THE STATE OF THE EUROPEAN UNION. Europe at the political crossroads

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COMPLETING AND REBALANCING THE ECONOMIC AND MONETARY UNION
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fiscal capacity has been advocated at a high
political level notably by the Italian Government.4
Participating Member States would need to
respect certain pre-requisites, as common budg-
etary resources are transferred to national budg-
ets. However, these should be defined reason-
ably within the existing legislative framework,
instead of creating yet new and potentially
counter-productive obligations. Different fi-
nancing forms can be considered for such a
mechanism –including revenues from the FTT–
leading to an own-resources system, as this
would make the mechanism most effective in
financial and in political terms. Participating
Member States should also ensure that their
own automatic stabilisation capacity as such is
functioning properly.
This instrument should be focused on short-
term countercyclical support and avoid net fiscal
transfers between countries over the whole
economic cycle, for instance through clawback
mechanisms. Its use should be limited to excep-
tional circumstances, in which despite originally
sound budgetary policy positions in the member
countries concerned, automatic stabilisers do
not prove sufficient to address a major econom-
ic shock.
A critical condition to develop this capacity is
to improve the coordination of tax policies be-
tween the Eurozone Member States in order to
eliminate downward tax competition which
erodes national tax bases and reduces the over-
all tax collecting capacity of the Eurozone and
of the EU. Member countries should agree on a
Common Consolidated Corporate Tax Base
(CCCTB) and on minimum tax rates as a basis
4Cf.:
pany_tax/anti_tax_avoidance/index_en.htm
for a common set of rules and practices in the
field of taxation. Furthermore, tax rulings should
be regulated so that the net tax rate could not
fall under a given threshold, after applying the
rulings.
Negotiations on the implementation of a
Financial Transaction Tax are still on-going, with
the group of Member States participating in the
enhanced cooperation process now being effec-
tively reduced to ten. In October 2015, the
Council reached agreement on automatic ex-
change of information on tax rulings. The
Commission undertook a public consultation on
re-launching the Common Consolidated
Corporate Tax Base5 and committed to present
a proposal during 2016. In January 2016, the
Commission presented an Anti-Tax Avoidance
Package 6 which puts forward measures that can
be implemented through national law and im-
proved cooperation among countries even be-
fore a CCCTB is enacted.
The instrument would complement the role
of the Banking Union (still to be completed by a
deposit guarantee mechanism), of the European
Stability Mechanism and of the ECB, while also
restoring the credibility of the “no bailout”
clause. The more effective its capacity will be in
the early stages of an economic shock, the less
likely these other sources of financial support
would be needed as the economic situation
would be prevented from deteriorating early on.
5Cf.:
pany_tax/common_tax_base/index_en.htm
6Cf.:
pany_tax/anti_tax_avoidance/index_en.htm