Predatory labour taxation not an issue for the Commission

Algirdas Šemeta, Member of the European Commission in charge of Taxation and Customs Union (EC Audiovisual Services).

Algirdas Šemeta, Member of the European Commission in charge of Taxation and Customs Union (EC Audiovisual Services).

It’s really unbelievable how easily some European Union Commissioners sidestep the hot issues and make speeches about trivial themes or focus on aspects of secondary interest. Take for example Algirdas Šemeta, the EU Commissioner responsible for Taxation and Customs Union, Audit and Anti-fraud. In a speech entitled, “Making progress on European Tax Policy: Towards more fairness and grater competitiveness”, delivered in Dublin on 11 January, he choose to put the emphasis on the wrong subjects and spoke about the “European Semester”, leaving aside the burning issues of the equitable distribution of tax burdens. He even forgot to say that all taxes in order to be equitable have to be progressive, with the richer paying larger percentages of their income.

He actually sidestepped the ostentatiously high tax burden on labour and talked about the positive effects of the “European Semester”. As everybody knows the European Semester is the new fiscal instrument of the European Union to control government budget deficits in the 27 member states and has nothing to do with the tax burden on citizens, let alone its equitable distribution.

Member states are completely free to tax incomes from labour and capital the way they like, or even choose whom to tax and whom to let go. Šemeta says nothing about all that or the  inequitable methods that some countries use while taxing their subjects. As a result the term “fairness” in the title of his speech serves just decorative and public relations purposes. It’s not at all analysed nor conclusions are drown about how fairly is the tax burden distributed in member states.

Nor the term “competitiveness” is dully analysed by Šemeta, because he says nothing about the hugely counterproductive character of heavy taxation on incomes from labour. As a matter of fact in most EU member states tax factors on income from labour are much higher than on profits. He said nothing about it. No tables of inequality were revealed.

In more than one EU country incomes from capital profits are taxed with a flat rate of 10%, while in those same countries labour incomes are taxed with progressive factor scales, reaching and actually exceeding 50%. On top of that working people pay their social security contributions, which vary between 10% and 20%. In reality, above a not very high level of income from labour, the tax burden on it plus social security payments claim even more that 70% of it.
This reality completely destroys any incentive for a salary earner to gain more from his work. It also kills his willingness to ask for a rise.

The good Commissioner instead of focusing and analysing with numbers the inequitable and unproductive distribution of the tax burden between labour income and capital profits, he chooses to state the obvious by citing some general purpose truths.

Stating the obvious

It goes without saying that the Commission cannot touch the issues quoted below because the EU has no say on member states tax policies. Probably that is why he states all those obvious truths. According to Šemeta: “there has been a general trend observed in the Member States towards fundamental tax reforms. However, there is still scope to shift the overall tax burden towards tax bases that are less detrimental to growth and job creation.
Such a shift requires a package approach which ensures equitable redistribution and is adapted to the circumstances of the individual Member State”. Then he continues,

“This is why the Commission recommends that:

*First, the tax burden on labour should be substantially reduced in countries where it is comparatively high and hampers job creation. To ensure that reforms are revenue neutral, taxes such as consumption tax, recurrent property tax and environmental taxes should be favoured.

*Second, revenue should preferably be raised by broadening tax bases rather than by increasing tax rates or creating new taxes;

*Third, tax compliance should be improved by reducing the shadow economy, combatting tax evasion and ensuring greater efficiency in the tax administration.

*Finally, the corporate tax bias towards debt-financing should be reduced and tax schemes which increase the debt bias of households should be reviewed to avoid financial risks”.

Mind you when the Commissioner dared utter a word about reducing the tax burden on labour, he rushed to add that this has to be “income neutral” and actually proposes a counterbalancing increase of taxation on consumption. All first year students of economics are taught that consumption taxes increase the inequality of the overall tax burden. In practice he proposed an even more inequitable way to make it up to the government’s coffers for losses after a possible cut of taxes on labour.

