The European Commission has announced its plan to scrap the member state veto on tax policy.

This was immediately rejected by Ireland, a country whose economic model is backed by tax-haven status.

If such a plan is going to be immediately rejected, why would the Commission bother to make a proposal in this way? Or is there a chance the change could be made?

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    Among other things, causing people to reject a proposal publicly creates political pressure. Presumably someone thinks that pressure will work in their favor. Politics is certainly not about achieving maximum efficiency. – phoog Feb 6 '19 at 1:32
  • Don't know if you realise this but you stumbled on a much better example than coal or CO2 of a policy where the case for harmonisation is straightforward and yet the EU has failed to act. – Relaxed Feb 6 '19 at 5:09

The EU Commission is desperate to find levers of action on tax policy. That's also the reason for the procedure against Ireland regarding the Apple tax ruling (which, importantly, is based on state aid rules, not the tax policy itself as the latter is largely off limits for EU institutions). In general, EU institutions tend to err on the side of more harmonisation and here the case is straightforward. Uncooperative tax policy is rightly seen as a major economic and PR problem, undermining the whole project and the EU Commission is wary of being seen as condoning it.

But there is little appetite for any sort of tax harmonisation – beside the VAT rules that already exist – from member states (not only Ireland) because it is extraordinarily complicated, politically sensitive and many of them (including Luxembourg, Belgium or the Netherlands…) have crafted loopholes to capture some tax revenues from larger neighbouring states.

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  • Any source for there being little appetite for harmonisation? I always hear Dutch politicians (see last paragraph on lower chamber of parliament being shocked about deals by executive) talking about wanting to crack down on tax havens (Amsterdam being a major one), yet privately I guess they like the GDP boost (since they don't pay many tax, if anything at all that doesn't really add to the economy). – JJ for Transparency and Monica Feb 6 '19 at 5:09
  • @JJJ This article is mostly about national measures, not harmonisation. The Netherlands has been regularly talking about mending its ways and usually ends up replacing one loophole with another… specifically to keep the pressure off and avoid any sort of real constraints. – Relaxed Feb 6 '19 at 5:15
  • @JJJ The key is that for any serious movement, you need a broad consensus from various governments at the same time. Luxembourg or Ireland could perhaps be pressured a bit but if you add Belgium, Cyprus, Malta, Austria, and whatnot, even one Dutch government being more open to it than usual won't change a thing (France and Germany are on board of course, as they stand to benefit from it). – Relaxed Feb 6 '19 at 5:19
  • According to Reuters, the 'double Irish, Dutch sandwich' has been around for decades. If we follow the graph here, it seems the Netherlands, Ireland and Switzerland are the biggest culprits in Europe. Having two of those on board, the rest of the EU will probably follow suit (mostly because they stand to benefit). – JJ for Transparency and Monica Feb 6 '19 at 5:24
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    Also, this might be the most prominent corporate tax “optimisation” scheme but Malta, Belgium, Austria, Portugal, or Cyprus all offer significant personal income tax loopholes and will be resisting a major push for tax harmonisation in general. – Relaxed Feb 6 '19 at 7:33

Keep in mind that the next Multiannual Financial Framework will be finalized soon. That is when all the remaining EU states will have to come together and say yes, we want the EU, warts and all. There will be countries who try to blackmail the rest a little bit with a threat of veto, but many of those are net recipients of EU funds. So the impulse to wreck everything will be tempered with the realization that everyone gains if the EU exists.

What do these general comments mean in the specific case? The Irish "no" is an initial negotiating position. Ireland has been a net recipient of EU funds and it benefits from holding the EU headquarters of big corporations, so it does not benefit from total gridlock in the EU.

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