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Another View of the Democratic Deficit ovvero
No Taxation without Representation*
Agust�n Jos� Men�ndez
ARENA
For a while it seemed that
European integration was on the peaceful track of
routine. The agreement reached at the Amsterdam summit in
1996 was sufficient to postpone big thinking [1]. It is true that a
certain sense of constitutional crisis was in the air
during the last months of Jacques Santer's presidency of
the Commission, but no major theoretical debate
surrounded its demise and the election of Mr Prodi as a
new, reformed head of the college of commissioners [2]. However, the last
two months have brought back big ideas to the European
public. A wave of speeches and statements of key
politicians has fostered a wide debate on where Europe
should be heading in the coming years. The three boldest
ones might have been Joschka Fisher's at Humboldt
University [3],
Jacques Chirac's before the German Parliament [4] and Carlo Azeglio
Ciampi's at the occasion of receiving an honorary degree
from Lipsia University [5].
This might mark a new stage in the debate, but to a
certain extent it was bound to happen, once we take into
account the following two processes. On the one had, the
Union is committed to enlarge its membership. A number of
candidate members have started negotiations, and some
more are on the waiting list. This has encouraged
fundamental thinking on the Union institutional
structure. It is widely agreed that it is not possible
simply to adapt the existing one to a constituency of
twenty-five or thirty members. On the other hand, the
number of issues dealt with at the European level is on
the increase, no matter subsidiarity. This is the direct
result of the new pillars added at Maastricht, but it is
also the consequence of the superior problem-solving
capacities of a supra-national institution. The problem
here is that Europeanisation of policies tends to take
place in a blurred way, increasing exponentially the
degree of complexity of the institutional structure.
It is in such a context that we can make full sense of
the three aforementioned discourses. The finalit�
of the Union comes quite naturally when one has to
consider fundamental reform. The three interventions can
be seen as an attempt to provide the political vision
that should underlie detailed plans of reform. References
to a European constitution, to enhanced cooperation and
federalism might look too vague, but should be considered
more as fundamental principles settled
at the beginning of the debate. At any rate, it seems not
too risky to guess that Pandora's box lies open and will
not easily close again. If only because of the timing of
the ad-hoc convention conveyed to draft a Charter of
Fundamental Rights for the Union. It has already produced
a final text [6] and
will release its final report on September. No matter the
need for such an exercise [7],
it is quite clear that the standing and status of rights
is a major constitutional issue. It does not take much
imagination to see this as a potential first step towards
a constitutional moment for the Union [8].
In this note, focus is on Fischer's
speech. His arguments are the most challenging. He does
not only have a certaine id�e de l'Europe, but a
quite detailed blueprint of how representation and
decision-making processes should be changed. His is a
committed federal proposal, and one might even say that
it has a Habermasian flavour [9].
My intention is to provide some normative arguments for
what seems to me the implicit premise of Fischer's
speech. That is, that there is no necessary tension
between European integration and democracy (which does
not entail that there is necessarily harmony). I
basically do two things. First, I try to analyse what the
democratic deficit is really about. Instead of invoking
it rhetorically, we should analyse it with the help of a
sound conception of democracy. If we do so, we see that
not only Europe, but also nation-states and unregulated
markets have to deal with serious democratic deficits.
Second, I try to show that the processes of European
integration verify this abstract normative argument. I
consider more closely one concrete policy area, namely
personal taxation. It seems to me that there is enough
evidence to conclude that Member States have paid a high
price to keep their formal sovereignty on this matter.
They seem to have lost most of their factual sovereignty.
This should be enough to conclude that Fischer's basic
insight is right. We can have more of Europe, more of
nation-states and more of democracy, provided we use our
institutional imagination.
