Bolkestein shoots down ‘Robin Hood’ tax

Date: 15/04/04

FRITS Bolkestein, commissioner for the internal market, has brushed-off calls from his native Netherlands for the European Commission to back a 'Robin Hood' style 'kleptocrat tax' on overpaid company directors - with the proceeds going to victims laid off during the recent downturn while their bosses took lavish pay awards.

Max van den Berg, a Dutch Socialist MEP, said a tax blueprint from the Dutch Trade Union Confederation (FNV) would rake in 52% of executive's salary packages above €half-a-million per year.

"The extra revenue that this would generate could be used to provide financial assistance to those duped by the restructuring carried out by the gentlemen concerned," he said.

Van den Berg, a former executive with relief agency Oxfam, added that the Commission should act as a facilitator for member states across the Union to follow suit to clamp down on greedy bosses.

"The business world claims to be going through hard times. Restructuring is common, people are losing their jobs and losses are being recorded. None of this is their fault, say company directors, because the economy is simply in a bad way and salaries are lower.

"Painful measures have to be taken. We are all feeling the pinch, so we should all tighten our belts and bear the burden together. If everyone pulls together, we shall win through," said Van den Berg, a Parliament vice-president.

"But anyone taking a good look at the salaries of CEOs in the Netherlands will come to the conclusion that they are still drawing huge salaries through share-option schemes, redundancy packages, bonuses and loans. This 'belt-tightening' obviously does not apply to them," he claims.

However Bolkestein, a former leader of the Dutch Liberal Party, said the Commission sees no role for pushing new taxes in a forthcoming policy paper on directors' pay.

"Taxes on personal income are one area which, in the Commission's view, should be left to member states even when the European Union achieves a higher level of integration than at present.

"Coordination of personal taxes at EU level is only appropriate to prevent cross-border discrimination or obstacles to the exercise of the four freedoms, as well as in some cases to avoid double taxation or unintentional non-taxation in cross-border situations and to tackle cross-border evasion."

He insisted that the structure and amount of directors' remuneration "must primarily be left to the decision of each company and its shareholders" - and not to the taxman.

However, the commissioner said "shareholders should be able to appreciate fully the relation between the performance of the company and the level of remuneration of directors and that they should be able to make decisions on the remuneration items linked to the share price. An appropriate regime of disclosure and appropriate governance controls is necessary in this respect".

The Commission began to examine the executive pay and perks issue as part of its follow-up to the Enron case in the US - which cast doubts about the checks and balances in place to stop company bosses abusing their positions of power.

Bolkestein said the Commission's policy would be in the form of a non-binding recommendation, designed to "foster an appropriate regime for the remuneration of directors".

He said this would focus on disclosure of the remuneration policy and of remuneration of individual directors in the annual accounts.

Also included would be calls for prior approval by the shareholder meeting of share and share option schemes in which directors participate and proper recognition in the annual accounts of the costs of such schemes for the company.

The European Commissioner for the Internal Market, Frits Bolkestein, has rejected calls from his native Netherlands for the Commission to introduce a tax on 'overpaid' company directors, with the money raised going to those employees laid off during the recent economic downturn.