July 18, 2024

News Cymru

Two sides to every headline

Matthias Mors – Another guy who thinks Greeks should be poorer, much much poorer

Athens News carried this article today

This is the highlight

“Basically I would say that if we look at what has happened in the last two years since the programme started, and what will happen until the end of the second programme, I think terms of reduction in unit labour costs, roughly speaking I would say maybe we are half way,” Matthias Mors the told a briefing in Brussels. 

I’ll ignore the immorality of one human being declaring that millions of other human beings get paid too much for their labour, that the value of their labour should be reduced and that this human being will try to pro actively reduce the quality of life of millions of other human beings. Let us ignore that point….

A statement like this shows one of two things.

Either the Troika have absolutely no clue about what is going on in Greece or..

They know exactly what is going on and they are extremely happy with the progress.

To say that labour costs in Greece have come down is the truth, but it is a fallacy to only highlight this point at the same time to ignore the fact that the cost of living in Greece has increased massively.

If I were to give Matthias Mors the benefit of the doubt maybe he is unaware of the cost of living in Greece. Perhaps he is only looking at wages and when he sees wages coming down he thinks he has done is job.

If this is insightfulness of the Troika’s top man then Greece would be far better out of the Euro.

Everyone who is following the Greek “crisis” should think again about what they are being told by the politicians and the media.

Personally I do not believe there is any reason for Greek unit labour costs to be reduced.

But assuming that this is the answer, you can not talk solely about wage costs.

If you are going to talk about wage costs then you also have to look at the cost of living because if you don’t you are blind to the potential of famine.

To only look at people’s wage costs and not look at this in the perspective of living costs is dangerous. And I am not dramatizing the situation when I use the word dangerous, if anything I am down playing the consequences of such narrow goals.

Until I hear the Troika start talking about living costs in Greece I worry for the Greek people as a whole.

If on the other hand the Troika know exactly what is happening and everything is going according to plan the it is obvious what the goal is.

For Greeks to consume less of the worlds resources and this will be made possible through oppressive and increasing taxation to destroy competitiveness while at the same time making as many people as possible dependant on the state so they can be controlled more easily.

The second option cannot be true, that would be a “conspiracy theory”. If you think this video is not relevant to Greece. I challenge you to imagine they are talking about Greece and not the USA and not to see the relevance with today’s problems in the Hellenic Republic.



So it must be option one, in which case the Troika are completely clueless. Either way, Greeks need to take control of the situation.

Luckily there is a politician in Greece who is calling out the destructive actions of the Troika. Rest assured, you can expect attempts to rubbish his reputation and destroy his popularity.

His life might even be threatened directly or indirectly.

With regards to the Troika, this is the first time I hear of Matthias Mors so I did a bit of research to try and find out what he is about.

From what I can see he is a tax specialist and also a carbon tax specialist. It can’t be the second option… can it?

Here is what I found




Carbon Tax Expert? – http://www.google.gr/search?hl=el&tbo=p&tbm=bks&q=inauthor:%22Matthias+Mors%22&source=gbs_metadata_r&cad=4


And I found this paper here

Direct Tax Developments in the European Union


Matthias Mors[1] – European Commission

Speaker’s Details

Matthias Mors is an economist by training, Matthias Mors, obtained a Ph.D in economics from the University of Regensburg (Germany). After working as a research assistant at the universities of Regensburg and Oxford (UK), respectively, he joined the European Commission in 1983. His work at the Directorate-General for Economic And Financial Affairs focused on economic evaluation of sectoral policies. Since August 1999, he is heading the unit “Co-ordination of tax matters” at the Commission’s Directorate-General for Taxation and Customs Union. The unit’s main tasks are the development of EU taxation policy, the fight against harmful tax practices (Code of Conduct on Business Taxation) and the preparation of the recent study and communication on company taxation in the Internal Market.

1. Introduction 

2. The Tax Package 

a) The taxation of savings 

b) The Code of Conduct on business taxation 

c) Interest and royalty payments 

3. The taxation of occupational pensions 

4. Company Taxation in the EU 

a) The content of the Commission services study 

b) Effective marginal and average tax rates 

c) The existing tax obstacles and their effects 

d) Removing the existing tax obstacles 

i. Targeted Solutions 

ii. Comprehensive Solutions 

e) Commission conclusions drawn from the company tax study 

5. Outlook for the next twelve months

1. Introduction

As in 2001, the European Union is facing a heavy direct taxation agenda in 2002. On the one hand, efforts are continuing to conclude the work on the so-called tax package, launched in December 1997, before the end of the year. On the other hand, the European Commission opened in 2001 a new chapter by presenting its priorities on taxation policy, and in particular those in the field of company taxation, for the years ahead.