Fischer's argument
Fischer makes a plea for a federal conception of
Europe. The general premise is that Europe has already
transcended the international or intergovernmental stage
of integration, and it increasingly resembles a
federation. The Rubicon of European integration
was passed with Monetary Integration (one can guess he
refers to the famous the third stage, in which the Euro
replaced national currencies). This quite
neofunctionalist idea seems to be shared by many
publicists in France [10].
It is worth quoting Fischer's statement: A tension
has emerged between the communitarisation of economy and
currency on the one hand and the lack of political and
democratic structures on the other [11].
This reality of an increasing integrated Europe is yet
to be translated into adequate mechanisms of citizen's
representation and of decision-making. This d�calage
makes it necessary to move forward to explicit political
integration, that is, to a European federation. The slow
process of integration, based on the idea that one small
step now will allow several small steps later on, is no
longer useful. Gradual integration without worrying a
picture of the polity that is being forged
(the so-called Monnet method) is just at the root of
present troubles. This implies at the very least two
things. Firstly, direct mechanisms of representation of
citizens. It requires the familiar transformation of the
European Parliament into something more similar to a
full-blown legislative organ, and the less usual claim
that the head of the European executive should be elected
directly by the people [12].
Secondly, a complete overhaul of the decision-making
process. We need a new (and proper) Constitution, with
full-blooded legislative and executive powers. He puts
forward new models for the Parliament (which should
consist of two chambers, one for direct citizens'
representation, the other for regional representation)
and for the Commission (which should be transformed into
a real executive, with its head receiving a direct
mandate from the people).
Reactions to Fischer's discourse
Fischer seems to have intended his discourse to foster
debate. He was cautious not to offend the sensibilities
of anybody. He insisted that this was not an official
piece, so he took his ministerial hat off. He softened
his language with several discharge notices. However, his
invocation of the European F-word (for federation)
has been more effective in awakening fears of a European
Leviathan than at offering a clear picture of the
decision-making structure he favours [13].
It is too soon to offer a detailed analysis of
criticisms. But it is not too risky to guess that frontal
attacks would be based on the argument that a Federal
Europe, with mechanisms for the direct political
representation of citizens and renovated breadth and
scope for federal decision-making processes, is unlikely
to reduce the legitimacy deficit of the European Union.
That is so because it is the pooling of competencies by a
supranational institution that is perceived to be the
problem. That is argued to be what is actually perverting
national democracies. Under such premises, a European
federation (somehow by definition) cannot be sufficiently
democratic.
This is, of course, the language of Euroscepticism, a
short name for anything opposing further political
integration. This usually comes in two main variants.
Firstly, we find those who conceive the Union as mainly
an economic affair. Integration would be mainly about
deregulating cross-border economic activities. The key
words here are competition and mutual recognition of
standards. This can be based on a general political
stance (neoliberalism, ordoliberalism) or on a particular
view about the distribution of competencies between the
Union and the member states (this seems to be the case of
third way social democrats like Tony Blair). Secondly, we
come across those who deny that a federal Union can be a
working polity, to the extent that it cannot provide a
basic resource for stability, namely, the loyalty of
citizens. The argument goes that politics requires a sort
of prepolitical solidarity, and that is based
on common culture. Because the later is absent within
Europe, the Union should be a mere association of states,
based on the intergovernmental model of international
organisations. The key words here are loyalty, solidarity
and demos. The Union as a federation would be a recipe
for tyranny [14].
Even if we are still waiting
direct responses to Fischer's speech, one cannot fail to
notice that it has had an immediate impact in the
discourse of national and supranational officials. It is
interesting to see how the basic premise of the Green
politician's argument is directly rebutted, namely, that
monetary integration needs to be complemented by further
political integration. This has been left painfully clear
in two statements within weeks of the Berlin's speech by
Gordon Brown, the UK Chancellor of the Exchequer [15], and the
flamboyant Fritz Bolkestein, commissioner in charge of
the internal market and tax portfolio [16]. It is worth
noticing that both of them advanced a view of the Union
based on economic competition [17],
and strongly disregarded any further integration towards
some supra-static form [18].
