What happened to Brown's EU victory?
Ever wondered what happened to Gordon Brown's triumph?
At the last meeting of the European Union's prime ministers and presidents, he grabbed headlines by unexpectedly persuading the other leaders to look at cutting VAT on environmentally friendly products.
Many at the time thought the leaders and the Commission were willing to give him the headline, but precious little of real value.
British diplomats haven't been told by Downing Street to push the idea, and currently it's stuck in the office of the commissioner for taxation.
The Commission tells me that this is not a new idea; it is at least two years old. They have two investigations going on. One is to look at whether reducing VAT on environmentally friendly goods does actually persuade people to buy them.
The second is how you define "environmentally friendly". A spokeswoman points out that technology changes so fast that today's friend can be tomorrow's foe.
So, perhaps, the reports may be done before the summer holidays and could lead to proposals by the end of the year.
But the Commission is not keen, and a penny to a euro they'll propose some tax incentive: but it won't mean a cut in VAT.
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So, as some euroenthusiasts claim "UK is a spoiler" after all.
That's right. What's wrong with manufacturing gas-guzzling cars, etc., when price of oil is unlikely to go higher than $200.00 p/b?
And pollute even more a heavily overcrowded area smaller than Australia?
[which has just over 20 million inhabitants]
Plus, have many years of hard work would it take for bureacrats in Brussels to determine how to define "environmentally friendly"?
And to issue specific directives, similar to those regulating trash disposal in EU countries, which have worked so well in Naples?
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Luckily for us, Gordon Brown is irrelevant. He will soon be history.
As for cutting VAT on "environmentally friendly" products, we all know that he (like other wretched politicos) was just jumping on a fashionable bandwagon. This week he's single-handedly saving Burma...
As politicians emit more that their share of hot air, surely they should be taxed for being 'environmentally unfriendly'.
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You have two issues here :
1) how to encourage "environmentally friendly" products and industries through tax breaks at a EU level ?
national policies sure can be implemented, but EU coordination is much better as to avoid tax loopholes and greedy tax competition.
2) Whether lowering VAT at a EU level would be the best to achieve that aim ?
This could be one of many tool to achieve 1), but I suspect it has more to do with
a) headline attention grabbling (with no real political will to push through the proposal) and
b) a way to lower VAT for a wide range of products EU-wide in a way to foster increased consumer activity.
I wouldn't be surprised to see this "trojan horse" tactic, as part of a more general desesperate move to revive UK fortunes in the economic field ... might have been smart, but it sure needs a lot more political will and involvement if it were to succeed.
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If it wasn't a new idea, then it cannot have been a victory. There was obviously nobody to be won over.....
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Starbuck11 @ 3 wrote: "EU coordination is much better as to avoid tax loopholes and greedy tax competition."
How is tax competition any 'greedier' than any other type of competition?
Ireland, for example, has prospered through a bit of corporation tax competition and many people have it to thank for their jobs.
I'm sure they don't think of themselves as greedy. They probably think the competition has been a good deal for them.
Maybe you meant it this way, but greed can only come in on the other side of the equation. Not on the side of the competitor, but on the side of governments who *refuse* to compete and to give up some of their tax income.
It's only standing aloof from a changing world and refusing to become more efficient that can then provoke a social cost. Those governments only have themselves to blame.
Of course, rather than compete, in the EU their reaction is to push for some EU-wide tax 'co-ordination', designed to bring the competitor back into line and ensure greedy governments remain well-fed. But that is not a sustainable path to prosperity.
- wrote: "2) Whether lowering VAT at a EU level would be the best to achieve that aim ?"
It's the *only* way to achieve that aim. VAT is an EU-governed tax. Countries have rights to alter rates within limits, but changes cannot be made without EU permission.
That's why, as now in so many other policy areas, the people we supposedly elect to govern have to go running to beg unelected EU institutions to take action.
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It should be the other way round: putting fiscal pressure according to the pollution level of the product or the good.
It is an impossible task to determine which products are "environmentally friendly", just because it is a contradiction per se: production can never be harmless to the environment.
This contradiction will continue in secula seculorum till the exhaustion of the planet. From one side, we appear very concerned about global warming; from the other, we are constantly urged to consume more and more in order to increase infinitely the production.
It seems we are obliged to consume as much as we can in the pursuit of hapiness.
That's capitalism, our "perfect" system.
Any "environmentally friendly" iniciative is just a drop in the ocean.
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Hi Stuart,
a few misconceptions to dispel :
It's not the "EU" who governs VAT rules, but national governments. In the same way, that's not public servants in EU organizations who decide what needs to be done, they are merely monitoring decisions made by the national ministers of the EU countries.
those countries have the responsibility to enforce decisions that they themselves agreed upon.
So any decisions to change VAT rates or rules can only come through unanimous national ministers agreement ("thanks" to national veto in that matter rather than majority-rule). EU bureaucracy apparatus stand as the arbiter, not the decision-maker.