2. The Tax Package

In line with the timetable for the tax package agreed by the ECOFIN-Council on 10 July, work continued in 2001 and early 2002 on all elements of the tax package.

a) The taxation of savings

On 18 July 2001, the European Commission adopted a revised proposal for a Council Directive to ensure effective taxation of savings income in the form of interest payments within the European Community. Following the agreement reached at Santa Maria da Feira in June 2000, the proposal replaces the draft Directive of May 1998 and reflects the conclusions on the substantial content of a directive on the taxation of cross-border savings reached at the ECOFIN-Council meeting on 26/27 November 2000. Under the amended proposal, each Member State is ultimately expected to provide information to other Member States on interest paid from that Member State to individual savers resident in other Member States. However, for a transitional period of seven years, Austria, Belgium and Luxembourg would be allowed to apply a withholding tax, at a rate of 15% for the first three years and at 20% for the remainder of the period, instead of providing information. Three quarters of the withholding tax revenues will be transferred to the Member State of residence while the remaining quarter remains in the hands of the Member State of the paying agent.

At the ECOFIN-Council of 16 October 2001, Ministers agreed on a mandate for the European Commission to negotiate with six countries outside the EU on ensuring the application of measures equivalent to the system that Member States have agreed to implement within the EU in relation to the taxation of savings.

Following intensive discussions in the second half of 2001, ECOFIN-Ministers agreed unanimously on 13 December 2001 that the July 2001 Commission proposal for a directive, as amended by the High Level Group of December 2001, represents the entirety of the provisions for the taxation of savings for the purpose of negotiating with the third countries identified by the European Council in June 2000 (the United States, Switzerland, Liechtenstein, Monaco, Andorra and San Marino). These negotiations, conducted by the Commission in close conjunction with the Presidency of the Council, are currently in progress. The June 2002 ECOFIN-Council is scheduled to discuss and take note of the finalisation of the negotiations with the third countries and of the discussions between the Member States concerned and all relevant dependent and associated territories (the Channel Islands, the Isle of Man and the dependent and associated territories in the Caribbean) with a view to implementing the same measures in these territories as those applying in the EU.

Finally, in March 2002, the Council agreed on a format for the automatic electronic exchange of information and decided to render this format public. Equally, the Council agreed on conclusions concerning the definition of “related entities” for the purposes of Article 15 of the draft directive (“grandfathering”).

b) The Code of Conduct on business taxation

The Code of Conduct Group continued its work with a view to the objective of achieving a final agreement on the tax package as a whole by the end of 2002. The Group undertook further work in the areas of standstill and rollback, as well as looked into the question of how to improve transparency and current practices in exchanging information in the area of transfer pricing. In February 2002, the Group agreed on its work programme during the Spanish Council Presidency, putting particular emphasis on the rollback of harmful tax measures. It has since then undertaken a measure-by-measure review of the rollback in progress. Furthermore, the Group decided to mandate a sub-group with the further work on transparency and exchange of information in the field of transfer pricing. The June 2002 ECOFIN-Council is scheduled to assess the adequacy of the envisaged legislative or administrative measures to rollback the harmful features of the tax measures identified in the Code Group’s November 1999 report and to finalise the work relating to standstill and to the possible extension of benefits for certain measures beyond 2005.

c) Interest and royalty payments

Concerning the third element of the tax package, the proposed Directive to eliminate withholding taxes on payments of interest and royalties made between associated companies of different Member States, no further discussions have taken place last year, as the ECOFIN-Council in November 2000 has in principle resolved the remaining issues requiring agreement.