This makes clear that we are within a debate for the soul
of European integration.
What to do with Fischer's discourse? A
new look at the Democratic Deficit
My point is the following. On the one hand, no
democrat can be happy with the present shape of the Union
political system. The democratic deficit, notwithstanding
Scharpf [19], is a
serious concern. There are serious legitimacy problems to
be faced. On the other hand, and as things stand, the
implicit premise of Fischer (moving towards a European
federation will increase legitimacy) seems to me plausible.
The contradictory character of these two statements will
immediately shock the reader. How is it possible to
increase legitimacy by strengthening an institutional
structure that presents many democratic flows? The key to
this puzzle is that we need to distinguish different
kinds of democratic deficit at stake here. The paradox
dissolves once we give second thoughts to the conception
and dimensions of democracy.
I claim in the next section that
political legitimacy is not to be equated with a concrete
method of aggregating preferences, but with a complex
conception of democracy [20].
This has at least four dimensions: procedure, substance,
implementation and scope. The democratic deficit of
European institutions is related to the first three
dimensions, while the democratic deficit of non-Europe is
related to the fourth, namely to scope. The Union is
needed because it makes decisions that are democratic in
terms of scope. Going back to the traditional
nation-state is no solution to the deficit. At the same
time, we can gain a clear picture of what is wrong at the
European level, and consequently, we can put forward
proposals to reduce the real dimensions of the democratic
deficit. That seems to be what Fischer is about, as a
matter of fact.
The Democratic Deficit Unbound
Politics is basically about deciding common action
norms. Once we recognise that we are not alone in the
world, and that our actions have severe consequences upon
others, we realise the existence of what have been called
the circumstances of politics. The only way to
claim our own autonomy while respecting that of others is
by means of agreeing on sets of norms to deal with
conflicts and, hopefully, to co-ordinate behaviour in
ways that will improve the lot of all of us. Democracy is
the yardstick that allows us to determine whether
political decisions are legitimate, and consequently, to
assess whether there is a good case for us complying with
them even if we eventually do not agree with their
content. That is essential for the regular functioning of
political communities. But what does democracy entail? It
has become quite intuitive to associate it with majority
rule, but if we had second thoughts we would depart from such conclusion quite quickly. Respect for
fundamental rights and a fair application of the laws is
also clearly associated with our concept of democracy,
and this involves appeal to substantive values (respect
for the life of the person, for its autonomy and dignity)
and criteria governing the actual implementation of the
laws, either by courts or by public administration [21]. It is in this
sense that we can claim that democracy is basically about
procedure (about how we decide which laws should govern
us), but that it is also about substance and guaranteed
implementation.
If this is granted, then, a democratic polity is one
in which citizens freely decide about common norms, which
give institutional expression to a set of democratic
values, and which are implemented in ways that ensure
their respect. Democratic politics is the epitome of
freedom. However, freedom is one thing and unbounded free
will is another. We are free to argue and vote for
a given set of common norms, but we are not free
either to decide whether we have certain issues on the
agenda or to decide which individuals will be also part
of the community. The circumstances of politics (the
commonality of interest in avoiding conflict and defining
schemes of cooperation) are the ones that define the
constituency. If that is so, this adds a fourth dimension
to democracy, namely, scope. The political
constituency called to decide a certain affair should be
the one of those affected in a relevant way by the
outcome of the decision. This works both ways. In the
same way that it will be undemocratic for the national
Parliament to decide the amount to be devoted to
gardening by a given city council, it will be
undemocratic for the local city council to set the rates
of the income tax nationally.
