Tax competition cannot be ruled out within the EU – Alfred Sant

Addressing the plenary discussion held during the European Parliamentary Week 2024 in Brussels on the future of the European Union Single Market and taxation, former Prime Minister Alfred Sant said that the notion of tax harmonization within the EU is a bad idea. Indeed, he claimed that tax harmonization is ineffective and likely to exacerbate tax evasion. On the other hand, Sant emphasized that tax competition cannot be ruled out not least because it can be beneficial for peripheral regions and islands that have limited endowments.

Alfred Sant stated that it is imperative to maintain differentiated tax systems in Europe especially when it comes to geographically remote areas. This will enable these territories to compete effectively within the Single European Market. By contrast, tax harmonization would stimulate the flow of resources from peripheral regions to central areas within the Union, thereby undermining economic and social cohesion, he argued.

One of the central components of the European Parliamentary Week was the Interparliamentary Conference on Stability, Economic Coordination and Governance in the European Union. The conference brought together MEPs and members of the EU’s national parliaments from across Europe to exchange views on future policy options. It included a plenary discussion about the single market and taxation which was co-chaired by Dita Charanzová, Vice-President of the European Parliament and Marie Lecocq, Vice-Chairwoman of the Committee on Finance and General Affairs of the Brussels Regional Parliament.

The participant panel speakers included Vincent Van Peteghem – President of the Economic and Financial Affairs Council (ECOFIN) and Deputy Prime Minister and Minister of Finance of Belgium and Christian Leysen – Chair of the Committee on Energy, Environment and Climate and deputy Member of the Committee on Energy, Environment and Climate and deputy Member of the Committee of Finance and Budget, Belgian House of Representatives. The discussion revolved around the Treaty of the Functioning of the European Union (TFEU) and how it produces directives aimed at harmonizing laws across Member States, especially in areas impacting the Single Market such as taxation.

Labour MEP Alfred Sant criticized the current ambiguity surrounding concepts like aggressive tax planning and tax avoidance. Their definition had become politically charged. Crucially, Sant emphasized that worries about differentiated tax systems leading to money laundering and tax evasion could best be met by insisting on more transparency in tax policies and procedures. There would be a full justification to call for a greater foucus on enhancing transparency across differentiated tax systems within the Single European Market, he noted.