‘Very bad’ idea
The idea of taxing turnover instead of profits is “very bad,” said Zsolt Darvas, a senior fellow at think tank Bruegel. One problem is that it hits sectors with very different profit margins.
Another issue is that the tax is regressive, putting firms with different financial conditions in the same basket. “It is not correct, it’s just not fair,” Darvas said. “It is probably the worst option.”
Many also objected to the fact that it seems diametrically opposed to the goal of industrial competitiveness. Von der Leyen has made “competitiveness” the flagship brand of her second term, and the tax on corporations is a political hard sell. Especially in Berlin.
Germany is going through a period of economic stagnation following a two-year recession. Its economic doldrums are forcing the government to rethink its fiscal stance completely in the middle of a trade war with the U.S., putting its export-driven economic model even more at risk.
Officials from the Economic Affairs Ministry had already warned that their assessment of the EU budget revenues would depend on how the competitiveness of the European economy is treated.
That’s not to say there’s no rationale for the tax. Companies from both Europe and third countries benefit from trading inside the bloc, and as French lawmaker Fabien Keller from the liberal Renew group put it, “that is directly linked to an EU public good: the single market. Without the EU, no seamless trade on the biggest single market in the world.”
But with such vociferous opposition from member countries and lawmakers, von der Leyen’s proposed tax has little hope of surviving in its current form.