All this has relevant implications
for the European integration process. Different processes
have led us to an increasing sharing of interests across
European countries. One could argue that the process of
market integration following the Rome Treaty of 1956 is
itself to be blamed for this, but it is also the case
that this was perceived to be the reaction to previous
developments taking place much earlier [22]. Be it how it
might be, we have reached a point in which we share so
many interests, and we share already a good deal of
common actions norms, as the thick repertoires of
Community law prove. This creates a good prima facie case
for arguing that the only way to deal democratically with
a good number of issues is at the European level (some
issues might even require us moving to the global level).
Against the arguments of Eurosceptics, it is democracy
itself (its scope dimension) which calls for
supranationalism.
As it was said at the beginning, but
it is probably worth repeating now, this does not mean
that the European Union is a perfectly legitimate polity
and that we should bow to any argument for deeper
integration. European institutions are still inadequate
in what concerns the other three dimensions of democracy.
Political participation is weak, the acquis communitaire
needs to be expanded in order to give a more balanced
protection to basic fundamental rights, and access to
Courts is imbalanced in favour of certain interests [23]. My reasoning
only makes clear that the way out of the democratic
deficit is neither deep deregulation nor a return to the
classical nation-state. In both cases we will
end up with a serious democratic deficit, due to the
mismatch between the level at which decisions should be
adopted and the one at which they are actually adopted.
And we will probably end up with far from efficient
arrangements. The experience with rigid
neoliberal macroeconomic policies must have taught us the
extent to which the market depends on fundamentals that
it cannot provide by itself. And a good deal of the
pressures to Europeanise certain fields or policies
derives from the incapacity of nation states to deal with
global problems unilaterally (although they might try to
adapt and do their best, and some do clearly better than
others) [24].
A closer look to taxation?
This rather abstract normative argument can be
rendered more concrete by considering specific policy
areas. In this section, I propose to review the process
of Europeanisation of taxes. Taxation is continuously
said to be a core competence of nation-states. The third
stage of Monetary Union has augmented the stakes. It is
now frequent to hear that tax policy is the last trench
of nation-states, deprived as they are of monetary pulls
and levers. It is rather curious that Joschka Fischer
does not even consider the issue. Although there is a
direct reference to the Europeanisation of monetary
policy, he makes no reference whatsoever to public
finance in the speech. My claim is that the present state
of play in the Europeanisation of tax matters makes it
clear that Fischer's basic intuition is right. Namely,
that furthering political integration within the European
Union is not against democracy, but it could allow us to
improve democracy.
This is so because member states have less room of
political manoeuvre in relation to those taxes that have
not been Europeanised than in regards those for which a
common normative framework has been established.
A first flaw of the usual rhetoric about taxation is
that it neglects that some taxes are already
europeanised. The usual argument that taxes have not been
harmonised at the European level is more accurately
reformulated as the premise that there has been no
positive harmonisation of personal taxes, what are
usually referred as direct taxes. That is true of
customs duties, and to a good extent also applies to the
value added tax and to excise duties (although to a
lesser extent). Thus, the actual failure of the European
political process is correctly circumscribed to personal taxes. Despite the fact that
ambitious plans for comprehensive tax harmonisation have
been in the agenda since the very beginning of the
Communities [25]
(the need of some harmonisation of corporate taxation was
already discussed in the very early stages of the Coal
and Steel Community), not much has been achieved on taxes
burdening capital or corporate income [26]. Bu this does not
mean that national sovereignty has been preserved intact
in this area. The relevant thing is that the formal
preservation of national sovereignty has come hand in hand with the progressive erosion of
the de facto sovereignty of the nation-states [27]. This is to be
explained by two parallel process, namely the
de-regulation of cross-border capital flows (quickly
implemented after the demise of the Breton Woods
international financial architecture) [28] and the
implementation of the merely negative aspects of
the free movement of capitals within the Community [29] [30]. It does not take
much ingenuity to see that, under such circumstances, all
states have tended to reduce the tax burden over capital
income and shift it to labour income. So, it is not too
adventurous to argue that this reflects a loss of factual
sovereignty. Nation-states have an increasing narrow
margin of manoeuvre in the design of their tax systems.
