Debate contributions by Fernando NAVARRETE ROJAS

Mr President, Commissioner, hyper‑complexity in the tax domain reduces competitiveness in basically two ways. Firstly, it deters cross‑border investments, so not all EU firms can tap the same pool of finance. Secondly, it imposes heavy compliance costs on those who clear the hurdle and manage to finally operate across borders. The outcome is both predictable and dismal. Too many EU companies cannot compete effectively and they fall further behind their US peers. The solution, I think, is not a fully harmonised tax system. Tax and institutional competition should remain a source of dynamism, provided it happens on a foundation that is both fair and practical. The real answer, in my opinion, lies in a simplified and more efficient fiscal framework that helps companies finance themselves and meet their obligations without devoting valuable resources to compliance costs. Simplification is necessary, but not sufficient. For companies to remain innovative, we must provide the right incentives. Rather than relaxing the State aid framework or considering to tax companies operating in the single market – as proposed in the current core proposal for own resources – I think we should rather prioritise fairer solutions, such as transferable tax credits for innovative investments recognised across borders. This approach would truly level the playing field, crowd in private capital and foster innovation while preserving national tax regimes. The path is clear: fewer barriers, simpler rules, more innovation and stronger competitiveness.

Madam President, Commissioner, in Europe, populist leaders on the right and on the left are fuelling the intergenerational confrontation with the frustration of young people for their future, with the concern of many older people for their safety and with the anxiety of many adults for their work. One against all where rights and culprits are emphasized and obligations and solutions are circumvented. What needs to be done, however, is to reform our socio-economic model to make it resilient to demographic and geopolitical challenges. It is a task of all, without exception, and that will require sacrifices and generosity. The greatest enemies of intergenerational cohesion are those who make promises that cannot be paid, those who feed the pension deficit, as socialism does today in Spain. Pensions will only be sustainable if our young people have more opportunities in a more productive economy, if the tax burden does not reduce incentives for innovation and leaves room for individual savings to be an income supplement for old age. But well-being in old age is not just a matter of money. Dependence, loneliness and helplessness are challenges that overwhelm the protective capacity of the State. We have a concrete responsibility towards our elders, which goes beyond the payment of contributions and taxes and in which the family, that great forgotten by some, has a key role to play. If archaeologists have found traits of humanity in Neanderthals because they cared for their elders, I hope that in forty thousand years they will find the remains of our fraternity, and not those of our self-destruction.

Mr President, Commissioner, President von der Leyen said this very morning that our imperative is for Europe to 'step up where others have stepped away'. Well, this imperative applies particularly to international taxation: resisting the temptation of unilateral action is not a sign of weakness. It is responsibility and leadership. But what should we do if others do act unilaterally? Some may argue that it gives us free rein to retaliate. I disagree: unilateral action, either by them or by us, is always an invitation to conflict. If Europe truly wants to be a global standard-setter in the new world order, we need to rethink our strategy. Sovereignty is not about the power to do everything we can do, it is about the responsibility to do what we should do. The world is watching and Europe must lead by example. Europe must remain open to the world and abide to globally agreed rules to be credible partners. We must first do our homework, simplify, innovate and create the conditions for businesses to grow here in Europe. A unilateral EU digital service tax will not get us there. Digital service companies are currently taxed according to the same principles to any other sector, based on profits and on the location where these services are provided. Some may consider this is flawed, but that only calls for a stronger global engagement for an alternative, not for unilateral shortcuts. Therefore, I'm really glad the Commission has decided to put aside the digital service tax as own resources. It is an important step in showing real leadership in a contested world.

Let me be very clear on the point of own funds and European taxes: I think that what Europe's competitiveness needs is no more taxes, especially not on firms. So, some of the proposals that have been put forward, for example own resources, I think they need to be revisited because having more taxes on companies – especially on medium‑sized companies – I think it's not the way forward, in particular for those that are trying to go into the single market. So, there are some aspects that have been put forward that I think need careful revisiting.

Madam President, Commissioner, reforms, fiscal sustainability and investment are the way to prevent more layers of the European population from falling behind. When governments put fiscal sustainability at risk, they threaten citizen confidence in the welfare state itself and undermine investor confidence. That is why we need to strengthen the fiscal sustainability rules – not weaken them – and strengthen the sustainability of pensions – not deteriorate it. In countries such as Germany or France, the authorities are aware of the sustainability challenges of the welfare state and are trying to take action. In others, as in Spain, the problems are aggravated. The Independent Authority for Fiscal Responsibility has warned that the pension reform in Spain – negotiated with the Commission – does not guarantee the sustainability of the system. And, in the face of this, what are we going to do? Europe cannot allow fiscal populism to undermine the trust of citizens and investors and hamper common competitiveness. I urge the Commission to make the sustainability of the welfare state a priority, also because of our competitiveness, and, to this end, first of all, not to validate in the recovery plans any measure that undermines it, to put pressure on the Member States to make structural reforms that contribute to the long-term sustainability of the public pension pillar and, as it has advanced us today, to encourage the development of complementary business and individual plans, which allow more investment to be channelled towards competitiveness, in addition to strengthening the security of citizens in their retirement. It is not an easy path, I know, but it is that prosperity must be worked every day with responsibility.