3. The taxation of occupational pensions

In April 2001, the European Commission presented a communication on the elimination of tax obstacles to the cross-border provision of occupational pensions (COM(2001)214). The existing tax obstacles act as a major disincentive to individuals wishing to contribute to pensions schemes outside their home Member State and pension institutions that wish to provide pensions across borders. The communication proposes a co-ordinated approach to the diversity of Member States’ tax rules rather than attempting to achieve harmonisation and calls for the elimination of unduly restrictive or discriminatory tax rules. The Commission will closely monitor national rules in this field and take the necessary steps to ensure their compliance with the Treaty, in particular with the rules on non-discrimination. Where necessary, the Commission will initiate legal action against Member States. In addition, the Commission has presented measures to safeguard Member States’ tax revenues in cases of cross-border pension provision.

Discussions on the issue of occupational pensions have begun in Council working groups. Efforts are currently under way to use the framework of the Mutual Assistance Directive for the automatic exchange of information in this area. Following the Council conclusions of 16 October 2001, a report on these issues will be prepared before the end of 2002.

4. Company Taxation in the EU

Following its Communication “tax policy in the European Union – Priorities for the years ahead” (COM(2001)260), the European Commission issued, in October 2001, two documents on company taxation. One study prepared by the Commission Services (“Company Taxation in the Internal Market” SEC(2001)1681) and a policy Communication from the Commission (“Towards an Internal Market without tax obstacles – A strategy for providing companies with a consolidated corporate tax base for their EU-wide activities” COM(2001)582).[2]

The two documents were prepared following a mandate given to the Commission by the Council of the European Union in 1999. Among other things, the mandate asked for the study to illustrate existing differences in effective corporate tax rates; highlight remaining tax obstacles to cross-border economic activities in the Internal Market; reduce continuing distortions in the Internal Market and examine possible remedial measures. The mandate explicitly stressed that policy should not aim at uniform tax rates.

In preparing its study, the Commission was assisted by two expert panels. However, in contrast to the so-called Ruding report of 1992, the last major report on company taxation in the EU, not only was this 2001 report specifically requested by the Council, but also rests the final responsibility for the content of the study with the Commission Services, rather than with outside experts.

The political context

Before setting out the content of the two Commission documents, and in order allow a better understanding of the Commission recommendations, it is useful to briefly set out the present political context for taxation policy in the European Union.

To begin with, it needs to be emphasised that the unanimity principle applies to all decisions on tax matters. Against this background, it is not surprising to observe that no new EU legislation on direct taxation has been adopted since 1990. Concerning company taxation more specifically, there was no success in implementing the recommendations of the Ruding Report of 1992. The Ruding report had in fact proposed a far-reaching harmonisation of the corporate tax base, as well as the introduction of compulsory minimum (30%) and maximum (40%) nominal tax rates.

Finally, it has to be stressed that any Community initiative has to respect Member States’ competences in the light of the subsidiarity principle.

a) The content of the Commission services study

In accordance with the mandate, the study prepared by the Commission services covers in particular four main areas of analysis:

1. The calculation and analysis of a wide range of marginal and average effective tax rates for the 15 EU Member States;

2. Identification of the remaining tax obstacles hindering cross-border economic activities in the EU;

3. An analysis of targeted solutions to the different tax obstacles that have been identified;

4. An analysis of so-called comprehensive solutions, trying to overcome all obstacles “at a stroke”.

b) Effective marginal and average tax rates

In line with the Council mandate, the Commission study presents estimates of effective corporate tax rates (marginal and average) on domestic and transnational investments in the 15 Member States (as well as the US and Canadian certain cases) taking into account different forms of investments in the manufacturing sector as well as different sources of finance. Based on a forward-looking methodology, the study finds a large variation in the effective tax burden faced by investors resident in the different Member States. The range of differences in domestic effective corporation tax rates is around 37 percentage points in the case of a marginal investment and around 30 percentage points (between 10.5% and 39.7%) in the case of a more profitable investment. In all Member States tax systems tend to favour investment in intangibles and machinery, and debt is by far the most tax-efficient source of finance.

