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EU watch: the start of the new Commission

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The new European Commission led by Ursula von der Leyen finally began its mandate on 1 December, after months of heated political discussions, backdoor scheming and embittered friendships that may never heal. This also means that the new Commission’s work can formally start, including on new tax initiatives.

But who now holds the reins for tax in the new Commission? Which commissioner should tax-interested stakeholders talk to? Four names (at least) should be kept in mind: Vestager, Timmermans, Dombrovskis and Gentiloni.

Firstly though, let’s remember the hierarchy that Von der Leyen set up in her Cabinet of Commissioners (or ‘College of Commissioners’ in EU jargon). There are three levels: executive vice-presidents, vice presidents, and finally ‘regular’ commissioners.

Commissioners have a specific portfolio and specific Directorates-General (DGs). They are in charge of delivering the concrete legislation and policies that are relevant to their areas.

Above the regular commissioners are executive vice-presidents and vice-presidents. For the purposes of this article, the distinction between ‘executive’ versus ‘regular’ vice-presidents does not matter.

These vice-presidents have a more strategic, coordinating and horizontal role. Each of them is in charge of a strategic high-level portfolio such as sustainability or digitalisation. They ensure that the DGs and ‘regular’ commissioners coordinate and cooperate between each other on their respective work to deliver consistently towards broader strategic objectives.

Tax is perfect to illustrate this in more practical terms.

So, we have executive vice-presidents Margrethe Vestager from Denmark in charge of digitalisation, the Dutchman Frans Timmermans leading on the so-called Green Deal (Europe’s upcoming green transition package) and Latvia’s Valdis Dombrovskis with the humble mission to ensure an economy that works for people.

And then we have Italy’s Paolo Gentiloni, the Commission’s new tax Commissioner in charge of DG TAXUD and delivering future tax proposals. Gentiloni’s task is to ensure that the tax work and proposals that his DG TAXUD delivers are aligned with the political priorities and instructions set up by vice-presidents Vestager, Timmermans and Dombrovskis.

Vestager will lead the EU’s efforts to deliver an international OECD agreement on the taxation of digital economy. If this fails by Q3 2020, she will task Gentiloni with continuing work on an EU-only solution.

Timmermans is expected to include sustainable taxation as one of the pillars of his future Green Deal. He will request Gentiloni and DG TAXUD to take forward measures such as the carbon border tax, as well as revising the Energy Taxation Directive so that it is better aligned with the broader environmental objectives of the new Commission.

And finally, Dombrovskis, in charge of capital market integration, may call on Gentiloni to continue work on resolving the debt-equity bias on taxation and to remove tax obstacles to cross-border investment in the EU. There is also a possibility to address the withholding tax system in Europe.

Whatever measures Gentiloni and DG TAXUD would wish to take forward on their own accord should not contradict or undermine in any way the strategic agendas led by the Vestager-Timmermans-Dombrovskis trio.

Poor Gentiloni, one might lament, with three ambitious vice-presidents above him dictating what the tax focus for the EU should be. But the fact that he has three vice-presidents linking to his portfolio says a lot about the political weight of Gentiloni’s assigned policy area. He will be the key player in delivering concrete results, and the three vice-presidents will need Gentiloni’s trust and full cooperation in order to deliver. So, in fact we have nothing to feel sorry about for him – except for the number of sleepless nights that lie ahead.

Easy, isn’t it? Now take a deep breath, sit back and also remember that Vestager continues to be in charge of state aid, including tax-related cases. Timmermans has anti-tax avoidance close to his heart, whilst Dombrovskis seems to only talk about tax if he really has to.

The point is, personalities, personal preferences and ambitions also matter – perhaps even more than strictly institutional hierarchies. It will be interesting to see, in the next few months ahead, how the coordination of the EU’s tax policy will pan out