On Tuesday, 15 September, the European Commission presented its famous communication on the gradual transition from unanimity to qualified majority voting in the EU Council on tax matters (see EUROPE 12168). Announced several times by President Jean-Claude Juncker and long promised by the European Commissioner for Taxation, Pierre Moscovici, the initiative has little chance of success, but at least has the merit of relaunching the debate.
“Times have changed! Holding tight to unanimity to protect national tax regimes against EU harmonisation [...] is based on myth, not reality”, Mr Moscovici told the press.
Seven important directives are still blocked in the Council, he continued, citing in particular intra-Community VAT and the tax on digital services (see EUROPE 12158).
And he recalled that this “inability to decide collectively” has a cost. In the absence of an agreement on intra-Community VAT, €147 billion in VAT is not collected each year, he argued.
“We propose to make this transition first for the most obvious, urgent, consensual matters and gradually broaden the scope”, the Commissioner explained.
Priority to the fight against tax fraud and evasion
The Commission proposes to tackle, as a first step, measures that are essential to combat tax evasion and avoidance and to facilitate compliance with corporate tax obligations and that do not have a direct impact on Member States’ duties, bases or tax rates. These would include measures to improve administrative cooperation and mutual assistance between Member States or the harmonisation of reporting obligations.
In a second step, the transition to qualified majority voting could be extended to tax measures to support other policy objectives, such as combating climate change or improving public health.
Then, by 2025, the Commission proposes that Member States focus on areas that are already largely harmonised and need to adapt to new circumstances, namely VAT and excise duties.
Finally, as a final step, it suggests an extension to other tax initiatives necessary for the single market and promoting fair and competitive taxation, such as the controversial Common Consolidated Corporate Tax Base (CCCTB).
“Hold Member States accountable”
To this end, the Commission proposes to use Article 48 (7) of the Treaty on the Functioning of the Union (TFEU). This is a “passerelle clause” which allows areas in which decisions are taken unanimously in the Council to be transferred to the ordinary legislative procedure, i.e. by qualified majority.
The only problem is that, in order to ratify the abandonment of the unanimity lock, the decision will have to be taken unanimously by the European Council, after consulting the national parliaments and obtaining the consent of the European Parliament.
“I do not want to trigger ‘Pavlovian’ reactive and negative reactions in some Member States”, said Pierre Moscovici. But we can already see the outcry from countries such as Luxembourg, Ireland and Belgium.
The Commissioner is not deluding himself. “The passerelle clause, I know, requires unanimity, but precisely this puts Member States in front of their responsibilities”, he said.
Article 116 of the TFEU – which allows for a move to qualified majority voting in order to eliminate distortions of competition due to different tax rules, if these distortions cannot be eliminated in consultation with the Member States concerned – would have been a solution to circumvent this unanimity rule.
“Strict conditions must be met in order to be able to use Article 116, which did not allow the whole problem to be dealt with”, said Mr Moscovici, specifying nevertheless that the Commission remained ready to use this article if necessary.
Since Strasbourg, the first reactions of MEPs have not been long in coming. While the S&D group welcomed the Commission's proposal by the Greens/EFA, which advocated the use of Article 116, disappointment is in order. French MEP Eva Joly (Greens/EFA) denounced the “electoral and distressing text”.
For the ECR group, the initiative is seen as “bad news for small countries, which will regularly be deprived of a voice at European level on tax issues that are essential for their economies”. (Original version in French by Marion Fontana)