As published on independent.ie, Wednesday 16 February, 2022.
EU-wide taxes could help fund more stimulus spending, US economist Joseph Stiglitz has said.
The Nobel Prize winner said taxes on super-wealthy individuals, corporate profits and tech giants could boost the EU’s €750bn pandemic fund, which he said was “too small” compared to the US.
“Europe’s response was a weaker fiscal response,” he told an online event organised by the Institute of International and European Affairs yesterday.
“€750bn is, on one level, a lot of money, but as a fraction of Europe’s GDP, it’s really relatively small.
“A European-wide corporate income tax would circumvent the role of a couple of the European countries that have engaged in tax arbitrage, to the disadvantage of other countries in Europe.”
Mr Stiglitz has previously accused the Irish government of “stealing” tax revenues from its European neighbours and has welcomed a global deal to tax large multinationals at 15pc.
Last year the European Commission suggested hiving off revenues generated by new carbon and corporate taxes to part-fund its trillion-euro budget.
The budget is currently funded by a mixture of national contributions, import duties, VAT and - since 2020 - a penalty payment on plastic waste.
The Commission is borrowing to finance its €750bn pandemic rescue fund, although it expires in 2026.
Mr Stiglitz also argued against reviving the EU’s 3pc deficit limit and 60pc debt ceiling, which have been suspended during the pandemic, saying they “never made any economic sense”.
It could have been a “disaster” if the EU’s hands were tied by the rules in the last two years, he said.
He said lower stimulus spending during the crisis is the reason the EU economy has not recovered as fast as the US.
However, he disagreed with the idea that the multi-trillion dollar US stimulus has contributed to rising inflation, which hit a 40-year high of 7.5pc in January. Eurozone inflation was 5.1pc the same month.
“I do not think that we did too much,” he said of President Joe Biden’s programme.
“The price of oil has nothing to do with excessive pandemic spending.
“Is this a long term inflationary problem? Not in general, unless you get a wage-price spiral. In the United States, unions are so weak it’s hard to see how we’re going to get a wage-price spiral.”