switzerland.
Last year you said in this forum that President Trump would bring more protectionism and nationalism to the global system. What is your assessment of his first year in the White House?
It is clear that the priority of his Administration is not multilateralism. They have taken some decisions on trade, for example as regards to the Trans-Pacific Partnership and North American Free Trade Agreement (NAFTA), that if not protectionists, shows they are focusing on their own interests.
This Administration has also withdrawn from the Paris agreement to fight against climate change. Finally, the US tax reform could ‘touch’ the work we did together in the G20 and the OECD against tax evasion and it creates some contradictions with the WTO rules.
Does it mean that is it an isolationist and protectionist Administration? Frankly, we cannot say that, because the working channels have not been interrupted. There are clearly two ways of looking at the world: the Trump way and the European way.
But still we are the two main economies of the world. We need to cooperate. That is clearly our own spirit, but respecting our own values and support to free trade and multilateralism, and our commitment to fight climate change and inequality at global level.
With this Administration things are more complex. But again, we didn’t move from Paradise to Hell. The US are still our friends, our allies and partners.
With regards to tax reform, US Secretary of the Treasury Steve Mnuchin said the administration has already discussed it with some EU ministers. Have European concerns been addressed?
His deputy David Malpass came to talk to me two weeks ago. Orally, they are reassuring us, but our questions are still pending. The letter sent by the European Commission didn’t receive a formal answer. It would be much better if this is done swiftly.
OECD Secretary General Ángel Gurría told Europeans to hold their horses on the digital tax. Are you still willing to move forward?
We play the game with the OECD. Our first answer must be international. That is why we are exchanging views with them. We expect that they will be capable of defining what is digital presence as a concept, for example.
But we absolutely need to have our own legislation. For that reason, at the beginning of March, I will propose a package of proposals on digital taxation, based on a Common Consolidated Corporate Tax Base (CCCTB), and probably short-term measures capable of creating revenues. We are working on that, discussing it with the main capitals, for example, with the French ministry on their proposal to tax turnover.
This is not conflicting with the OECD approach, it adds to its proposal. I was supportive of their work, but they should also understand that we are politically integrated. For example, when you look at Base Erosion and Profit Shifting issues, we are always trying to do more, to take the leadership and go further.
Is there a risk that this could led to tax competition similar to what the US is doing, but in a different area?
Our approach is not protectionist or about our own interest. It is about a level playing field. As far as we know, the effective taxation rate for digital companies is 9%, while the average tax for a traditional company is 23%. That is not acceptable.
Here in Davos I met with representatives of digital companies. I will meet with them in Brussels. They understand that the present situation cannot continue as it is. They need to pay their fair share of taxes. It is not anti-digital, it is pro-fairness. Pro-business and fairness can go hand in hand.
Who did you meet with?
I met with Google here [in Davos]. I will meet with all of them in the coming weeks before we present the proposal.
Still on taxation, you made a solemn request to member states to disclose the commitments made by jurisdictions included in the EU’s black list of tax havens. Member states said they cannot publish them because they would violate the confidentiality agreement reached with these territories. What do you think?
I am not convinced at all. I cannot believe it! Ministers must be conscious that the credibility of the listing process is at stake.
For the process to be credible we need three things: a very strong screening process of the countries in the grey list, transparency and sanctions. Parliaments, media, NGOs and citizens need to know the commitments made by these jurisdictions [to exit the black list].
Finance ministers cannot say ‘we have done it’ because there is a list. No! They need to enhance credibility. That is why my call will remain. In Davos, I saw that people expect us to take the leadership in the fight against tax evasion and tax avoidance. We have the capacity to do that. Ministers will be guilty if they just act with an attitude of ‘status quo’.
Can we expect in June concrete proposals to deepen the eurozone, or at least a roadmap with commitments?
It needs to happen. There is a window of opportunity. It is short. It won’t be reopened for a while, for at least two years. We must not waste time.
Certainly, we must have a stronger, more integrated and more democratic eurozone. The elements of the package are on the table. I am confident we can make it.
Once there is a new Government coalition in Germany, we will need to have intensive work until June. We already started to reflect on that, in the Eurogroup, in the Ecofin, with the most important ministers.
At my invitation, there was a dinner with (Germany’s) Altmaier, (France’s) Le Maire, (Spain’s) Guindos, (Italy’s) Padoan and (Portugal’s and Eurogroup President) Centeno. I see the capacity to converge. I will not say I am overwhelmingly optimistic, because there is a lot of work to be done, but we can make it and we must make it.
Does convergence include a fiscal capacity for the eurozone?
We need to have a stabilisation function. We need tools to deal with our own crises, to complete the banking union, a stabilisation function and better governance of the eurozone. For me, these are the four big deliverables for the eurozone.