The EU-wide spread of effective tax rates cannot be explained by one single feature of the national tax systems. However, the analysis of the general tax systems tend to show that – leaving aside preferential tax regimes – the different national nominal tax rates (statutory tax rates, surcharges and local taxes) can explain most of the differences in effective corporate tax rates between Member States both in the domestic and the transnational analysis. Tax rate differentials more than compensate for differences in the tax base.

c) The existing tax obstacles and their effects

The different tax obstacles that have been identified are described in some detail in the above-mentioned Commission Services study. The can be summarised as follows:

  • Cross-border flows of income between associated companies are often subject to additional tax. In particular, withholding taxes on bona-fide intra-group payments of dividends, interest and royalties contain a risk of double-taxation. Moreover, the scope of the Parent-Subsidiary Directive (90/435) is too narrow (not all companies subject to corporation tax are covered and the Directive only applies to direct holdings of 25% or more) and its implementation in Member States is very different, which reduces its effectiveness.
  • Cross-border restructuring operations give rise to substantial tax charges. Although the Merger Directive (90/434) provides for the deferral of corporate tax on such operations, not all situations are covered (like for the Parent-Subsidiary Directive), its implementation by Member States varies significantly and there is at present no EU company tax law framework for cross-border mergers, thus reducing the effectiveness of the directive. Capital gains taxes and transfer taxes on cross-border restructuring operations are often prohibitively high, thus forcing companies to leave economically sub-optimal structures untouched.
  • There are limits on cross-border loss relief, which may lead to (economic) double-taxation. Generally, losses of subsidiaries are not tax-effective at the level of EU parent companies and losses of permanent establishments can be offset against headquarter profits only under specific circumstances.
  • Profits have to be allocated on an arm’s length basis by separate accounting, i.e. on a transaction by transaction basis. This gives, inter alia, rise to numerous problems on the tax treatment of intra-group transfer prices, notably in the form of high compliance costs and potential double taxation. In addition to increasingly onerous documentation requirements, there are substantial divergences in the detailed application of transfer pricing methods between Member States. Concerning transfer pricing disputes, the Commission Services study found that the Arbitration Convention (90/436) is rarely used and that certain of its provisions may act as a deterrent for taxpayers to make use of it.
  • As a result of conflicting taxing rights, there is a considerable potential for double taxation. Although most double taxation conventions within the EU follow the OECD Model, there are significant differences in the terms of the various treaties and their interpretation. There are also instances of divergent application of treaties by the treaty partners, leading to double-taxation or non-taxation. Furthermore, tax treaty provisions based on the OECD Model, in particular non-discrimination articles, are not adequate to ensure compliance with the EU law principle of equal treatment.

The economic effects of the above-mentioned obstacles, when seen from a company’s perspective, are in particular:

– A higher tax burden for trans-national companies compared to otherwise identical national companies;

– Economic double taxation resulting from incompatibilities between national tax systems;

– An extra tax burden in case of cross-border economic restructuring;

– High compliance costs because of the necessity of dealing simultaneously with up to 15 different tax systems in the EU.

d) Removing the existing tax obstacles

In principle, the remaining tax obstacles could be removed either by targeted solutions or by comprehensive solutions trying to remove the obstacles in a more unified manner.

i. Targeted Solutions

In its October 2001 Communication, the Commission proposed a series of targeted remedies:

