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10th Jul 2020

EU commission eyes majority tax rules

  • The commission would identify areas where a majority decision-making would unclog the system (Photo: Ken Teegardin)

The European Commission will, next year, seek to identify tax areas where decision making could be moved to a qualified majority of member states instead of unanimity, in an effort to show voters ahead of the European elections that the EU is serious about tackling tax evasion.

In its 2019 work programme, unveiled on Tuesday (23 October), the EU executive named taxation as an area where it wanted "more efficient lawmaking", and identified topics "for a move to qualified majority voting".

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"Enhance the use of qualified majority voting and allow more efficient decision-making in key fields of taxation and social policies, so that the EU single market legislation can keep pace with economic and societal developments," the programme said of the commission's goals.

The EU executive plans to roll out a non-binding 'communication' early next year on the issue before the European elections, which means there would be no time left for this commission to propose any real legislation on the issue.

The idea was already floated by EU commission president Jean-Claude Juncker in his state of the union speech in September.

"Europeans taking to the polls in May 2019 will not care that the commission made a proposal to make internet giants pay taxes where they create their profits - they want to see it happening for real. And they are right," he told MEPs at the time.

"I also think we should be able to decide on certain tax matters by qualified majority," he added.

The commission, earlier this year, pointed the finger at Belgium, Cyprus, Hungary, Ireland, Luxembourg, Malta, and the Netherlands, where it said sweetheart deals may have enabled multinational companies to cut their tax bills aggressively.

The finance and taxation commissioner, Pierre Moscovici, said, at the time, that tax rules in those seven countries "have the potential to undermine fairness and the level playing field in our internal market, and they increase the burden on EU taxpayers".

Some multinational companies have made extensive use of Ireland and other EU countries to shift profits and avoid taxes.

With this initiative, the commission aims for faster adoption of proposals. But it also wants to avoid proposals being taken hostage by one or a few member states which might block agreement on some areas.

It could also make it easier to avoid making exceptions for member states in certain proposals before they are adopted by unanimity.

However, there is little chance there would be anything tangible at the end of the process.

The commission pointed out that the treaty allows for a change in the decision-making process through so-called "clauses-passarelles".

According to this procedure, EU leaders have to notify national parliaments, which have six months to object, and if even just one EU parliament raises the red flag, the proposal is dead.

The European Parliament is also asked to consent by majority and then EU leaders adopt the decision by unanimity.

A German centre-right MEP, and a member of the parliament's economic committee, Markus Ferber, warned in a statement that the commission should tread carefully.

"Today, some small member states such as Ireland, Luxembourg or the Netherlands can protect their dodgy tax schemes by vetoing every decision in the Council - at the expense of all other member states. When it comes to closing tax loopholes and facilitating better cooperation between tax authorities, majority decisions can be useful to prevent the worst culprits from blocking everything," he said.

"However ... Brussels must not dictate [tax] rates by majority decision as this would be entirely incompatible with the budgetary rights of national parliaments," he added.

The issue goes to the heart of competences being divided between Brussels and member states.

However, as it is up to a unanimous decision of member states to do away with unanimity, it is unlikely to happen any time soon.

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