The German Times, Juli 2009
Auditors from Ernst & Young have a simple explanation for why top football players like Cristiano Ronaldo like to play for Spanish clubs. When AC Milan or Bayern Munich want a foreign player with a net salary of €2 million, they have to cough up a gross sum of €3.6 million. The difference goes to the taxman. Manchester United has to spend €3.4 million. That French clubs no longer figure in the Champions League, may have something to do with the fact that they would have to pay €4.3 million annually for the same player. Spanish clubs like Real Madrid or rival FC Barcelona can have him for a relatively modest €2.67 million.
Spanish clubs therefore have a competitive advantage, thanks to a law passed in 2003 by the then conservative government aimed at encouraging top foreign talent – business executives and scholars – to move to Spain. They were to pay only 25 percent tax, an amount later reduced by one percent.
Europe lacks uniform rules. Football fans are not the only ones to feel Europe’s injustice and disunity. EU countries still compete with one another. They struggle for employers who create jobs – and for their profits. The latter go to the state that charges the lowest taxes. After years of liberalization and deregulation, after years of failure to shape common European policy, governments are falling over each other in the race to cut corporate taxes. All EU states have lowered their nominal tax rates for businesses in the past 10 to 15 years.
Some companies do not even have to move their production or marketing to use the advantageous rates. They just shift their European headquarters to a “low-tax” country – as large international software companies tend to do. Profits are then taxed there, for example in Ireland at a rate of just 12.5 percent. “High-tax” countries – whose consumers generate the sales – get nothing. Pro-free-market commentators have welcomed this kind of theft as exemplary.
The Irish rejected the Treaty of Lisbon partly because they feared the EU could take away the country’s freedom to set corporate taxes – for decades, the basis of Ireland’s prosperity. When Dublin joined the European Community in 1973, it was the poorest of the group’s then-nine countries. By 1987, Ireland’s GDP stood at nearly 70 percent of the EU average. Today, it has reached almost 150 percent of the average – beaten only by Luxembourg.
The European Commission has spent years working on a plan to ensure that profits are taxed where they are earned. It is called the Common Consolidated Corporate Tax Base (CCCTB). Under it, the overall profit of all branches of a company would be assessed according to uniform rules and distributed among its locations according to wages paid, assets, and sales. The commission is not, however, planning to set minimum tax rates.
This kind of policy also gives us the answer to the question why the “little guy” has no interest in EU politics: because the policies are not made for him. Because the rich in Europe are making more and the growing ranks of the poor less, Europeans from Latvia to Spain, from Sweden to Greece, believe the EU represents big business. Europe is not a social project; it is – as it started out to be – an economic one. In this view, the EU’s 2004 and 2007 enlargements served primarily to open up new markets for business.
It’s the little guy who picks up the tab, though, and he knows it. He sees that only capitalists can use the free movement of capital. And he sees that the state, unable to get money from big business, takes it instead from those who cannot escape – employees and smaller companies.
When small German farmers discover that agricultural subsidies go mainly to big corporations that sometimes have little to do with producing food, they get angry. The fact that Bavaria refuses to publish the list of its EU subsidy recipients gives us a hint of how bad the situation must be. Most importantly, the little guy sees just how unfathomable, uncontrollable, undemocratic and unfair Europe is.
“What does Europe do for me?” is a question many such people are asking. The answer, they realize, is nothing. “Politicians don’t take action, they don’t protect my honest labor. They care only about the interests of big business.” The citizens are not alienated from Europe; Europe is alienated from its citizens.
Europe will remain dysfunctional as long as national politicians in Brussels and Strasbourg remain focused mainly on getting back at least as much cash as they put in. “I want my money back!” is not a European attitude; it is a European psychosis that, unfortunately, is spreading – and incurable. One symptom can be observed in many European politicians – their tendency to boast at home of how they defended old national interests or pushed through new ones.
Those who place the sovereignty of the state first will never be convincing Europeans. And those who give in to blackmail cannot credibly tell the little guy that Europe has higher goals. Europe will not grow together if it does not feel it belongs together. As long as a considerable section of our European elites talk and act on behalf of national interests, no one can blame the little guy for first asking “What does Europe do for me?”
This question is justified – for the little guy. And anyone who wants greater participation in this great project must answer it. Pointing to 60 years without war is not enough.
Leaders can be directly elected. But the truly democratic approach would be European parties: a conservative European party, a social democratic European party, a free-market, a green, a leftist party and some others. It would be a start to have a Europe-wide selection of candidates from all the member countries, with top candidates who campaign for the party’s goals and who know Europe’s voters because they talk to them on their home ground about where and how Europe serves them, their town, and their region. Only that can convince voters that there is a point to the EU.
The candidates for key positions in the European Commission must be drawn from these elected representatives, as must those who ensure that Europe finally decides whether Russia is to be a friend or foe. The little guy would also welcome a cohesive foreign policy. To generally promote enthusiasm for European issues instead of national campaigns, partly basing subsidies for campaign costs on voter participation would be the right thing.
Anyone who wants to win the hearts and minds of Europeans for Europe is going to have to answer that question: What can Europe do for me? To do that, European politicians must ask themselves: What can I do for Europe? Then they will have to get up and walk that road. National egoism would be defeated, the federation advanced, and, ultimately, the United States of Europe achieved. That must be the goal – not just to be convincing domestically but also to speak credibly internationally. A Europe of regionalism with many vain chiefs is not taken seriously, neither at home nor abroad.
The project could extend to sports, with a European Football League for clubs. But to ensure fair competition there, Europe’s politicians will first have to do some of their homework.