Mr President, what will digital technologies hold for us? Technology is simply enabling and it is up to us, as policy makers, to steer its use towards the general interest. Associating technology with goodness is as absurd as its opposite, or as confusing novelty with progress. If we do this, we run the risk of being dazzled by new technological possibilities and forgetting the substance of what we intend to achieve. In the specific area of retail digital currencies, such as the digital euro, we are in danger of falling into this confusion by glare. The objective is common: that citizens can pay easily, safely and freely across Europe. Today, that freedom is conditioned by an excessive dependence on non-European suppliers. It is an economic and geopolitical vulnerability that we have to correct. But watch out: the solution cannot be to lock European innovation into a single product that presents significant economic risks, raises citizens' concerns about their privacy and prevents the emergence of alternative options. Today, thanks precisely to the technological advances and infrastructures that already exist, we have a real opportunity to build a pan-European, competitive, innovative and autonomous payments ecosystem. The success of this route is not assured, but neither is its failure. Do not throw this opportunity to bet everything on a single card, dazzled by the novelty. Let's mark a shared ambition and fearlessly explore what different payment solutions can offer citizens.

Mr President, the global technological race began years ago and Europe has been left out of the generation of major disruptions of the last quarter century. Is it an unrecoverable delay? Of course not, but doing so involves tapping into our strengths and overcoming our weaknesses. Our strengths are clear: the general educational level of the population, talent, and technical and scientific infrastructure. In fact, European talent triumphs abroad and basic research is of quality. Our biggest weakness is the lack of incentives. Why do companies in Europe expect lower returns on their R&D&I investments? First of all, because the one who risks, innovates and succeeds must be able to enjoy the fruit of his success. If in Europe what you receive are high taxes and higher bureaucratic burdens, the result is obvious: less innovation. Secondly, the lack of a genuine single market is a barrier to innovations rapidly reaching sufficient critical mass. This also hinders access to sources of finance in a kind of vicious circle that limits growth. We certainly don't know what the next technological disruption will be, but it will most likely be on a young European's mind right now. Let's work so that it can bear fruit here and does not have to look outside for the conditions to be able to develop it or, worse, that it never gets to see the light of day.

Mr President, thank you, and thank you all, colleagues, for all your all your comments and discussions. I would like to close this session on my side thanking all the Members and all shadow rapporteurs from all groups for the hard work, trying to find a compromise that I think is reasonable and acceptable for most of us. So, I would like to ask for the support of all of you, colleagues, for this report. I think it addresses properly, in a reasonable manner, based on some sort of analytical thinking, some of the deep concerns you've expressed here today – so, basically, why we are having mediocre-at-best economic results in the medium and long run, the causes and its consequences, the need to establish fiscal buffers in order to accommodate crises, the ones we are currently facing and the ones that will come in the future as well, the need for an alignment in terms of the management and responsibility of the different policies and its financing. It's equally absurd, in my view, to have a common policy that is financed nationally. And it's also absurd to have a national policy financially common. We have to align both things: responsibility and funding in order to make not just economic but political sense out of our policies. So, I'd like to thank also the collaboration with the Employment Committee. So, we have two separate reports on our side as Parliament, but they are working together. So, I think there's been no undue overlap. We have a common message for the Commission and the Council on this important European Semester.

