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EU Commission Plans for Qualified Majority Voting on Tax Issues

POSTED ON Jan. 11, 2019

On January 15 the European Commission will present a communication setting out options to move from unanimity to qualified majority voting in tax matters.

According to EU Tax Commissioner Pierre Moscovici, the shift would be gradual. “My belief is that unanimity does not protect national sovereignty. We have to shift to a European sovereignty,” Moscovici told a few reporters January 9.

Moscovici mentioned a few proposals that have stalled in the EU Council, such as the digital services tax and common consolidated corporate tax base (CCCTB) proposals. “These are structural proposals for which unanimity is obstructing a deal,” he said, adding that unanimity is no longer a bulwark but mainly an obstacle.

“We are not going to propose to shift all taxation issues to qualified majority voting. That would be an elegant provocation, but ineffective,” Moscovici said.

According to EU sources, the commission has identified another article of the Treaty on the Functioning of the European Union that would help provide for qualified majority voting on tax in some cases, such as tax incentives for green energy sources. Article 192 of the TFEU says the council may apply the ordinary legislative procedure to measures that are primarily of a fiscal nature or those that significantly affect a member state’s choice between different energy sources. The ordinary legislative procedure entails qualified majority voting and a co-decision on equal footing with the European Parliament. Currently, under the special legislative procedure for tax issues, the Parliament is only consulted.

The commission has previously referred to article 48.7, which says that “where the [TFEU] provides for the Council to act by unanimity in a given area or case, the European Council may adopt a decision authorizing the Council to act by a qualified majority in that area or in that case.”

The commission’s communication will use “a pro-internal market narrative,” according to one source. One of the proposals presented by the commission that had to be withdrawn because it was blocked in the council is the standard VAT return. That means businesses in the EU have to file 28 different VAT returns, despite the fact that the EU is a single market.

One option, as a first step toward qualified majority voting, would be to use the ordinary legislative procedure to make decisions on proposals that do not “have an impact on the right to tax, on tax bases, or on tax rates.” That would cover, at a minimum, every proposal strengthening administrative cooperation between member states. The exchange of information on tax rulings, for example, was introduced through the administrative cooperation directive. Another step would be to use the ordinary procedure also for proposals such as the digital services tax or CCCTB. But EU sources don’t believe this would be politically feasible.

The Committee of Permanent Representatives of Member States to The EU has invited Moscovici to explain the commission’s upcoming communication. According to diplomats, only Spain and Portugal expressed clear support, while France seemed reluctant, unless the shift is strictly limited to a few tax areas. Germany and Greece reportedly said they want to see the proposal before giving their position.

One country apparently noted that a large number of proposals have been adopted in the last few years despite the unanimity rule. Moscovici reportedly acknowledged that 14 directives have been adopted since he took over the portfolio, but he noted that the EU was blocked on every other file not related to tax evasion.

Speaking to reporters, Moscovici praised the EU tax haven blacklist, which he said he hopes will be reviewed in the March Economic and Financial Affairs Council meeting. He also said that reaching an agreement on the digital services tax in March would be difficult but not impossible.

The communication on ending the unanimity rule for some tax issues is expected to be defensive, and to stress that tax competition will always be preserved and that taxation will remain a national competence.

“The commission will not revise [EU] treaties; it will only modify the procedure,” one source said, rejecting the argument put forward by Ireland that the initiative might violate the protocol on the concerns of the Irish people on the Treaty of Lisbon. The protocol says that “nothing in the Treaty of Lisbon makes any change of any kind, for any Member State, to the extent or operation of the competence of the European Union in relation to taxation.”