I'm not against tax competition. Greed is a powerful economic agent for motivation. But I'm against corporations who tries to get the better of all world while shirking from their social responsibilities.
Meaning the same company using tax loopholes in various countries due to lack of coordination between said countries, while using those countries infrastructures, educational and health systems paid for by said countries taxpayers.
would you agree on foreign companies operating in the UK with no employees living in the UK, claiming taxbreaks (designed for companies developping/employing UK labour force) while shirking from UK tax system because foreign-based ?
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brown is EU history in the making . Get reqady for David EU he wil break the treay or someone will point to the exit dooror this undemocratic union
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Socrates
Roman Empire
Catholic Church
Norman Invasion
Inquisition
Spanish Armada
Napoleon
Papal ?Infallibility?
Marx and Engels
Kaiser Bill
Hitler
Yugoslavia
?EU?
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SuffolkBoy2,
See you in Benidorm, Provence, Tuscany and now even in Bulgaria.
Fresh news today: new records on British expats.
At the end of the day, the hell isn't so bad.
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How many Eurocrats does it takes to work out that lowering the price of a product by reducing its rate of taxation will persuade more people to buy it?
The real issue here is that the EU law on the minimum rate of VAT should never have been created in the first place. Even in the USA individual 'states' (actually provinces and not real states) are free to set their own rates of sales tax, with some being zero rated. The American system is designed to encourage tax competition between their 'states' leading to healthy pressure for efficient state adminsistration. The EU system is designed to protect the least efficient country (Germany) from losing VAT revenue to its more efficient neighbours to the detriment of all.
John Major and other leaders of the early 1990s agreed to the creation of EU law on a minimum rate of VAT which had no immediate practical consequences at the time. But due to the supremacy of EU law and the Commission?s monopoly on legislative initiative something of great significance did change which is now becoming apparent. We lost the ability for a political party to run for office on a manifesto commitment to reduce VAT and actually be able to implement this program if elected. Two French Presidents (Chirac and Sarkozy) have now been elected on promises to reduce VAT on restaurant bills but neither has been able to implement this policy. Gordon Brown cannot reduce VAT on environmentally-friendly products. It is absolute nonsense that the EU should prevent elected politicians from implementing policies that they ran for office on, when those policies will not adversely impact the citizens of any other country.
It should be realises that this problem does not just relate to VAT but is an inherent problem with the EU itself. It will reoccur in every policy area transferred to Brussels by the treaties on European Union, including all those areas now being transferred by the Lisbon treaty. We used to have ministries of trade and agriculture, but these have been shut down because our governments are powerless in these areas. The Lisbon treaty transfers power over immigration, sport, environment, etc., etc. to Brussels and it is only a matter of time before the national ministries in these areas are also closed down with our elected governments becoming as powerless to make changes in these areas as they are now regarding VAT.
The EU system is only suited to producing single market regulations of a minor technical nature (e.g. food standards such as maximum curvature of cucumbers, etc.). It is totally unsuitable for deciding the major issues of public policy such as rates of sales tax because it effectively removes these decisions from the democratic arena.
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Mark:
Gordon Brown's victory by looks of things was a little one!
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Free-born John #11,
Maybe I've forgotten the details but there must still be some ability left to change a TVA/VAT tax rate otherwise all countries would be using the same rate and I know of 17.5%, 19%, 21% at least, plus the UK taxes food at zero whereas Belgium taxes food at 6%. Maybe the right way would be through making certain 'approved' products 'tax exempt', but knowing the way the EU's governments work they would only use that mechanism to promote local products that would improve their election chances and ignore how good/bad they are.
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Buzet23 (13): EU law now prevents VAT being reduced below 15%, but includes some exemptions for specific products that have historically been taxed at a lower value in certain countries, e.g. children?s clothes n the UK. Our elected governments may only modify the rate above that level up to a maximum of 25%.
Historically we have had much lower rates than this. Margaret Thatcher campaigned for office in 1979 with a promise to fund income tax cuts with a rise in VAT from 8% to 15%. Nobody today could campaign for office on a promise to do the opposite, illustrating how our democracy has been progressively degraded by EU integration.
There are currently EU plans underway to standardise the way that business taxes are calculated. The next step will be to introduce a VAT-style regime setting a minimum rate of corporate tax in the EU. The federalists are progressively disenfranchising us to build their super-state.
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After the ridiculous Brown's performance last December when he came latein purpose to sign the Lisbon treaty (to please the Mail), who is going to take him seriously inside the EU?
If Britain wants to influence the EU, Brown should step down now in favor to David Miliband, who is much more appreciated in Brussels.
I'm sure Peter Mandelson agrees with me.
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Betuli (15): You?re not really someone with your finger on the pulse of the nation are you?
If David Milliband can read the national mood better than you we may see him heading to Brussels to take up a position there (such as EU representative for foreign affairs) in preference to 10 years or more of warming the opposition benches in Westminster. But if he follows Mandelson, Kinnock, Patten etc. it will be the same one-way trip to political oblivion.