Most of the discussion surrounding major tax reforms
taking place since the eighties have focused on the
consequences that the reform would have for the
international competitiveness position of the country in
question. If one needs further evidence, one can consider
the evolution of some technical aspects of the corporate
tax, directly related to cross-border activities. It is
difficult to argue that there is much democratic support
for the reforms of the tax treatment of capital gains or
of the taxation of savings, which tend to go barely
noticed by the public despite their major distributive
effects. Tax reforms of such elements of the tax mix are
normally undertaken under the argument that whether
you like it or not, there is no alternative.
It is paradoxical to see that the
same nation-states have much more room for political
decision concerning taxes that have been europeanised.
That is the case with the Value Added Tax, for example. A
bunch of European directives constitute the basic
normative framework for national laws defining the
value-added tax. Member states have to design their taxes
according to the tax base definition established at the
European level. However, this allows them to have room to
fix the basic rates of the VAT, and they can also apply
preferential rates to certain products or activities.
This ensures a smooth working of the referred tax, and
allows sufficient room to make politically significant
and transparent decisions. Reducing or increasing the
basic VAT rate some points is a politically relevant
decision, and different governments have opted for
different solutions, in line with the national political
preferences [31].
This all boils down to evidence that
democracy is also a matter of scope. To the extent that
the interests of the citizens of many different states
are at stake, it is clear that national decision-making
is bound to be either undemocratic or plainly
ineffective, and thus, against the actual preferences of
citizens. This renders clear that for a common action
norm in this respect, we will need to have resort to the
supranational level. But this is, in a way, part of the
traditional liberal motto, No taxation without
representation. It does not only require extending
voting rights within the polity, but also deciding things
in institutional frameworks where all those affected can
be represented. In personal tax matters, this implies a
common normative framework decided at the European level.
Only in such a way member states could regain actual
political sovereignty [32].
Of course, that does not make such level of governance
immediately democratic. That will depend on procedure,
substance and implementation.
So, what can be learnt from Fischer?
As stated, I have made two points in order to defend
Fischer's vision. First, that any fruitful analysis of
the democratic deficit should start by analysing the
concept of democracy itself. By doing so, we realise that
European integration can help increasing legitimacy on
the scope dimension of democracy. That does not hide the
fact that there are other dimensions of democracy in
which much needs to be done. The Union as a polity still
needs to find better ways of increasing political
participation, it has an insufficient commitment towards
certain substantive values and it provides insufficient
access to judicial protection to individuals. But this
cannot be solved by a move towards a non-Europe or a
free-trade area conception of the Union. Second, that a
careful analysis of the process (or lack of) of tax
harmonisation confirms the previous analysis. The mixed
record of tax harmonisation shows that the lack of a
supranational framework for personal taxes has led
to a considerable narrowing of the tax policy options
open to national political processes. The only way of
rescuing national sovereignty is by means of increasing
supranational arrangements.
It seems to me that this provides a bit more solid
ground for the general insight of Fischer. Under such a
light, one should construct him as making a modest plea
for constitution making.
After all, he is openly arguing for a federal Europe.
The problem with federalism is that it means very
different things to different people, and it is not
always the case that everybody is eager to learn what
others mean by it. According to classical constitutional
thinking, what is at stake here is where sovereignty
rests, or what is the same, who has the last word, the
power of last resort (this tends to be called by lawyers
the competence-competence). States can establish
different frameworks of cooperation. In a confederation,
states retain their original sovereignty, while
delegating a limited number of powers to the new central
power, which is a mere creature of the states. In a
federation, sovereignty moves to the centre, and states
have their powers enshrined and limited in the federal
constitution. Eurosceptics share very much this view;
consequently, they see Fischer's plea for a federation of
states as a recipe for depriving member states of
sovereignty. However, one could doubt that this way of
conceptualising sovereignty makes any longer sense. For
one, Neil MacCormick has shown how the present structure
of European law cannot be explained with such conceptual
tools. The Union makes it clear that we
have go beyond sovereignty. The relationship between
European and national law cannot be said to be one based
on the unconditional supremacy of any of the systems over
the other. We have a plurality of overlapping legal
systems, and a pluralistic relationship between them [33]. The last word
does not belong to the European or the national legal
system, but to the dialogue that exists between
the two. Under such understanding, federalism is not a
formula to determine where the power of last resort
rests, but to describe the kind of foundations of the
Union. Structures of international law are exclusively
based on the commonality of interests and the functional
need of finding common action norms.
