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Read Commission’s lips: Pay more taxes

The EU launches a new ‘Action Plan’ aimed at businesses.

The European Commission is taking aim at corporate tax avoidance in the EU with a politically ambitious set of proposals it says would make it tougher for multinational companies to take advantage of legal loopholes.

The “Action Plan for Fair and Efficient Corporate Taxation in the EU,” introduced Wednesday in Brussels, comes in response to criticism that companies such as Apple and Amazon are earning big profits in the single market while taking advantage of Europe’s patchwork of national rules to pay little or no corporate tax.

“Citizens can no longer accept that some companies avoid paying taxes and some tax regimes promote that,” said Pierre Moscovici, the commissioner for economic and financial affairs, taxation and customs.

Among the key proposals is a relaunch of the Common Consolidated Corporate Tax Base. First proposed in 2011, the plan offers a single set of rules that cross-border companies could use to calculate their taxable profits in the EU, instead of having to deal with different national systems.

“Corporate taxation in the EU needs radical reform,” said Moscovici. “In the interests of growth, competitiveness and fairness, member states need to pull together and everyone must pay their fair share.”

Negotiations on the original common corporate tax base proposal from 2011 have been stalled, however, because it was too ambitious in terms of consolidation of rules. The new proposal, according to the Commission, has been adjusted to focus on areas where talks can move forward.

The whole taxation issue is a difficult one for the Commission, and the plan is careful to avoid proposing a “harmonization” of tax rates across all EU countries — a political non-starter.

But mounting public outcry over the issue of big companies avoiding taxes in the EU — illustrated most recently in the “Luxleaks” scandal involving special tax status given to companies in Luxembourg — has prompted the Commission to act.

“I’m tempted to quote Bob Dylan,” said Moscovici. “The times they are a-changing. What we’re doing is part of a trend internationally.”

The European Parliament, meanwhile, continues to conduct its own inquiries into special tax deals of the kind revealed by Luxleaks. The Commission’s competition department is also investigating special national tax arrangements.

Another proposal in the Commission action plan will require companies who benefit from the EU’s single market to pay “a fair share” of taxes to the country where they make their profits.

The Commission also announced it will launch a public consultation that will run from June 17 to Sept. 19, seeking feedback on a proposal to require companies to disclose their profits in annual reports on a country-by-country basis.

Tamira Gunzburg, Brussels director of the anti-poverty group ONE, welcomed the public consultation but said it “should not slow down the momentum for financial transparency. Given that measures already exist for certain sectors, we expect the Commission to charge ahead with legislation for public country-by-country reporting well before the end of the year.”

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China’s new silk road might save Greece

But only if Syriza lets Chinese investments revitalize the country’s infrastructure.

ATHENS — A key factor driving Greece’s devastating recession since 2010 has been the collapse of international investment. Multinational companies with holdings in the country put new projects on hold, and foreign direct investment — already low before the crisis — slowed to a trickle. 

Among the few positive developments was a major investment from China Ocean Shipping Company, COSCO Pacific, in Piraeus, Greece’s largest port. In China’s quest to improve the efficiency of its supply chains into Europe and expand its presence in the global economy, it has spent the past few years rolling out its “One Belt, One Road” initiative. Piraeus has recently emerged as a focal point of this strategy — and in particular of China’s planned “21^st Century Maritime Silk Road,” which aspires to link the country with Europe via the Indian Ocean and the Suez Canal.

In 2008,  COSCO, China’s state-owned shipping giant, reached a €4.3 billion deal with the conservative government of Kostas Karamanlis giving the Chinese the right to operate the second terminal of the Piraeus Port Authority (PPA), as well to rebuild and operate an unused third terminal, for a period of 35 years. Since 2010, when COSCO began operating in Piraeus, it has quadrupled the number of shipping containers passing through Athens every year. Chinese investments in Piraeus may be one of the few things that can save Greece’s economy, but since the Syriza-led government took office in late January, such investment is danger of stalling.