  • In view of the existing divergences in the interpretation of EU law by Member States, the Commission has proposed to develop guidance on important ECJ rulings and to co-ordinate, via appropriate Commission Communications, the implementation of these rulings. The above-mentioned Communication on occupational pensions is a first initiative in this field.
  • Due the importance of the Parent-Subsidiary and the Merger Directive, respectively, the Commission will give priority to tabling proposals for the extension of the existing directives. The Commission has already begun detailed technical discussions with Member States and intends to come forward with amended proposals in 2003. These proposals will also ensure that the current body of EU company tax law will be fully applicable to companies formed under the European Company Statute as from 2004.
  • Concerning the cross-border offset of losses, the Commission Services study has investigated two alternative solutions; either an amended version of the existing Commission proposal (COM(90)595), allowing parent companies to take into account the losses incurred by both permanent establishments and subsidiaries situated in another Member State; or a more complete scheme for the consolidation of group income along the lines of the Danish joint taxation system which in certain cases enables Danish parent companies and their foreign subsidiaries to be taxed jointly in Denmark. Given the reluctance of Member States to consider any EU initiative in this area, the Commission intends to first convene consultative technical meetings with Member States before presenting a new proposal. However, the Commission has recently withdrawn its 1990 proposal.
  • In the area of transfer pricing, the Commission has proposed to develop commonly accepted practices in the EU. In order to provide a framework for dialogue at EU level, the Commission has announced the creation of a Joint Transfer Pricing Forum with Member States and business representatives. (Candidate countries and the OECD Secretariat will be invited to participate as observers.) The Forum should examine, within the OECD guidelines, those issues which can be addressed without legislative initiatives. It should in particular focus on documentation requirements (including the scope for reducing the compliance burden for SMEs), the promotion of greater certainty as regards the acceptability of transfer prices to tax administrations (e.g. APAs) and the exploration of the potential for speedier and more streamlined dispute resolution mechanism. Furthermore, the Forum should as a priority look for pragmatic solutions to improve the practical functioning of the Arbitration Convention. It should, for example, contribute to a common understanding of the procedures to be followed during the interim period when not all Member States have ratified the Convention, of the starting point of the two-year period for the first phase of the arbitration procedure, of the definitions where they give rise to different interpretations and of details of the proceedings of the second phase of the arbitration procedure. A call for expression of interest has been published in the Official Journal (Series C) on 16 April 2002 in order to prepare the selection of the private sector members of the Forum.
  • Finally, the Commission considered that the current tax treaties of Member States should be improved in order to comply better with the principles of the Internal Market enshrined in the EC Treaty and that a better co-ordination of the treaty policy in relation to third countries is necessary. Following technical discussions with Member States in 2003, the Commission will prepare a communication on the need to adapt certain provisions in Member States’ double taxation conventions. This could be a first step towards either an agreed EU model convention or the eventual conclusion of a multilateral convention (a solution recently called for by the Italian Finance Minister, Mr. Tremonti, and the European Parliament).

ii. Comprehensive Solutions

The underlying cause of most of the additional tax and compliance burdens identified above can be seen in the co-existence of 15 separate tax systems within the Internal Market. The fact that each Member State is a separate tax jurisdiction

– obliges companies to allocate profits to each jurisdiction on arm’s length basis by separate accounting (i.e. on a transaction by transaction basis);

– implies that Member States are reluctant to allow relief for losses incurred by associated companies whose profits fall outside the scope of their taxing rights;

– leads to a situation in which cross-border reorganisations entailing a loss of taxing rights for a Member State are liable to give rise to capital gains taxation and other charges;

– entails the risk of double taxation as a result of conflicting taxing rights.

Some of these effects could be mitigated by the above-mentioned targeted solutions. However, the underlying causes would still remain unresolved, even if all the targeted solutions were eventually agreed and implemented. The Commission therefore considered it necessary to examine more far-reaching solutions to the identified tax obstacles to the smooth functioning of the Internal Market.

Four options were analysed in the Commission Services study:

1. Home State Taxation (HST), where all or a group of Member States agree to accept that certain enterprises with operations in more than one Member State could compute their taxable base according to the tax code of their “Home State”, instead of according to all the different tax codes of the respective Member States where they have operations.

2. Common Consolidated Base Taxation (CCBT), where some or all Member States would agree on an optional additional tax code applicable to certain types of enterprises operating in more than one Member State.

3. European Corporate Income Tax (EUCIT), where – similar to CCTB – a new single corporate tax would have to be drafted for application across the EU. In the purest form, there would be one single EU-wide tax rate and the revenues would go to the Community budget.

4. Compulsory Harmonisation of the existing fifteen national tax codes in the EU.

All options would offer companies the possibility of using a single tax base for all their EU-wide activities. All, except to a certain extent EUCIT, would require a mechanism for allocating tax base / tax revenues between Member States. In all cases, except under certain circumstances EUCIT, Member States would continue to set the tax rates.

It has to be stressed that none of the four comprehensive solutions appears to offer a perfect solution. Each has its respective advantages and disadvantages, which can be summarised as follows.

Pros and Cons of “Home State Taxation”


  • The approach is based on the Single Market idea of mutual recognition;
  • It respects the subsidiarity principle;
  • There is no need for unanimous agreement of Community measures, as a sub-group of Member States could start implementing HST;
  • There is no need for the time-consuming development of new laws;
  • Tax administrations as well as companies can work on the basis of existing tax laws, traditions etc.;
  • The details of the proposal are relatively well researched (Stockholm Group)
  • It could provide a pragmatic intermediate step in the development of more ambitious approaches.


