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Why don’t EU officials pay normal taxes on their pensions?

8 August 2015

Why don’t EU officials pay normal taxes on their pensions?

I’ve already drawn attention to the fact that EU officials are paid regal salaries and expenses. This usually stirs up a storm of protest, but I haven’t changed my position. Not long ago, however, I discovered that this tale has a strange twist in it: when an EU official takes his or her pension, he or she continues to pay the special low tax rate to the European Commission, no matter where they settle. There’s even a special agreement with non-member state Switzerland to avoid ex-officials having to pay double taxation, to the EU and to the Swiss. In my view this has to change and change quickly. Retired EU officials should pay normal tax, just as everyone else has to in the countries in which they live.

Foto: SP

In recent years pressure has grown on EU salaries yet if you take into account all of the bonuses, they remain far higher than those of comparable national civil servants. I’ll keep up the discussion around this, but in the European Parliament there’s no majority wanting to tackle the issue of salaries, and in particular bonuses. For that reason I’m directing my activities for the most part at those excesses which any sensible person must admit really can’t continue at a time when poverty everywhere in Europe is on the rise and when austerity policies mean that national civil servants are lagging ever further behind.

One of these excesses affects pensions. These are in any case already high enough, and above all the opportunity to take an early pension at 58 with only a limited reduction is like paradise when you compare it to what’s on offer to national civil servants. The European Commission, moreover, was very critical of Greece’s offering early retirement to its civil servants.

What particularly gets me, however, is that the member states are in agreement with a system in which European taxes are imposed not only on salaries, but even on pensions, while national treasuries can whistle for their cut. I find this odd: if you return to your own country and as a retired person take advantage of all local and national services, then it seems to me logical that you should pay your taxes there. The idea behind a European tax was originally so that people who work for the EU institutions could be as independent as possible, which meant that national taxes were inappropriate. It would furthermore create a situation in which EU officials would be paying different levels of tax, depending on where the particular institution for which they worked was based. None of these arguments applies to retired officials, who can choose for themselves where they want to live and often simply return to their native climes.

It won’t be an easy thing to have this regulation changed, anchored as it is in EU law and with the member states in agreement. To change such a law is always difficult, but as a first step I intend to ask the European Commission for an explanation when the expenditure debate comes around. Perhaps I’m missing the important arguments, but if not, then it presents our Finance Minister, Jeroen Dijsselbloem, with a very nice task in his role as Eurogroup president. Given how hard he was in his approach to the Greeks, can he take the same line with the Commission?

Dennis’s next weeklog will appear on 30th August.

 

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