Sending containers — packed full of electronics goods from companies like HP and Sony — through Piraeus and then, via rail, to central and Eastern Europe saves COSCO between four and ten days, compared with an alternative route through northern ports like Hamburg, Antwerp and Rotterdam. It’s a mutually beneficial arrangement:  the Greek logistics sector is one of the country’s most promising industries for future growth, according to a 2012 McKinsey survey. Chinese investment has massively increased the capacity and the turnover at the port, and has lured other international shipping companies to bring their business to Piraeus as well. 

Just last week, it was reported in the Greek press that Yang Ming Lines, a major Taiwanese shipping company, made a deal with PCT (Piraeus Container Terminals), the Greek subsidiary of COSCO, to expand its use of the port’s facilities. Shipping behemoths like MSC and Maersk have also increased their presence in Piraeus since the Chinese invested in upgrading the port’s infrastructure.

“My assessment is that there can be a strategic development partnership with China,” Yannis Dragasakis, deputy prime minister and a key representative of the moderate wing of Syriza, told POLITICO. Dragasakis, a wily 68-year-old economist, was narrowly defeated in his bid to lead the Greek Communist Party in the early 1990s. “In the context of the New Silk Roads initiative, there are infrastructure projects which are of common interest,” he said. “A significant part of Greece’s recovery in the coming years needs to come from increased infrastructure investment.” 

Dragasakis’s views on the relationship between the two economies echoes the words of China’s Prime Minister Li Keqiang in an article for the Greek newspaper Kathimerini during a visit to Athens last summer. “China wants more cooperation with Greece in airport, rail, road and other infrastructure development,” wrote Li. “The Chinese and Greek economies are mutually complementary,” he added, noting that “Greece is accelerating privatization and infrastructure construction” and that “China will encourage its well-established enterprises to play an active part in this process.”

The problem is that Greece is no longer “accelerating privatization.” The Chinese have declared an interest in bidding for for a 67.7 percent stake in the Piraeus port, which, if awarded to COSCO, would make the port a major part of the Chinese supply chain, and a significant entry-point for Asian exports into Europe. But since the Syriza-led government took office in late January, there have been a host of contradictory statements by ministers on the fate of the privatization process, which remains mired in uncertainty. Syriza’s Shipping Minister Theodore Dritsas had not even been sworn in before declaring: “The privatization of PPA stops here.”

Less than a month later, in the aftermath of the February 20 Eurogroup agreement on the extension of Greece’s bailout program, Athens pledged not to roll back privatization projects already under way. In an official visit to China in late March, Dragasakis, who has a broad mandate over the government’s economic policy, told the official Xinhua news agency that the government would sell its majority stake “within weeks.” But since then, there has been further vague talk of altering terms of the process (though the latest news suggests that privatization will be set in motion again in early May).

“We have a different conception of how to develop publicly owned enterprises,” Dragasakis said. “We speak of joint ventures between the state and the private sector, not just a sale of the government’s stake in a company, though management control can be placed in some cases in the hands of the private investor.” The terms of privatization have been set, restricting the government’s room to maneuver — something the deputy prime minister acknowledges. But he said that the Greek privatization agency, TAIPED, is examining what amendments can be made without derailing the process. One such amendment is related to “the percentage of the stake that will be offered,” he said, arguing that “there is no justification” for the 67.7 percent figure, other than the expectation of a higher price.

A Chinese diplomatic source in Athens expressed hope to POLITICO that the uncertainty would soon be resolved. “We need to see concrete proposals,” the official said, adding that “a smooth privatization process would spur further Chinese investment in Greece,” but that COSCO has “other options” into Europe if things get stuck in Piraeus.

The problem — as Dragasakis freely admits — is that “though the Chinese have a clear strategy” about the port as a commercial hub, the Greeks “have never developed a fully-fledged strategy of our own.”

The absence of long-term strategy, a perennial bane of Greek policymaking, has meant that a great deal of potential has been wasted. China’s presence in Piraeus is making that waste more visible in three sectors in particular: rail transport, logistics and ship repair.