They resemble a modus vivendi, in which parties
tolerate each other. A Federal Europe is based on
something else. Common action norms deal with areas in
which we need to solve conflicts and achieve cooperation,
but they are also inspired by common values. The
right model is that of the overlapping consensus, of a
normative consensus on which the whole integration
process seems to be founded [34].
Such conception of federalism makes it clear why
Fischer has felt in need of reopening the debate on the finalit�
of the Union. We could interpret him as saying that
citizens should realise the Union is already based in an
overlapping consensus that transcends a mere modus
vivendi. In this sense, and to use Ackerman's
terminology once again, Europe is not facing a radical
new constitutional beginning in which it has to redefine
its identity. It is just entering a constitutional
moment, in which important reforms will be adopted.
This implies, among other things,
reconsidering the division of competencies between the
Union and member states, but this is not necessarily a
recipe for a super-state (actually, it could be just the
opposite). However, it seems to me that Fischer might be
too optimistic. It is not realistic to expect that we
could make a one-page list to sort all things out.
Anybody familiar with policy processes at the European
and at the national level within federations knows that
things are far more complex. On what concerns tax
matters, the efforts to establish an Anti-Fraud office
(surprisingly baptised as OLAF in the Euro-jargon) show
that different schemes of cooperation are needed, no
matter who is mainly responsible for doing what [35]. But nothing
prevents making things as clear as possible, even if
complexity is to be accepted as the price for
sophisticated governance.
Conclusion
That means that we are just at the beginning of the
real debate. The European Union is already a full-blown
polity with a constitution [36].
There are good democratic reasons for that to be
so. If we are really committed to democracy, we should
endorse the move from a messy and undefined constitution
towards a drafted charter that has benefited from
extended deliberation [37].
This will allow us to start tackling the real democratic
deficit at the European level. We need to have a clear
set of procedures, substantive values and criteria for
implementation. But this requires moving forward, not
backwards, in the process of European integration.
Fischer's vision is thus basically correct. We can have
both more of Europe and more of nation-states, but only
if we dare becoming the pouvoir constituant.
Footnotes
* Many
thanks to Svein S. Andersen, Edoardo Chiti, Andreas
F�llesdal, Erik O. Eriksen, Hans Petter Graver, Johan P.
Olsen, Elena Rodr�guez and Helene Sjursen for remarks
which made this paper a better one, although not devoid
of errors of which I am responsible. Special thanks to
Christian Joerges, for rendering it possible.
[1]
A very helpful outline is contained in Renaud Dehousse, European
Institutional Architecture after Amsterdam: Parliamentary
System or Regulatory Structure? (Florence: Robert
Schuman Centre Working Paper 11/98, 1998). It is
available at .
[2]
See Edoardo Chiti, Crisi della Commissione ed evoluzione
del sistema istituzionale europeo, Giornale di diritto
amministrativo (6:593, 1999).
[3]
From Confederacy to Federation. Thoughts on the
finality of European Integration. Speech by Joschka
Fischer at the Humboldt University in Berlin, 12 May
2000. Available at .
[4]
Our Europe. Speech by M. Jacques Chirac, President
of the Republic, to the Bundestag. Available at (English
text).
