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EU watch: what does the appointment of the new European Commission President mean for EU tax policy?

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Ursula von der Leyen, former defence minister of Germany, is the next European Commission President. To get there, she had to make political commitments, including on taxation. What conclusions can we draw from her concessions, and what do they tell us about the future direction of EU tax policy?

Von der Leyen’s appointment as the new president was far from obvious. Until late June, the expectation in Brussels was that one of the so-called spitzenkandidaten – that is, Manfred Weber, Frans Timmermans or Margrethe Vestager – would be the next chief of the Commission.

But, in the Council, von der Leyen emerged as the compromise candidate who could muster support from European countries of all directions. In order to subsequently secure her ratification by the European Parliament, she had to bring together the Parliament’s ideologically oriented political groups. As a Centre-Right candidate, she sought to make policy commitments that would appeal to the Greens and the Left, whilst still not alienating her own allies.

On 16 July, the European Parliament approved her nomination as the Commission President by 383 in favour, 327 against and 22 abstentions. To be nominated, she needed the support of at least 374 MEPs, and in the end she ‘passed the line’ with a margin of just ten MEPs. Her balancing efforts worked, but only narrowly.

What’s the impact on EU tax policy?

In her list of concessions, von der Leyen promised to deliver on a number of key tax policies. Her stated tax agenda for the next five years includes:

  • Setting up a carbon border tax.
  • Reviewing the Energy Tax Directive, notably in view of addressing flight taxes.
  • Introducing qualified majority voting (QMV) in the Council for tax decision-making. Currently, all tax proposals in the Council must be approved unanimously by all member states. A possible transition to QMV would in itself also require unanimity approval.
  • Introducing a tax on large digital companies, and resume work on EU-specific solutions if OECD fails to find an agreement in 2020.
  • Delivering the common consolidated corporate tax base (CCCTB) – a common way of calculating, aggregating and allocating companies’ tax bases across the EU.
  • Proposing to ‘improve business taxation environment in the single market’, presumably to cut down tax barriers to free movement of capital, labour, goods and services.
  • Taking stronger action against ‘harmful tax regimes’ in third countries.

Some of these commitments, especially on CCCTB and QMV, appear unrealistic given the continuing lack of support from a number of member states. However, for now, all that matters is that she makes the commitment to try.

What conclusions can we draw?

Cynics say that von der Leyen and her conservative allies can make all sorts of tax policy promises to the Parliament and then simply count on the Council to reject them, thus enabling her to put the blame on a possible failure to the member states.

Whilst probably not completely untrue, this is too simplistic a conclusion. Von der Leyen’s stated tax policy priorities align closely with the next Commission’s tax policy priorities (see my previous article). As such, the next Commission was expected to work on the above topics anyway, and perhaps she just skillfully made new sounding commitments out of existing plans.

If there is one lesson we should draw from von der Leyen’s stated tax priorities, it is the consistency with which they follow the already expected tax agenda of the next Commission.

Von der Leyen’s appointment shows that nothing is more uncertain than making political predictions. With new tax developments and scandals, such as the recent so-called Mauritius leaks, emerging on a regular basis, who knows how far the new Commission President can take her tax agenda. She has five years ahead of her.