The problematic state of Greek rail infrastructure, for example, was highlighted a few weeks ago when heavy rainfall in northern Greece caused 800 meters of track to sink into the ground, causing the derailment of 26 cars carrying Sony containers, headed from Piraeus to Hungary. TrainOSE, the state-owned railway company, had to use an alternative route for about a month to get the cars into Serbia (the first transit country) — a route ten hours and 200 kilometers longer than planned. On another occasion, a train loaded with cargo was delayed because the rails were blocked by a herd of cows and there was no secondary track.

In October, TrainOSE signed a significant, open-ended agreement with China’s COSCO to increase the rail shipment of goods from Piraeus to central Europe and vice-versa. Since then, the rail operator has dispatched about 200 trains to northern points, with electronic parts to be assembled into final products in Hungary, Slovakia and the Czech Republic. TrainOSE is also slated to be privatized (there is Russian, but not Chinese interest in that deal). But its attractiveness as a prize — and its ability to contribute added value to the Greek economy — is crucially dependent on infrastructure maintenance by the government, which lacks both the funds and the administrative capacity to do the job.

“We have a unique window to turn Greece into an international trade hub, but it needs concerted government action,” said Thanasis Ziliaskopoulos, the long-suffering yet indefatigable head of TrainOSE. “With the right policies, Greece could claim for itself some of the manufacturing” that now takes place in central European countries, according to Ziliaskopoulos, a former professor of Engineering at Northwestern University outside Chicago who has managed the rare feat of surviving atop a publicly-owned enterprise through four different administrations.

Ziliaskopoulos also served, between 2013 and 2014, as the chairman of a committee of experts set up by the previous government to make recommendations for a framework law to help boost the Greek logistics sector. But he and other members of the committee complain that the law they helped draft has yet to be implemented, as the necessary ministerial decisions have not been issued.

Meanwhile, the bidding process to develop the Thriasio Freight Center, a 59-hectare piece of real estate to the west of Athens that has remained underused for decades, was supposed to be completed by March, but the elections have pushed the deadline back indefinitely. COSCO is among the bidders. The rail link between Thriasio and the port of Piraeus — the 17.5 kilometer-route required for a direct reloading of cargo containers from ships to trains — took 13 years to complete, and was finally made operational only two years ago.

There is also the state of disrepair into which the ship repair zone in Perama has fallen in the past two decades — but especially since the outbreak of the crisis five years ago. The zone, on the outskirts of Piraeus, owned by the port authority, once prospered, on the back of a long, proud tradition of workmanship and the willingness of Greek ship owners to bring their vessels there. Today, it is a black hole of misery and unemployment, as well as political extremism.

Employers in the zone accuse the Greek Communist Party, which has long controlled the unions in the region, of fostering conditions of industrial unrest that have driven ship owners away. The unions, for their part, accuse some of the employers of backing Golden Dawn, the fascist party whose leadership is currently on trial for running a criminal organization. Golden Dawn grew in popularity in Perama in recent years as its members waged a bloody campaign to get rid of Communist influence in the docks.

Growing competition from lower-cost neighboring countries like Turkey and Romania has also contributed to the travails of Perama, as has the failure of the Piraeus port for the past decade to maintain and upgrade equipment.  Some here hope that the privatization of the port authority will lead to significant new investment in ship-repair and a resurgence of the sector. COSCO has indicated an interest in this, and Dragasakis  said he raised the idea in his visit to China — though it is unclear to what extent the company with the winning bid will be obligated to develop the sector.

Syriza’s ambivalent attitude toward COSCO is not the company’s first taste of the contradictions of the Greek left — which have contributed significantly to country’s inability to build a productive, globalized economy. In 2008, when the original COSCO deal was being struck, the leader of the official opposition, Geórgios Papandreou, openly opposed it. The dockworkers’ union — which continues to this day to oppose the Chinese investment in the port, and privatization — was a source of strong support for Papandreou’s party, Panhellenic Socialist Movement (PASOK), so he pledged to renegotiate the contract signed by the New Democracy government.

