Friday

13th Dec 2019

EU suggests majority vote on digital tax by 2025

  • Commissioner Pierre Moscovici announced the call for political dialogue in Strasbourg (Photo: European Parliament)

The EU commission proposed on Tuesday (15 January) to extend majority voting to all EU tax policies by the end of 2025 - a highly-sensitive issue, as member states guard their tax policies fiercely.

The EU executive argued that it would make the bloc able "to reach quicker, more effective and more democratic compromises on taxation matters," and more responsive to cross-border challenges such as organised crime and tax evasion.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 30-day free trial.

... or join as a group

The commission said that globalisation and, the growth of the digital economy have complicated taxation and revenue rights, while recent scandals, such as the Panama Papers, allowed a peek into the massive scale of international tax fraud.

"Unanimity doesn't protect the sovereignty anymore," economy commissioner Pierre Moscovici said Tuesday. He added that €50bn is not collected annually simply because of cross-border fraud.

The commission also suggested to member states extending majority voting to the controversial digital tax by 2025.

That three percent digital tax is on online revenues of large digital companies accused of paying too little tax, by funnelling their EU profits through states with low taxes, such as Luxembourg and Ireland.

The digital tax plan has been in deadlock after finance ministers failed to agree on it in December. France has since announced it would go ahead with the tax.

The commission stated that it only wants to start a political debate on the issue with member states, and was not intent on harmonising tax rates or creating new EU-level competencies.

"We want to move forward with member states, not against them," Moscovici told reporters in Strasbourg.

"We wish to convince member states that it is in their interest, and in the interest of the citizens, to gradually move to qualified majority voting," he added.

"This is not about creating new competencies, new taxes, new revenue, or harmonising tax rates, but to start a discussion on how to respond to the expectation of citizens," Moscovici argued.

Moscovici said, referring to the European elections, that according to an EU poll, 74 percent of citizens think the fight against tax evasion and tax fraud should be one of the priorities of the EU.

The commission said the unanimity requirement makes compromise very difficult, as one member state can kill the entire process, and it drives countries to agree on the lowest common denominator settlement, making tax powers toothless.

The EU executive now wants member states to agree quickly on majority decision-making, to improve cooperation in fighting tax fraud and tax evasion, and harmonise reporting obligations for businesses in the EU.

Another field where the commission sees the possibility for better coordination is where taxation supports another policy area, such as fighting climate change or improving public health.

The next leap for member states would be to agree, by the end of 2025, to modernise EU rules for VAT and excise duty, to allow majority vote on such policies as the common consolidated tax base, a single rulebook for calculating businesses' taxable profits in the EU and digital tax.

The commission plans to activate a so-called "passarelles clause" in the Lisbon Treaty to move tax issues from unanimity to majority vote. It will be up to EU leaders to active the clause with the consent of the European Parliament, with no objection from any of the national parliaments.

This way the EU could avoid the almost impossible task of renegotiating the treaty.

Rolling back national tax powers is also championed by EU commission president Jean-Claude Juncker, who served as the prime minister of Luxembourg for almost two decades, overseeing turning the small duchy into a tax haven.

He floated this idea in his state of the union speech last September.

However, EU member states are unlikely to throw themselves into discussing EU-wide tax policies ahead of the European elections in May, where populists who already accuse Brussels of a power-grab are likely to surge.

Opinion

The EU's tax haven blacklist - impressive or impotent?

One year ago, the European Union published its first ever blacklist of tax havens. It is crucial that EU governments help end the era of tax havens to ensure the billions currently hidden from public coffers.

EU commission eyes majority tax rules

The commission plans to address tax avoidance schemes in some EU states by shifting tax decisions away from unanimity to a majority system in what amounts to a long shot.

Opinion

Nordic states urge U-turn on EU digital tax plans

Finance ministers of the EU's three Nordic countries have urged partners to shelve plans to tax large corporations for their digital turnover. The digital economy should be taxed where value is created, they say.

Opinion

Why majority voting on EU taxation is a bad idea

Harmonising tax rates would probably not mean harmonising all tax systems to low rates – such as those in Ireland, for instance, but much rather an increase of taxes across the continent.

News in Brief

  1. EU Scream podcast wins media award
  2. Sturgeon will set out Scottish independence plan next week
  3. Slovenia, Croatia ex-leaders highlight jailed Catalans
  4. Italian court tells Facebook to reopen fascist party's account
  5. EU extends sanctions on Russia until mid-2020
  6. UK exit poll gives Johnson majority of 86
  7. Orban: 'financial guarantees' to reach climate neutrality
  8. Merkel hopes EU leaders agree 2050 climate-neutrality

Feature

Promises and doubts: Africa's free-trade adventure

The EU is hoping that a continent-wide free trade agreement in Africa will help lift millions out of poverty and help solve issues of security and migration. But its message of values and equal partnership do not resonate with everyone.

Opinion

Why von der Leyen must put rights at core of business

Ursula von der Leyen's in-tray must include those European executives on trial for systematic workplace harassment, the break-up of European slavery rings, and allegations of European companies' abuse in palm oil, including child labour, land grabs, and deforestation.

Stakeholders' Highlights

  1. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  2. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  3. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  4. Nordic Council of MinistersNordic Climate Action Weeks in December
  5. UNESDAUNESDA welcomes Nicholas Hodac as new Director General
  6. Nordic Council of MinistersBrussels welcomes Nordic culture

Latest News

  1. EU values face scrutiny This WEEK
  2. EU sighs relief after 'decisive' Johnson victory in UK
  3. Huge win for Conservatives in UK election
  4. Behind bars: a visit to an imprisoned Catalan politician
  5. Leaders agree 2050 climate neutrality - without Poland
  6. EU leaders cagey on 'Future of Europe' conference
  7. Pressure mounts to grill Malta's Muscat at EU summit
  8. Revealed: little evidence to justify internal border checks

Stakeholders' Highlights

  1. UNESDAUNESDA appoints Nicholas Hodac as Director General
  2. UNESDASoft drinks industry co-signs Circular Plastics Alliance Declaration
  3. FEANIEngineers Europe Advisory Group: Building the engineers of the future
  4. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  5. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  6. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues

Join EUobserver

Support quality EU news

Join us