Mr President, Commissioner, ladies and gentlemen, this report is particularly relevant for Europe at the present time. Not surprisingly, the European Semester is the main tool for economic policy coordination between Member States. A little over a year ago we reached an agreement on the new fiscal rules, more flexible rules that incorporate a medium-term orientation to anchor the sustainability of public accounts and preserve countries’ investment capacity in common European priorities, such as the green or digital transitions, energy security or – very relevant to the debates these days – the creation of defence capabilities. Moreover, thanks to the impetus of this Parliament, the calculation of net expenditure excludes all national co-financing in programmes financed by the European Union. This gives Member States more fiscal space and flexibility in the short term to invest in common priorities without undermining sustainability in the medium term. But what we cannot forget is that in order to be able to make effective use of this flexibility in the short term when necessary – and it now seems to be – it is absolutely essential that the framework of European tax rules be credible vis-à-vis citizens and markets. Without this credibility, the relevant budgetary constraint will not be the one discussed in this Parliament or in the Council, but the one that dictates a market risk premium. We cannot fall into the mistake of forgetting the hard lessons of the last sovereign debt crisis. The strongest foundations for our legitimate aspirations for social progress and security are prosperity and economic stability. Without them, neither progress nor security will be lasting: Hence the importance of this report making a preliminary first assessment of the application of the new framework of tax rules. And what do we find? This report stresses the urgent need for the commitments generated in the structural fiscal plans to be translated into concrete actions in the annual budgetary plans. That is why we call for the presentation of these budgetary plans as soon as possible for those countries that, without having elections or being in government formation processes, have not yet done so. On the other hand, macroeconomic assumptions in structural fiscal plans tend to be more optimistic than the Commission’s guidance, sometimes even unjustifiably, which often entails postponing the consolidation effort to the end of the adjustment period. Most Member States have not consulted their structural fiscal plan with their independent fiscal institutions or other stakeholders. In some cases, even national parliaments have not been involved or informed. Finally, and in anticipation of the need to face major challenges affecting the Union as a whole, the report also points to the limits of what can be achieved only by coordinating economic policies. Thus, for example, it points to the desirability of investment and joint financing mechanisms that allow, thanks to the European scale, to minimize the cost for citizens and taxpayers in the provision of European public goods, such as, again, certain defence capabilities that transcend national borders. It also shows that the mere coordination of fiscal policies at national level through rules ensuring their medium-term sustainability does not ensure that, at all times, the aggregate fiscal position of the Union as a whole is the most appropriate to stabilise the economy. In sum, effective coordination of economic policies, and in particular fiscal policies, through an effective European Semester is a necessary condition for our collective success, but it must be complemented by other joint mechanisms to address the important challenges ahead.

Mr President, Commissioner, the Competitiveness Compass has, in my opinion, a good diagnosis of the European economy; in short, a deficit of competitiveness with respect to the main economies of the world, as a result, first of all, of a deficit in the generation and dissemination of innovative ideas in the production of goods and services. Second, by comparatively higher energy costs, even with respect to other economic areas that do not have large indigenous energy resources, such as China or India. And thirdly, because of a lack of scale in key industries, as a result of an internal market that remains far from fully integrated. At least we know where we are, but that's not enough: We need a safe course towards prosperity for all citizens. And, as a first step, I suggest thinking about horizontal measures that promote the productivity of the economy as a whole. How? First, by cheap energy and, if it can be, low carbon, better, but never the other way around. Secondly, through real incentives for innovation. And the first is that those who risk and succeed have the right to enjoy the fruit of their innovation in a competitive market and with internationally attractive taxation. And thirdly, by removing barriers to the internal market that currently make internal barriers to trade between EU countries equivalent to a tariff. ad valorem 45 % for goods and 110 % for services. In other words, it is better understood: The self-inflicted damage from our lack of ambition in the single market is greater than any protectionist threat coming from the United States. We have a lot of work ahead of us: Let's get going now, with ambition and realism.

Mr President, Commissioner, President Lagarde, I want to begin by recognising the successful job the ECB has done under your leadership in ensuring price stability amid major shocks. A soft landing is now within reach – well done. Dear colleagues, this recognition, however, should not blur our judgement on the digital euro initiative. We all agree on the need to digitally proof the single currency, but does this require giving citizens a direct access to the ECB balance sheet, thus facilitating bank runs? Can untested safeguards like holding limits withstand political and financial stress? Should an innovation be led by the private sector? Is a digital euro based on central bank money the best solution to our dependencies in the payment area? Regardless of our answers, the potential issuance of a digital euro would be one of the most consequential decisions in financial policy. It will have far‑reaching consequences beyond monetary policy in areas like financial stability, innovation in payments and citizens' privacy, just to name a few. Dear colleagues, regardless of our standing on the substance, the only thing we cannot do as parliamentarians is to relinquish our duty by a massive delegation of power in these domains. Don't you think it is for us, co‑legislators, to co‑decide if and when the conditions for the issuance of a digital euro are met? I do think so, not least because I truly believe in central bank independence when conducting monetary policy.

