The Gloves Come Off

by Andrew Stuttaford

El Pais is the highest circulation newspaper in Spain, a serious paper, supposedly.

Earlier this week it retracted a piece (by a guest columnist) that compared Angela Merkel to Hitler.

Here’s a translation (in PressEurop) of a recent column by Xavier Vidal-Folch, the paper’s deputy director, on the subject of Europe’s “tax havens.” After savaging Cyprus, he turns his attention to Luxembourg and, well, other places:

Let’s talk about Luxembourg for a moment. The world’s richest principality is home to 200 foreign banks, with rather more than €3trn of the €20trn of offshore financial assets at large out there in the world. However, they don’t derive as much benefit as they did from the old ‘1929 holding company’ regime, which offered exemptions from all taxes. Since 2007, SPFs (sociétés de patrimoine familiale ) which do not have to bother with the inconvenience of municipal business taxes, wealth taxes and VAT, have been subject to a subscription tax of 0.25 per cent. Such are the advantages of fiscal limbo.

But one day, perhaps, Luxembourg, and Switzerland, and the island sewers of the City of London (and Singapore) will come down with a bad case of the Cyprian disease, which, in a sense, they are already incubating. To save the German and Spanish taxpayers from having to foot the bill to rescue the holders of uninsured bank accounts when that day comes, there is, however, a solution: destroy the foundations of the fiscal limbo.

How can this be done? Through a powerful fiscal harmonisation, which will bring in additional tax revenues required by the fiscal compact, which is designed to keep spending deficits under control. This fiscal harmonisation will set out a level playing field for taxes on capital, implement minimum standards for personal income tax, get rid of VAT exceptions, and raise corporation tax to do away with the benefits that non-resident companies derive from tax havens, while imposing a progressive Tobin tax on movements of capital.

Such an initiative won’t be a stroll in the park. Tax agreements in the EU require unanimity. The havens and their friends have the power of veto. And they use it. For now. Let’s destroy that too.

A journalist, sure, but one channeling the authentic spirit (if not the usually soothing voice) of an authentic EU oligarch, thuggish, authoritarian, centralizing, contemptuous of national sovereignty, open competition and free markets. His poisonous little screed should disgust Luxembourg (how dare it exist!) and it should particularly appall those Baltic and Central and Eastern European countries trying to take a low tax route to a better future. They still cling to the naïve illusion that the EU is the liberalizing force that — for a while — it (sort of) once was. Those days are done. And the sooner they come to realize it the better. And when they do, they might want to reflect on whether they could have stood alongside the U.K. — the most effective, but increasingly outvoted, opponent of the EU’s imperial thinking — rather more than they did.

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