[5]Discorso
del Presidente della Repubblica Carlo Azeglio Ciampi in
occasione del conferimento della laurea Honoris Causa
dell' Universit� di Lipsia. July 6th, 2000.
Available at (only in Italian).
[6]
The final draft was released July 28th. It is
available at .
[7]
Cf. Joseph Weiler, Editorial: Does the European
Union Truly Need a Charter of Rights?. European
Law Journal, 6:95-7.
[8]
Applying Ackerman's apt terminology. Bruce Ackerman, We
the People (Cambridge: Harvard University Press, 1991
and 1998), Bruce Ackerman (1991) The Future of the
Liberal Revolution (New Haven and London: Yale
University Press) and Bruce Ackerman, The Rise of World
Constitutionalism. Virginia Law Review, 83:771-97
(1997). The second one shades a very interesting light on
European integration.
[9]
Which is not surprising given his reading diet. This is
hinted at in an interview to EL PA�S, July 7th,
2000.
[10]
One can just recall the catchy formulation of former
President D'Estaing: We wanted the European Central
Bank an independent body, not an orphan one. See
his speech of May 9th, 2000 before the French
National Assembly.
[11]
This is completely in line with the feeling of both
Chirac and Ciampi. It must be said that it was in
the air during the May 9th session at
the French National Assembly, where a very interesting
debate on the priorities of the French Presidency took
place.
[12]
Fischer refined his views on July 6th before
the Constitutional Committee of the European Parliament.
See at .
[13]
See The Times, May 13, 2000: German threat to isolate
Britain. The correspondents report that Paris
and Berlin are determined to counter what they see as an
Anglo-Saxon plot to turn the EU into little more than a
free-trade area and that Francis Maude, the
Conservative shadow Foreign Secretary argued that
Fischer had spectacularly blown the lid of Europe's
superstate agenda. It is only interesting to have a
look at the two letters to the editor in The Times, May
17, 2000, under the headline European `superpower'
plan eclipses Euro debate. One of the readers, Sir
Roy Denman, argues that [the UK] will not be
prepared to join a federation for a generation. That is
the length of time we shall simply be a sidekick to a new
European superpower under Franco-German leadership.
[14]
It is worth considering the extent to which the two
variants have deeper intellectual connections. After all,
neoliberal arguments against redistribution suggest that
charity could be an alternative means to guarantee that
people are not exposed to extreme economic deprivation.
The obligation of charity is then located in the members
of close-knit communities, where culture, language and
other things are shared.
[15]
A lecture delivered July 13th, 2000 to the
Royal Economic Society. Available at .
[16]
Speech given June 27th , 2000 to conservative
MEPs participating in the Intergovernmental Conference.
Available at .
[17]
Bolkestein was assertive. He said: I am not about
to harmonise taxes. I would rather have fiscal
competition. Instead, we try to simplify as much as
possible by recognising the validity of each other's
rules. We call that the mutual recognition of standards.
Where necessary, we replace fifteen different sets of
rules by just one. So the goods, services, labour and
capital can now freely flow across borders.
[18]
Brown was quite straight, and indirectly referred to
Fischer's speech as an old claim. Here is the
relevant passage: We are challenging the old claim
made by some that tax harmonisation and a federal
super-state run by the European Commission are the next
stage after Monetary Union. We are putting the case for
tax competition and against tax harmonisation, for the
mutual recognition of nationally determined standards,
and calling for timetables that would open up the single
market in aviation, telecommunication, utilities, energy
and financial services.
[19]
Fritz Scharpf argues that the democratic deficit has been
more an academic than a political concern up to quite
recently. See Governing Europe (Oxford: Oxford
University Press, 1999)
[20]
For the complex conception of democracy, see Agust�n
Jos� Men�ndez In Redistributive Taxation We Trust
(Florence: Law Department of the European University
Institute, Working paper 1/2000, 2000) at p. 68ff.
[21]
It needs to be said that all this is dealt with in the
draft charter of the fundamental rights of the European
Union.