After reading all the 2,016 words of his speech he made no concrete reference to the destructive inequality between taxes on labour and profits. And this while speaking in a country like Ireland, where this difference has attracted wide criticism from many sources. Even if he didn’t want to annoy his hosts, he could at least say one word in support of the wage earners. And by God the Irish are hard-working people.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Why artificial intelligence is learning emotional intelligence

China’s New Normal and Its Relevance to the EU

Here are 10 of the most urgent health challenges we’ll face in the 2020s, according to WHO

Shipping industry must contribute to climate neutrality, say MEPs

A record one million Syrians displaced over six months, during six key battles: UN investigators

UN heath agency: Time is now to ‘act as one’ in fighting infectious coronavirus

The EU Commission predicts a decimated growth in the next years

Security Council calls for dialogue in Haiti

Digital learning can help us close the global education gap. This is how

CO2 can help the construction industry emit less CO2. Here’s how

“Our house is on fire.” 16 year-old Greta Thunberg wants action

A long German political winter is on the way

Telemedicine and the Brazilian reality

The future of work requires a return to apprenticeships

Why is black plastic packaging so hard to recycle?

These researchers want to use your computer in the search for a COVID-19 vaccine

EU Council agrees to reform the system for motor vehicles but with “restricted” power for the Commission

Main results of Environment Council of 09 October 2018

Three-quarters of South Sudanese children have known nothing but war, says UNICEF

First EU collective redress mechanism to protect consumers

Boeing subsidy case: World Trade Organization confirms EU right to retaliate against $4 billion of U.S. imports

Sustainable Finance: Commission welcomes the adoption by the European Parliament of the Taxonomy Regulation

Four ways innovation can help to beat heart disease

This is how climate science went mainstream

Health spending set to outpace GDP growth to 2030

Restoring prospect of peace in Middle East is ‘our shared responsibility’ UN envoy tells Security Council

UN working with both sides, after hidden tunnels confirmed along Lebanon-Israel ‘Blue Line’

Human rights breaches in Belarus, Ethiopia, and Algeria

European Citizens’ Initiative: Commission decides to register an initiative for ‘a ban on biometric mass surveillance practices’

Yellen and Draghi tell Trump and markets not to expedite the next crisis

Security of 5G networks: EU Member States complete national risk assessments

Antitrust: Commission publishes findings of the evaluation of rules on horizontal agreements between companies

The West and Russia took what they wanted from Ukraine

Parliament’s interparliamentary delegations established

When it comes to envirotech adoption, NGOs can lead us out of the woods

EU plans pan-European network of cybersecurity services

The link between air pollution and COVID-19 deaths

UN rights chief calls for international inquiry into Kashmir violations

In Bali, UN chief Guterres outlines importance of international financial cooperation for sustainable development

These photos show some of the world’s smallest things massively magnified

Ebola cases rising in DR Congo, but UN health agency cites progress in community trust-building

5 amazing people fighting to save the oceans

Your computer can help scientists find a cure for COVID-19. Here’s how

Investors must travel a winding road to net-zero. Here’s a map

Can the world take the risk of a new financial armageddon so that IMF doesn’t lose face towards Tsipras?

How one change to shipping goods could change the way we live

4 ways to build businesses that work for good, right now

Clamp down on illegal trade in pets, urge Public Health Committee MEPs

We need to rethink neuroscience. And you can help us

European Commission revamps its ‘Have Your Say’ portal

Vaccine hesitancy: a pregnancy related issue?

Globally, youth are the largest poverty-stricken group, says new UN report

How the world’s best teacher is changing lives in Africa

Mergers: Commission approves Assa Abloy’s acquisition of Agta Record, subject to conditions

How to fight back against misinformation and polarization

Ukraine’s Poroshenko implicates NATO in his duel with Putin

Idlib deal could save three million ‘from catastrophe’ says UN chief, as militants are urged to lay down arms

South Sudan: UN official welcomes release of women and children abducted by armed group

Commission caps charges on card and Internet payments and enforces competition

Mergers: Commission approves acquisition of joint control over Prosegur Alarmas by Telefónica and Prosegur

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s