After he was elected, though, and the investment started paying off, Papandreou forgot about those commitments. He was, in any case, sinking in the vortex of the Greek crisis, and keen to enlist Chinese assistance to stay afloat — through more investment, and even through purchases of Greek debt by Chinese buyers. He could not really afford to infuriate Beijing by undermining the port deal.

The situation Syriza finds itself in is strikingly similar. It, too, has to make the difficult transition from pre-election promises to the harsh realities of governing. It, too, is trying to get China to give Greece a vote of confidence — through more investment, especially on infrastructure, and by helping out with the liquidity crunch the government has been grappling with for the past few months (the Chinese have been among the minor participants in Greek T-bill issues since January).

It is a treacherous balancing act for a party with the ideological background of Syriza. “We don’t want another Skouries,” Dragasakis says regarding the government’s policy on private investment, referring to a controversial gold-mining operation in northern Greece. “We don’t want investment projects enforced by the riot police; we want socially acceptable investments.”

The problem is that the tendency to question large-scale projects in Greece is ubiquitous, the legal system offers endless recourse to those who protest, and the Chinese have other alternatives for their “One Belt, One Road” grand plan. Short of money, time and friends on the world stage, Syriza must soon prove whether it can reconcile its contradictions on the key issue of attracting investment, or sink in the murky waters of Piraeus.

Yannis Palaiologos is the author of The Thirteenth Labour of Hercules, and a journalist for Kathimerini newspaper in Athens. Follow him on Twitter @yanpal7.

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Sweden nominates Malmström as commissioner

Sweden becomes the second EU member state to put forward a woman for the next Commission.

The Swedish government today (31 July) nominated Cecilia Malmström for a second term as European commissioner.

Sweden becomes the second member state – after the Czech Republic – to nominate a woman for the next Commission (15 men have been nominated).

Click here for the list of nominees for the next Commission

Malmström commented on her nomination on Twitter, saying that she was “happy and honoured” to be put forward for a second term. Since 2010 she has been European commissioner for home affairs. In 2006-10, she was minister of European affairs in the centre-right government led by Prime Minister Frederik Reinfeldt. He said that “it is a pleasure to be able to nominate Cecilia”.

Nominating Malmström boosts Sweden’s chances of getting a more important portfolio in the Jean-Claude Juncker Commission. Juncker has been under increasing pressure to improve the gender balance of the Commission. The nine women in the Barroso II Commission last month wrote a letter to Juncker saying that the next college should have at least ten women, a goal that seems more and more unlikely. Malmström is the fourth member of the Barroso II Commission to be nominated for the next college. The other are Johannes Hahn (Austria), Neven Mimica (Croatia), and Maroš Šefčovič (Slovakia).

Malmström  is a member of the Liberal People’s Party, which is affiliated to the ALDE group in the European Parliament. From 1999 to 2006 she was an MEP and initiated a petition calling for the Parliament to have a single seat and abandon the trips to Strasbourg.

Sweden is to hold a general election on 14 September.

Click here for European Voice’s profile of Cecilia Malmström

 

Actor Christian Bale lashed out at President Donald Trump in a new interview, calling him a “clown” with an “enormous ego.”

“He’s (Trump) bombastic, he’s loud,” Christian Bale said. “Cheney was quiet and secretive and far more capable, far more brilliant.”

Bale portrays Dick Cheney in the new film Vice, which tells the story of the former vice president and his life in the George W. Bush administration. At the Golden Globes, Bale thanked “Satan” for giving him the “inspiration” to play Cheney.

The American Psycho actor also said that unlike Dick Cheney, President Trump doesn’t have a good understanding of how the government works.

