The European Commission has launched a debate to change the way that tax law is passed within the EU, suggesting abandoning the unanimous vote needed and relying instead on a majority in order to speed up the progress of tax legislation
A communication published by the Commission suggests a roadmap for a transition from the unanimous vote required to pass tax legislation to the qualified majority vote (QMV).
Under QMV, a proposal is passed if 55% of member states vote in favour of it and the proposal is supported by member states representing at least 65% of the EU’s population. It is the standard for the majority of proposals which are passed by the EU, and the communication notes that ‘taxation is the last EU policy area where decision-making exclusively relies on unanimity’.
This has created issues in which member states ‘have used sovereignty and unanimity as the basis for their arguments to protect specific national interests to the detriment of the Single Market’, such as low excise rates for alcohol and tobacco or ‘attractive tax regimes for corporates or wealthy individuals’.
Noting the emergence of new challenges to the EU’s tax system which have ‘exposed the limits of unanimity in tax policy at both EU and national levels’, the communication suggests that the transition is managed via four stages.
In the first stage, the European Council should agree to move to QMV decision-making regarding measures that improve cooperation between states in fighting tax fraud and evasion. In the second, QMV would be introduced to ‘progress tax measures as support for other policy goals’ such as climate change or improving public health. These stages are proposed as happening almost immediately.
Stages three would involve the modernisation of already-harmonised EU rules such as those that apply to VAT and excise duty to allow for faster decision-making to allow the EU to ‘keep up with the latest technological developments and market changes’. The fourth stage would see a shift to QMV for major tax projects, such as the common consolidated corporate tax base (CCCTB). These stages are proposed as being completed by 2025.
Pierre Moscovici, the commissioner for economic and financial affairs, taxation and customs said: ‘The EU has had a role in taxation policy since the origins of the Community six decades ago. Yet if unanimity in this area made sense in the 1950s, with six Member States, it no longer makes sense today.
‘The unanimity rule in taxation increasingly appears as politically anachronistic, legally problematic and economically counterproductive. I am fully aware of how sensitive an issue this is, but that cannot mean that the discussion is off limits. So let's begin this debate today.’
The proposal, Towards a more efficient and democratic decision making in EU tax policy is here
Report by James Bunney