The European Council asked the Commission on 23 April to prepare a proposal on the recovery fund. The Commission is now required to prepare a draft linked to the Multiannual Financial Framework. This is expected for the beginning of May. Previously, the European Parliament had already used a motion for a resolution to call on the Commission to put a strong recovery package in place to soften the economic and social consequences of the crisis.

Impact on the Internal Market

Committee Chair Irene Tinagli, welcomed the measures already agreed to manage the crisis. Like other Committee members, she also emphasised the necessity of further instruments. In view of the looming divergencies within the European Union, Commissioners Dombrovskis and Gentiloni also saw the urgent need for new funds and measures. More support is needed in particular for the worst affected regions and countries. Strong disparities between countries lead to a further divergence of the Internal Market. Last week, the great importance of the Internal Market has also been emphasised in the recovery plan of the European Council.

Recovery fund as part of the Multiannual Financial Framework

Due to the Council mandate to prepare a proposal on the recovery fund as part of the Multiannual Financial Framework (MFF) was also a key issue in the parliamentary debates. Concerning the MFF, the European Parliament - apart from European Council and Commission - is also part of the process. The idea of a short-term budget has already been dismissed. Hence, work is currently ongoing on a compromise concerning an MFF with a normal term of seven years. Negotiations are also still going on in respect of the exact design of the additional recovery fund post Coronavirus. In view of the MFF negotiations, which had been stagnant even before the crisis, agreeing a new budget has become an increasingly greater challenge. Afterall, negotiations have been ongoing without success since May 2018. Last Thursday too, the European Council still had different ideas as to how such a recovery fund should be shaped and which percentage of GDP should form the basis of the MFF. In Parliament Gentiloni argued that both aid and loans were required.

Calls for tax justice

In view of the substantial sums of money required to rescue the economy, MEPs also raised issues of tax justice. According to Green MEP Sven Giegold, tax avoidance and tax evasion must not be tolerated. MEP Evelyn Regner, S&D Group, also demanded more transparency regarding state aid for the support of businesses. In such cases, the distribution of bonuses and dividends should be banned. Dombrovskis and Gentiloni announced their intention to present fiscal policy measures during the next weeks and months. The Commission will present an updated list of high-risk countries as well as a plan to combat money laundering at the beginning of May. A plan against tax evasion would follow within the next two months. Gentiloni agreed that the tax package had to be at the centre of the initiative to achieve economic recovery; a tax action plan would be ready in four months. This would be an important step to improve the fight against tax avoidance and tax evasion.

The latest report of the Tax Justice Network also refers to the urgent need for action. Each year, the EU loses more than EUR 27 billion in corporation tax due to US companies shifting profits to European tax havens – the UK, Switzerland, Luxembourg. According to Oxfam, the EU should also add Ireland, the Netherlands, Cyprus and Malta to the list of tax havens. In view of the Coronavirus crisis, France, Denmark and Poland have already decided to exclude companies registered in tax havens from economic bailouts.

Further information:

AK EUROPA: Commission presents exit roadmap

AK EUROPA: Eurogroup agrees on economic response to the COVID-19 crisis

Chamber of Labour: How much do tax havens cost us?

Tax Justice Network: The axis of tax avoidance. Time for the EU to close Europe’s tax havens crisis