“In terms of their ability to understand government, there’s no comparison. Trump doesn’t understand it, Cheney did, that’s what made him so powerful, these decades within the government,” he said. “Whereas Trump is sort of a clown by comparison. Clowns can do a lot of damage but fingers crossed in the next two years that doesn’t happen.”

“But I would say because of his enormous ego, Trump is actually far less dangerous–providing he doesn’t go bloody pushing the button–than Cheney,” Bale also said.

The 44-year-old joins most of his fellow Hollywood stars in expressing hatred for the president.

In 2017, the Dark Knight actor ripped into Trump, saying his presidency is a “genuine tragedy” for America.

Malmström weathers the storm

Parliament put Swede’s nomination to the vote after a hearing that showcased how intensely political the EU’s trade relations with the US have become.

Cecilia Malmström had appeared likely to pass comfortably through the European Parliament’s hearing on her nomination to be the next European commissioner for trade.

She is a former MEP; she is Sweden’s serving European commissioner (for home affairs); and MEPs view her as a good commissioner. The emerging trade agreement with the United States, the Transatlantic Trade and Investment Partnership (TTIP), was certain to be the focus of her session, but the probable questions – and the answers – have been repeatedly aired for many months.

The past Commission’s challenge was getting people to listen to those answers; and part of the rationale for Malmström’s selection was that she is an able communicator. In the event, the hearing turned into a gruelling experience for Malmström. The issue that was most “toxic” – her word – was the question of whether the TTIP should decide how disputes between investors should be arbitrated.

The issue of an investor-state dispute settlement (ISDS) mechanism became much more toxic when Malmström disowned the most controversial statement in a text that had briefly emerged in public: “no investor-state dispute settlement mechanism will be part of that agreement”. That clause, she said, was written by someone else.

Later, it emerged that the author of the disowned phrase was none other than Martin Selmayr, the right-hand man of the incoming president of the European Commission, Jean-Claude Juncker. It was a telling “accident” – the word used by Malmström – that adds to the sense that ISDS, an important element of the TTIP for the US, is on death row.

There was, though, no accident involved in what proved to be Malmström’s biggest problem: the emergence of an e-mail on Sunday (28 September), the eve of the hearing, that suggested Malmström’s private office had “reached out” to the US embassy in Brussels to express “concerns similar to those” of the US about an EU data-protection proposal.

The e-mail, obtained under a freedom-of-information request in the US, also indicated what was no secret: that there was little love lost between Malmström and Viviane Reding, the then-European commissioner responsible for drafting the laws. Reding, who is now an MEP, took to social networks before the hearing to apply pressure on Malmström. Malmström seemed not to realise during the hearing quite how difficult this issue would prove for her, failing to use her closing statement to try to put the issue of data protection to rest.

The socialists and Greens called two votes in the trade (INTA) committee the next day, and demanded a written statement from Malmström, which she used to give the type of statement on data protection that she had failed to give during her hearing. Malmström survived, but she will probably have learnt some lessons about Juncker’s Commission and the complications that its more overtly political approach to EU matters could bring. She will be very clear about some of this Parliament’s priorities: its desire to have as much information and influence over trade policy as possible as well as its wish to get ISDS out of TTIP, part of a broader desire for a different approach to TTIP.

But that knowledge only sharpens the immediate dilemma for Malmström: how to keep an ISDS clause in the EU’s newly agreed trade deal with Canada, while removing it from the emerging TTIP? Malmström had started the hearing by claiming that it had long been a “dream” of hers to handle trade policy. By the end, she must have realised that trade policy is a poisoned chalice.

But there were more general and far more important lessons to derive from this hearing. The first is that chefs are stampeding into the kitchen to cook TTIP. The danger is that the result will be a dog’s breakfast.

A compensation for the European public is that the process could end up being more transparent. But it was not easy to see the transparency in the process that produced Malmström’s written statement to the Parliament. Who actually is the commissioner for trade? That question will linger. Nor did the underwhelming quality of the questioning and its narrowness prove that MEPs are likely to boost the quality of transparency and debate about TTIP to a significant degree.

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