If all good progressive reasons for more Europe have slowly disintegrated in the ongoing austerity drive of the Eurozone, there is still the argument that you simply can’t go it alone in a globalised world. Climate change, migration, security and tax evasion serve as the killer exhibits for this line of reasoning. If you want to tackle these – and which right-minded progressive doesn’t want to – you simply need more European coordination. At first sight self-evident – if issues exceed the national scale, supra-national solutions are a no-brainer – European reality suggests something else. Take tax evasion.
Thanks to the hard and courageous work of whistleblowers and reporters alike (Swissleaks, Luxleaks, Panamapapers), European electorates have finally discovered tax evasion as a ‘public bad’ that gives multinationals unfair competitive advantages and leaves citizens with the bill. In response, European politicians have been forced to shift gear and move from obstruction to hesitant collective action. The results so far have been disappointing: a slightly larger tax base, lots of transparency promises and a host of good intentions, while the number of legal exceptions has only increased and the risk of more tax competition has subsequently grown.
Recent reporting of the European parliamentary committee investigating tax evasion shows why. In the motion the committee sent to European Parliament, it observes that there is a widespread ‘pattern of systematic obstruction’ to curtail tax evasion among member states; that member states have for decades refused to share information; that member states have declined repeated invitations of the committee to hand over secret minutes; and that member states by doing so have intentionally breached their legal obligation to collaborate with the European Parliament. Hence the call upon the European institutes to force member states to fully disclose their negotiating positions in the Council and other European decision-making bodies.
Annex three of the report gives an historical overview of all those moments when one or more member states blocked collective action. It is a disconcerting list, in which the Netherlands, together with other European tax havens such as Luxemburg, the UK and Belgium, plays a particularly nasty part. A selection:
15 May, 2009: ‘Statements of Belgium and the Netherlands according to which they object to any initiative aimed at coordinating defence measures against untaxed outbound profit transfers.’
- 25 May, 2010: ‘On hybrid mismatches, the Netherlands, Luxembourg and Belgium, as well as Malta and Estonia to a lesser extent, have for long delayed swift collective action by asserting that hybrids should not dealt with under the Code [of Conduct] at all.’
- 11 April, 2011: ‘Initiatives taken by the United Kingdom, Luxembourg and the Netherlands which effectively pushed the group to not pursue this field of action further [tax evasion by investment funds, EE].’
- 29 May 2013: ‘As regards patent boxes, the Netherlands, Luxembourg and, to a lesser extent, Belgium have opposed an encompassing assessment of all EU patent box regimes despite grounds to suppose the harmfulness of existing regimes against the Code [of Conduct] criteria.’
- 3 June, 2013: ‘Spain, the Netherlands, Luxembourg and the United Kingdom have further delayed the process of reforming patent box regimes by repeatedly introducing additional demands in the decision-making progress.’
And in 2015 and 2016 there were no real improvements, despite a spate of scandals and investigations. Even after Luxleaks, no member state has yet of its own accord shared its tax rulings with other member states. Nor have they reached an agreement on such obvious measures as minimum rates. Instead, delay is the name of the game.
The story of the European war against tax evasion is one of obstruction and procrastination, opposition and delay. And make no mistake: the story of bank regulation, emission standards, and state aid is in essence the same – whenever ‘national champions’ are at stake obstruction of European regulation is never far away.
It is partially due to the constitutional makeup of the European Union. Since taxation is an intergovernmental competence, each member state has in fact veto power. This is why the investigations of the European Commission into the tax deals handed out by the Netherlands, Luxembourg and Ireland are conducted under the frame of ‘illegal state aid’.
Over the years this has been skillfully abused by the political protectors of the tax evading industry in jurisdictions like the UK, Luxembourg and the Netherlands. Every proposal that could potentially harm the fees of the Big Four was systematically blocked – and if that proved impossible it was amended to smithereens. Sometimes on behalf of the Dutch, sometimes on behalf of the Luxembourgians, sometimes on behalf of the Brits – the upshot was always the same: deadlock.
It puts the progressive infatuation with Europe in a new and distinct light. The argument that only Europe can tame the monster of global capitalism, assumes a Europe that doesn’t exist, has never existed and will never exist – and is thus either extremely naive or extremely cynical. Only if taxation (and, for that matter, social policy) were a truly communautarian competence, would the European Union be able to harmonise taxation and launch a European welfare state. Under the Treaty of Lisbon this is simply impossible.
Worse, the current European Union serves as an intransparent, undemocratic policy space where nationally elected politicians are absolved to bend their democratic mandate as they see fit and walk all over the interests of their electorates. Shielded from press, public and parliament by the European ‘democratic deficit’, the finance ministers of the UK, Luxembourg and the Netherlands have for years now used its cover to shamelessly serve the interests of the Big Four, while back home blaming ‘Brussels’ for European inaction. This is no contingency but the essence of European integration: making the logic of intergovernmental backroom dealing prevail over the logic of parliamentary democracy. It is no accident, it is what the European Union was designed to do.
The honest progressive should either make a passionate plea for a new treaty – one that is democratic as well as social – or straightforwardly argue for its disbandment. Instead left wing voters get the dishonest, halfhearted projection of a utopian European future on the neoliberalisation machine that is the really existing European Union. So far, the European left has lacked the courage to make such a plea – as has the ‘extreme middle’. Scared stiff of populist minorities who threaten to use treaty change to blow the European project out of the water, the European left is reduced to neurotically nursing its false consciousness: she desperately, and against her better self, defends a machine which produces the exact opposite of what she stands for, for the sake of a transcendental promise (equality, security, welfare and democracy) which she knows will never be delivered. That is in a nutshell the political pathology that is decimating the European left.
Instead it is better to attack capitalist excesses where citizens still have voice and democracy still counts. By unilaterally closing national tax loopholes, say. It will shrink Dutch GDP by 0.5 per cent, but since the rewards flow predominantly to the Big Four, while other jurisdictions suffer multiples in foregone taxes, it would be a small price to pay.
I am aware that this sounds eerily like the ‘taking back control’ of the Brexiteers. But if we have to wait for European unanimity it will simply be too late. The populist backlash will then be hijacked by the extreme right, using multiculturalism, migration, refugees and terrorism as its great mobilisers. The type of democratic control that I envisage serves completely different ends. Not to reinvent the nation, nor to double down, Maoist-style, on Thatcher’s neoliberal revolution, as seems to be the fate of post-Brexit UK, but to democratically reclaim the commons. The wasteland that is Southern Europe or Wales clearly shows that the neoliberal experiment has run its course.
Note: the set image for this post was given courtesy of Jacobin.