Kaikille niille, jotka kuvittelevat nykyisen hallituksen tai Euroopan
unionin savan jotain positiivista aikaan. Kaikkein paras on tämä: "We
should avoid tax competition and the damage this would cause to
Europe’s economic growth."
-Olli J.
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Europe will need to raise taxes in harmony
By Matti Vanhanen
Published: June 16 2009 19:52
The global recession is forcing Europe to re-evaluate the
co-ordination of economic policy. Surviving the present crisis,
ensuring the sustainability of European countries’ public finances and
maintaining the continent’s competitiveness will compel us to
co-operate more deeply than ever before.
According to conservative estimates, the total public sector deficit
in relation to gross domestic product will grow in Europe this year
and next by about 5 percentage points. Public debt as a share of GDP
will rise to around 80 per cent, and in many countries well beyond
that.
We have to initiate discussions at the European Union level about how
to prepare for the post-crisis period. Getting public finances in
order is a must if we are to grow, create employment and provide the
welfare services that we in Europe value so much.
After the recession, we will have to reduce elevated public
debt-to-GDP ratios if we are to cope with the expenditure pressures
that will come with the ageing of the EU’s population. This will
require tight control and, in many countries, painful cuts. However,
it would be unrealistic to assume that all the balancing could be done
on the spending side alone.
The overall tax rate will have to rise as well over the longer term.
In some areas that can be done without much consultation between the
countries. For example, property taxes or inheritance taxes can
largely be determined at the national level without adverse economic
consequences. But such taxes will not raise significant amounts of
revenue. Only changes in value added tax, various excise taxes or
taxes on earned and capital income can make a real difference.
However, raising such taxes can have detrimental effects on economic
activity. This is especially so when a country acts on its own:
capital and people can respond by migrating to jurisdictions with
lower rates. Deeper co-operation is therefore necessary if tax
revenues are to be increased in a way that truly helps fiscal
consolidation. This is a tough requirement. Taxation belongs – as a
rule – to national competence, and does so for many good reasons.
I am not advocating overall tax harmonisation. But I believe that we
should follow in taxation the examples of what we did in banking
policy and fiscal stimulus last autumn. In both areas, EU member
states decided to co-ordinate their policies in important ways.
Decisions to provide banks with guarantees and capital injections, and
to create national stimulus packages of a certain minimum scale, have
proved important in stabilising Europe’s financial system and
arresting a free-fall in economic activity.
These measures were not based on the authority of the Union but on the
fact that member states considered parallel measures and
recommendations to be sensible policy. The same co-ordination will be
needed to balance public finances after the recession. It is important
that different countries do not find themselves with very different
tax solutions. We should avoid tax competition and the damage this
would cause to Europe’s economic growth.
Parallel measures, which are neutral in terms of tax competition,
would enable us to make better decisions than we could alone. At the
same time, the rehabilitation of public finances would be accelerated
without distortion of the internal market.
EU policy with respect to tax competition is currently based on member
states refraining from implementing new tax competition measures and
on dismantling old measures perceived to be harmful. These codes of
conduct are not legally binding. I do not think this could or should
be changed. But member countries could agree, for example, to change
the levels of certain taxes in parallel.
Parallel measures would help all of Europe: tax competition risk would
be reduced and the public finances of individual countries would
improve. Such co-ordinated tax changes could set also an important
global example. In particular, it might encourage the US – with lower
tax levels in most areas – to do what has to be done to address its
spiralling budget deficit.
We are in stimulus mode still, and that is where we should continue to
be for a while. But we have to prepare also for the next phase: fiscal
consolidation. Co-ordinated action on taxation will have to play a
role in that. Given all the sensitivities involved, discussion about
the best way of implementing parallel policy changes should start now.
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