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Betuli,
Brown will soon be history and Milliband is irrelevant.
As for Peter Mandelson: he is greasier than a dozen snakes in a barrel of olive oil. You're welcome to him. In Britain we send our rejects and other damaged goods to be EU Commissars.
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Freeborn-John writes: Even in the USA individual 'states' (actually provinces and not real states) are free to set their own rates of sales tax, with some being zero rated.
Yes, but in the US there is a little thing called the Federal Income Tax. Sales tax is a state tax like UK council tax is a local government tax: it has to be seen in the context of a much bigger tax system above it. The EU doesn't have any Europe wide taxes, just minimum rates on VAT.
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Re #18
1. there are no income taxes in EU member states?
2. US sales taxes are completely different and separate from state taxes. BTW check what's the state tax in Alaska. :-)))
3. The highest sales tax in any US state is about ONE THIRD (1/3) of a typical EU VAT rate.
4. I won't even bother to compare average marginal federal tax rates in the US and EU.
Or explain, why, despite the fact that we all pay the same price for a barrel of oil, and despite its recent huge increase (@ $135.00 p/brl) - gasoline in US still costs HALF of what it costs in EU.
Let alone explain why many EU citizens with higher incomes choose to hide their money in...Lichtenstein.
5. One could argue that US states have in some respects more autonomy than EU states, or, at the rate Brussels is going, they soon will.
P.S. I strongly suspect no EU 'federalist' has ever read Federalist Papers. :-)
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Anthony Zacharzewski (19): Do not confuse the issues of the legitimacy of tax raising powers with that of the binding nature of EU decisions on future governments. The EU, so long as it exists, must be funded from public expense but it cannot raise those funds itself because it is not (no matter how much it wants to be) a state deriving legitimate authority from a sovereign people to decide the limits of its own powers (including tax raising powers) over that people. In US political lexicon there is no difference between the words 'national' and 'federal' but US federal institutions and taxes are in fact accepted as legitimate because they are happen to be national. There is a big difference in Europe between the words 'national' and 'federal' meaning the imposition of federal EU taxes is simply unacceptable.
The issue under discussion here is that a one-off decision taken at EU level in the early 1990s to introduce a minimum rate of VAT now prevents governments from doing what voters want. If decisions taken by the first American presidents could not be reversed by their successors the American democracy would long ago have seized up. This is the situation we have in Europe since Maastricht and it is only because recent prime ministers and presidents are the first to be able to bind their successors politically (rather than in minor areas of common market regulation) that we begin to see a problem of degraded democracy which can only get worse and worse. John Major lost an election in 1997 and Mitterrand is in his grave, but the decision they took at EU level to set a minimum rate of VAT govern us more today than the wishes of the current British and French leaders, and will continue to do so until the EU decision-making rules are renegotiated.
EU law superior to national law is simply too powerful an instrument for general use because of the binding effect it has on future governments. Law of such power should only ever be applied to prevent one European government from harming the interests of citizens of another state. Since reductions in VAT on green products in Britain or restaurant meals in France can cause no ill effects to citizens of other European states, there is no reason why such changes should be blocked by previously agreed EU law.
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ScepticMa (No 17) I had never thought of that angle. Perhaps you are right, that why the U.K. gets such a poor deal from the E.U.
Poor Gordon, I am beginning to feel almost sorry for him but he really is his own worst enemy. After his antics in Lisbon which achieved nothing an only manage to irritate the rest of the leaders, he is not going to get much change out the E.U.
He got the cold sholder when he went to the U.S.A. Whatever possessed him to go when the Pope was being fated?
I do not to dwell on his problems at home.
H ereminds me of Anthony Eden who, having been an effective Foreign Secretary under Churchill, managed to sink the Special Relationship with the U.S.A. in the Suez Canal almost single handed.
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Another Brown "victory" : the refusal to join the Euro
Here is an editorial from the usual eurosceptic (not -phobe) Financial Times, making a brief appraisal of the Euro to date, and cautious warnings about what remains to be done
http://www.ft.com/cms/s/0/c124985e-2a79-11dd-b40b-000077b07658.html
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"A spokeswoman points out that technology changes so fast that today's friend can be tomorrow's foe."
So be careful of tabled 'quick fixes' and this applies to all areas of policy.
"...cutting VAT on environmentally friendly products."
Sounds reasonable.
The VAT is currently the European Central Banks equivailent to the Fed. Banks Income tax. Mass fraud.
"VAT is the worse tax there is with no progressive element to it at all. From its initial introduction as a "temporary" tax at 2.5% its grown to a massive 17.5%. It should be repealed..."
- Anonymous Coward
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Re 8 "Get reqady for David... someone will point to the exit dooror this undemocratic union"
On bicycles, with the cars following? As for breaking away from the Union, I would be more watchful to Alex Salmond's words ;-)
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Re 17: "In Britain we send our rejects and other damaged goods to be EU Commissars."
And then complain when the continentals call you names.
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