Mr President, Commissioner, as we in the European Union embrace the restrictions of the Green Deal, our global competitors are moving forward. in their environmental commitments with less burdens and greater pragmatism, and responding to market impulses and technological progress. European primary and industrial sectors face more restrictions, thus losing global competitiveness. We have paid a price, but have we at least contributed more to global emissions control than the United States, for example? As Europe lags behind economically, the decline in emissions in recent decades in the United States and the European Union is similar. Faced with such nonsense, some propose – we have just heard – doubling the dose. Others propose to deny everything and some, not touch anything. In my opinion, we must rigorously evaluate the strategy followed in recent years and be open to profound reforms. We need a flexible approach that responds to technological momentum and price signals, and is not based on arbitrarily set targets and timetables. It is a matter of accountability to the citizens. We must ensure that we get to the end of the road with a strong and competitive economy. This requires a strategy that mitigates the costs of the green transition, reduces regulatory burdens and favours horizontal policies that maximise competitiveness. We must lead the transformation, yes, but without imposing restrictions that undermine our ability to compete and innovate. It's a global race and we have to win it for our citizens.

Madam President, Commissioner, ladies and gentlemen, the fact that Europe has lagged behind in the technological revolution of the last 15 years has, in fact, more to do with the underdevelopment of the venture capital ecosystem than with economic debates that sometimes attract more attention. This is because venture capital is, in the first place, the natural way to finance innovative projects that aspire to disrupt markets or compete globally. And, secondly, because it is an ecosystem that promotes the diffusion of technology and knowledge, thus generating new success stories. Unfortunately, as has already been said, our market is only 80% the size of the American market. Many good ideas start in Europe and end up making the leap to the United States to succeed in the world. In addition, around 40% of venture capital funds invested in the EU come from outside. This is a global recognition of the potential of our entrepreneurs, but also a demonstration that we have neither the ecosystem nor the risk appetite to propel our good ideas. Europe is surplus in financial capital, but very deficient in risk appetite and disruption. Our financial markets must therefore remain open to the world. This does not mean ignoring the geopolitical risks or behavioural differences that major pseudo-state investors develop in their home countries. But the solution is not to close our markets, but to strengthen the institutional framework at national and European level, ensuring that those who invest here meet our standards.

Mr President, ladies and gentlemen, 'taxing the very rich to end poverty' is the title of today's debate. What an attractive title! But what a great fallacy for those for whom poverty is not merely a number, an index, but actually evokes to them the suffering and legitimate yearnings for progress of flesh-and-blood people. For those I have good and bad news. The good news is that for the first time in history we know how to end poverty. Over the last four decades we have achieved, thanks to economic growth, innovation, trade and investment, that almost one billion people have swelled the global middle class. The bad news is that the fight against poverty is not an immediate process. It requires not falling into fallacies like the one presented to us today. There is no evidence that extraordinarily taxing the wealth of the rich will contribute to reducing poverty in the world. Quite the opposite. Of course, the rich, of course, must pay all the taxes that correspond to them within the framework of tax systems that are progressive. And why doesn't this happen sometimes? Well, really the complexity is the crack, by which some individuals of high and not so high income manage, even within the law, to reduce their tax bill. Adding new layers of complexity with highly distorting taxes on savings and investment is not the way to go if we want to achieve greater tax fairness and greater prosperity. In any case, we must not be naive. In reality, what the groups of the left intend is to tax the patrimony of the middle classes. And serve the action of the Socialist Government of Spain as an example. We start talking about the so-called billionaires, continue with a new wealth tax of more than three million euros and end with the recovery of the wealth tax for all citizens. That's what happens. Appealing to very rich people is a decoy. If we let ourselves be fooled, the costs in terms of lower growth and, ultimately, higher poverty and inequality will be great. It serves as a summary for those genuinely concerned about poverty and inequalities this headline, not so attractive, but that at least is true: Against tax avoidance, simplicity, and against poverty, growth.

Mr President, the recent ruling on the issue of state aid to Apple offers us some important lessons for the future design of European industrial policy, but for this it is first of all important to understand what this case is really about, and what it is about is not tax justice or tax evasion or calling into question the tax competences of the Member States, as we have heard here today. It is simply a paradigmatic case of illegal State aid. These illegal aids can take many forms: subsidies, subsidies or, as in this particular case, privileged tax treatment, but to restore competitiveness in Europe and give more prosperity to citizens the path is not that of privileged treatment for a few companies or sectors, there are no shortcuts. What European companies need, all of them large and small, is first and foremost a clear, simple regulatory framework with low compliance costs; secondly, an internationally competitive and incentivising taxation of innovation, investment and job creation, and thirdly, a genuine, integrated and undistorted single market. The sooner we begin to walk this path in Europe, the sooner we can avoid the risk of irrelevance and stagnation that inaction leads us to and that Mario Draghi warned us about with his report the other day.