Former Prime Minister Alfred Sant told the European Parliament that calls for the harmonisation of tax structures, or even for “fairness” in so called tax competition, could inhibit even further the competitiveness of areas which find themselves at a disadvantage compared to better endowed areas within the monetary zone. Dr. Sant said that in the absence of a well-organized transfer union, tax competition will remain a tool by which peripheral or disadvantaged regions can survive. ‘The challenge is to make such competition transparent’, emphasised the Maltese MEP.

Dr Sant explained his reservations at the EP when he abstained on ‘The Annual Tax Report’. He said that in a single market, especially one with a single currency, it is to be expected that there will be demands for a level playing field across all business related matters, including taxation. This would ensure that competition  occurs under fair and transparent conditions.

Dr Sant remarked that operational conditions for enterprises across the monetary area are not the same because in the real world, things shape up differently. Physical endowments are an obvious example of this. When the monetary zone operates as a federal system, or a so-called transfer union, mechanisms exist to ensure that those who are less well endowed with competitive attributes, received compensation for their handicaps. This is done by financial or other transfers, automatic or politically directed. None of this is possible in the euro zone, emphasised Dr. Sant.

The report passed with 444 votes in favour, 110 against and 41 abstentions.