Scholars have long argued about the benefits and harms of tax competition.

Where some consider it sensible for states to also pursue location policy through their tax policy and try to be attractive for mobile production factors, others find precisely that fatal because tax competition triggers a downward spiral ("race to the bottom") and that Erode a country's tax base.

Werner Mussler

Business correspondent in Brussels.

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As evidenced by its website, the EU Commission only knows the harmful form of tax competition, and it does everything possible to combat it. Standardizing tax policy, however, remains a difficult business because it presupposes that all 27 member states are ready to harmonize. The introduction of a minimum tax rate for companies in the EU based on a global agreement, for which the Brussels authority will present a proposal this year, is therefore an important step for the Commission.

But Tax Commissioner Paolo Gentiloni is not only working on this one front for tax harmonization.

In the summer he opened an EU tax observatory.

Its head, the French economist Gabriel Zucman, said at the time that he wanted to provide ideas for the fight against tax avoidance if this was politically desirable.

"Tax competition is not something God-given, it is one political option among several."

Arrangements for the rich

Now the Observatory has submitted a larger study. Their core thesis is that the EU countries have changed their “competition parameters” in tax competition. They would no longer be so competitive in terms of tax rates (whether in corporate or income tax), but instead tried to lower the tax base for certain - especially high-income or high-income - addressees, usually very selectively. This pattern of "tax deals" for individual companies or groups is already familiar from corporate taxation.

According to the findings of the study, a number of member states are relying not only on attracting high-income companies with tax “offers”, but also high-income private individuals. The authors have identified differently tailored tax regimes in 15 EU countries, Germany is not one of them. All of them have the more or less clear purpose of bringing top foreign earners into the country - be they top managers, cultural workers, scientists or football stars. Wealthy retirees have also discovered some countries as addressees.

The number of these special arrangements in the EU increased from 5 to 28 between 1995 and today, it is said.

The authors have calculated that around 200,000 people have benefited from the arrangements.

However, this also includes the British costs of 1.37 billion euros, which have to be deducted due to Brexit.

Ronaldo and Beckham are happy

According to this, Italy, Greece and Cyprus are going to work particularly aggressively, demanding only flat taxes from high earners. With these, the tax rate can be pushed well below that of the average earner. Anyone who earns more than 500,000 euros and moves to Italy or Greece only has to pay a flat tax of 100,000 euros. Allegedly, the Italian tax regime made his interim move from Real Madrid to Juventus Turin palatable to football star Cristiano Ronaldo in 2018.

In any case, a similar arrangement is guaranteed in Spain, which bears the significant name "Beckham Law" and came into force shortly after the English footballer switched to Real Madrid in 2005. It demands a flat rate of only 24 percent from foreigners. Other regulations - such as the 30 percent rule in the Netherlands, according to which highly qualified foreigners can make 30 percent of their income tax-free - have existed for several decades.

The political conclusion that the authors draw from their findings is quite explosive.

They want to classify the tax breaks for the rich as just as harmful as the privileges that individual states grant companies.

As a first step, they propose expanding the mandate of the so-called Code of Conduct group in the EU Council of Ministers to combat harmful tax competition in corporate taxation.

This group should also examine the income taxation of the rich for harmful practices in the future.