Market leading insight for tax experts
View online issue

EU roadmap for ending unanimity on taxation

printer Mail

The European Commission has published its proposed ‘roadmap’ for moving away from unanimity and towards qualified majority voting (QMV) by member states for making policy decisions in certain areas of EU taxation, which it would like to achieve by 2025 in four main steps.

The Commission believes that the time it takes to agree tax decisions at EU level, bound up with issues of sovereignty, means the unanimity rule is no longer suitable for dealing with common problems such as fraud and the digital economy. The EU Taxation commissioner, Pierre Moscovici, expressed the Commission’s view that while unanimity might have made sense in a community of six member states, it ‘increasingly appears as politically anachronistic, legally problematic and economically counterproductive’.

In its proposal, the Commission says: ‘the question is no longer whether there is a need to move away from unanimity in taxation, but rather how and when to do it’. The Commission’s ‘roadmap for a progressive and targeted transition’ sets out the following four steps for applying QMV to tax policy:

  • step one for measures that have no direct impact on member states’ taxing rights, bases or rates, in areas such as administrative cooperation and mutual assistance against fraud, evasion and avoidance, including BEPS;
  • step two for measures in which taxation supports other policy goals, such as climate change, environmental protection, or improving public health;
  • step three in areas of taxation already largely harmonised, such as VAT and excise duties; and
  • step four in major tax projects, such as the common consolidated corporate tax base (CCCTB) and a new approach to taxation of the digital economy.

The proposal suggests member states should move ‘swiftly’ to agree on steps one and two, while steps three and four should be developed by the end of 2025.

Besides QMV, the Commission also intends to move the decision-making process from the special legislative procedure under Treaty on the Functioning of the European Union (TFEU) art 113 and 115 that applies in taxation matters, under which the EU Parliament has only a consultative role, to the ordinary legislative procedure, requiring the consent of Parliament.

The Commission’s preferred approach to introducing the changes would not involve amending EU treaties, but would use the so-called ‘passerelle clause’ in the Treaty on European Union (TEU) art 48(7), under which the Council can notify the member states of its intention to adopt QMV for a specific measure and, if there is no objection from national parliaments, agree this procedural change unanimously with the consent of the EU Parliament.

The Commission acknowledges the strong association between taxation and national sovereignty and the proposal makes clear that it does not intend changes to EU competences in the field of taxation, nor does it aim to shift towards a system of harmonised personal and corporate tax rates across the EU.

‘I am fully aware of how sensitive an issue this is, but that cannot mean that the discussion is off limits’, said Pierre Moscovici. According to the Commission, the main problems created by the unanimity rule include:

  • compromise is difficult to reach, given each member state’s power of veto;
  • agreement in the field of taxation tends to be at the level of the lowest common denominator;
  • member states can use important tax proposals as a bargaining chip against other demands; and
  • decisions taken by unanimity can only be undone by unanimity, which often limits ambition and makes member states overly cautious.

The Commission now calls on EU leaders to debate and endorse the roadmap and on the Council to use the passerelle clause in TEU art 48(7) in respect of measures covered by steps one and two above, to notify the member states’ national parliaments of the intention to move to QMV and the ordinary legislative procedure.