[22]
Alan Milward, The European Rescue of the Nation State
(London: Routledge, 1992) remains the unavoidable
reference.
[23]
See Chris Harding Who Goes to Court in Europe. European
Law Review, 17:105-25 (1992).
[24]
See Scharpf, ibid.
[25]
See the comprehensive Neumark report. It can be found in The
EEC Reports on Tax Harmonisation (Amsterdam:
International Bureau of Fiscal Documentation, 1963).
[26]
See Paul Farmer and Richard Lyal EC Tax Law
(Oxford: Oxford University Press, 1993) and Adolfo
Mart�n Jim�nez Towards corporate tax harmonisation
in the European Community (The Hague: Kluwer, 1999).
[27]
See the recent Reuven S. Avi Yonah, Globalisation, Tax
Competition and the Fiscal Crisis of the Welfare State, Harvard
Law Review (forthcoming in volume 113).
[28]
See, among others, Kim Taeko (1993) International
Money and Banking. Routledge: London, pp.184ff and
Ethan Kapstein, Governing the Global Economy,
Cambridge: Harvard University Press, chapter 2.
[29]
See Council Directive 88/361/EEC of 24 June 1988 for the
implementation of Article 67 of the Treaty. See Official
Journal L 178, 08/07/88, pp. 5-18.
[30]
Of course it is difficult to determine the relationship
between different causal agents. The two ones to which I
make reference seem to be the remotest causes of many
other relevant developments, but this might be
inaccurate. For example, one could consider that a major
cause of the erosion of national control over the economy
is the volatility of capital markets. My assumption is
that short-termism in economic decision-making has
been rendered possible by the previous deregulation of
capital markets. And that it has been aggravated by the
specific way in which freedom movement of capitals was
implemented in the Union.
[31]
For example, the basic VAT rate went down 1 point in
France in April 2000, after an interesting debate on what
should the taxing and spending preferences be. See
WorldWide Tax News (International Bureau of Fiscal
Documentation), document TNS-51 (2000). This might look
modest, but to my mind it is not so. It makes it clear
that there is room for taking decisions with a clear
distributive impact in different directions, something
which is far from clear concerning personal taxes.
[32] A
further question is why such normative framework must be
a fully supranational one, and not one established
through classic international law. Fully tackling
this issue will triple the size of this note, but it can
be said that the functional argument (member states can
no longer act unilaterally and be factually sovereign)
can be complemented by normative arguments of different
kinds in favour of deciding in Europe. One could be that
a purely intergovernmental solution would not be
sufficiently sensitive to the strength (in number and in
reasons) of transnational coalitions in support of
certain measures. As things stand, one member state (even
of the size of Luxembourg) can veto any proposed
arrangement, without any need of invoking reasons
acceptable to others for adopting such stance. It is
puzzling to hear that an institutional arrangement that
makes that possible is the essence of democracy.
[33]
See Neil D. MacCormick (1999). Questioning Sovereignty
(Oxford: Oxford University Press, 1999).
[34]
See Massimo La Torre (1999), Legal Pluralism as
Evolutionary Achievement, Ratio Juris, 12:182-95,
especially at p.188ff.
[35]
See the First report on the operational activities of
OLAF, Brussels, 23 May 2000. Available at .
[36]
See Neil D. MacCormick. Questioning Sovereignty
(Oxford: Oxford University Press, 1999).
[37]
A similar idea in Jean-Claude Piris. Does the European
Union have a Constitution ?Does it need one?
(Cambridge: Jean Monnet Chair Working paper 5/00, 2000).
Available at . Philippe C. Schmitter puts forward an
interesting proposal for a constitution-making process in
his recent Comme democratizzare l'Unione Europea e
perch� (Bologna: Il Mulino, 2000). See especially
pp. 145-55.
[Date of publication in the ARENA
Working Paper series: 15.09.2000]
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