  • There is a risk of getting stuck with an unsatisfactory intermediate solution (e.g. like in the case of the transitional VAT system);
  • There is a different treatment for companies operating in the same market depending on the location of their parent company (up to 15 home states);
  • This could under certain circumstances cause discrimination problems;
  • Despite the available research, technical problems remain (for example double-taxation agreements with third countries or the treatment of minority shareholders);
  • The responsibility for tax audits and control is unclear;
  • There is some reluctance by Member States;
  • There is a need to define ‘home state’ and ‘home state group’.

Pros and Cons of a “Common (Consolidated) Base”


  • It is a coherent and systematic approach from an industry perspective;
  • There is a common treatment for all participating Member States and companies.


  • Developing a completely new EU tax base is an extremely complex and time-consuming task;
  • Member States would have to administer at the same time two tax systems;
  • There could be possible discrimination problems;
  • A number of technical problems remain (double-taxation agreements with third countries; treatment of minority shareholders);
  • There is a reluctance by Member States, presumably in particular in relation to a common EU tax base that is more attractive than the existing domestic one;
  • There are no existing practices; traditions etc.;
  • The legal system in case of disputes is unclear (which jurisdiction?).

Pros and Cons of a “European Corporate Income Tax”


  • Similar advantages as Common Base Taxation
  • If there were only an EU tax rate, one single effective tax rate would apply across the EU, thus avoiding economic distortions;
  • For participating companies the obstacles would be removed.


  • There are additional political difficulties (link to debate on the EU’s own resources system; national sovereignty on tax rates);
  • There is the question of who would administer the tax (national tax administrations or a new EU tax administration?);
  • There could be possible discrimination problems;
  • The new tax system would be time-consuming to develop.

Pros and Cons of a “Compulsory Harmonised Base”


  • Theoretically, this could be ‘perfect’ for the Single Market;
  • It provides one tax base (both for companies and tax administrations);
  • There a less administrative and compliance costs;
  • The regime would be transparent.


  • Harmonising Member States’ existing tax bases is an extremely complex and time-consuming task;
  • It would imply other far-reaching harmonisation steps (tax system, EU double-taxation agreement etc.);
  • Member States have fundamental objections to a harmonisation approach in the field of company taxation;
  • It could be argued that this would be a disproportionate measure in relation to its purpose (of resolving specific tax problems of multinationals).

e) Commission conclusions drawn from the company tax study

On the basis of the analysis presented in the Commission Services study, the European Commission has drawn the following policy conclusions.

  • Firstly, a two-track strategy is required, containing both targeted and longer-term comprehensive solutions.
  • Secondly, companies resident in the EU should be provided with (the possibility of) a consolidated corporate tax base for their EU-wide activities.
  • Thirdly, each of the comprehensive solutions has its particular advantages and disadvantages. At this point in time, it is therefore not possible to recommend any particular comprehensive solution. Instead, further analysis and debate is necessary before deciding on the way forward. In order to launch a wider debate, the Commission has hosted, on 29/30 April 2002, a European Conference on Company Taxation with the participation of high-level government representatives, business leaders, economic operators, senior tax professionals and reputed academics. Furthermore, the Commission has set up a specific web-site dedicated to company taxation[3] which includes an electronic discussion forum. The Commission intends to report on this wide-ranging debate and the policy conclusions to be drawn in early 2003.

5. Outlook for the next twelve months

The coming months will see intense efforts to progress with the different elements of the tax package, in particular the taxation of savings and the Code of Conduct on business taxation, with a view to reaching agreement on the package as a whole before the end of this year. The final agreement on the tax package will free resources, both in the European Commission and in the Member States, which will give the European Community the opportunity, as called for in the Commission’s communication of May 2001, to put the main addressees of the Internal Market – its citizens and enterprises – centre-stage. In fact, with the Commission initiatives in the field of supplementary pensions and company taxation, this shift in emphasis has already begun. It will move into a higher gear once the tax package is concluded.

1. European Commission, Directorate-General for Taxation and Customs Union. The views are those of the author and do not necessarily correspond to those of the European Commission. 
2. Both documents can be found on the Commission’s web-site under http://europa.eu.int/comm/taxation_customs/taxation/information_notes/tax_saving.htm 
3. http://europa.eu.int/comm/taxation_customs/taxation/company_tax/index.htm

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