Unanimity in EU tax matters no more?

ABBL Published 15.02.2019

Taxation has traditionally been considered a delicate matter as it is closely linked to EU Member States’ sovereignty and even more importantly the income side of their budgets i.e. their means of action. Therefore the EU Treaties provide for decisions by unanimity among Member States when it comes to tax matters. Contrary to the vast majority of primary legislation, the European Parliament has no co-decision power but delivers a non-binding opinion.

As long as unanimity reigns, no tax legislation can be forced on any single Member State that disagrees. That has been the idea from the start and in truth it is not a simple detail that only gets EU nerds excited. It has far reaching consequences. A historical example in the banking sector is the savings tax directive and the possibility for a number of Member States to apply a withholding tax instead of the general scheme. Without unanimity the automatic exchange of information would most likely already have been introduced in the 1990s. A more recent example is the common consolidated tax base (CCCTB) that again would weight on the revenues of small and medium sized Member States.

Over the years some EU governments and notably the Commission have expressed their frustration regarding the difficulty of decision making as well as the adoption of measures that in their eyes lack ambition. As a result on 15 January this year the Commission published a communication proposing the gradual switch in certain areas from unanimity at the Council to qualified majority voting and involving the European Parliament via the prevalent co-decision process. Qualified majority voting or QMV in short is by far the most used form of voting in the EU. It consists of reaching a majority of 55% of Member States representing 65% of the EU’s population. Currently this means 16 out of 28 Member States representing 333.5 out of 513 million people.

The means of a change from unanimity to QMV is a so-called “passerelle” clause in article 48 of the Treaty on the European Union, which would allow such a switch under a relatively heavy procedure. Indeed the European Council (i.e. the Heads of State or Government) would need to take the initiative, notify all national parliaments and if there is no opposition from the latter, the European Council can adopt, by unanimity, the decision.

In its communication the Commission suggests a four-step approach in introducing qualified majority voting. Each step of the sequence corresponds to an identified area:

1. Introducing QMV in the filed of combatting tax fraud, evasion and avoidance.
2. Moving to QMV in measures of fiscal nature designed to support other policy goals like climate change, the environment, public health or transport.
3. Areas of taxation that are already largely harmonized like e.g. VAT.
4. Fields of taxation to support the Single Market like the above mentioned CCCTB, the taxation of the digital economy or possibly the financial transaction tax.

Earlier this week on Tuesday Ministers at the ECOFIN Council discussed the communication. Unsurprisingly a number of Member States showed not much enthusiasm for the Commission’s plans. These included Luxembourg, but also a.o. Ireland, Sweden, Malta, the Netherlands, … Big Member States like Germany, France or Spain expressed their sympathies for the Commission’s ideas. Given the above-mentioned procedure, it will be challenging to get the required unanimity in the European Council and from all national parliaments for such a project. But the Commission knew that from the start and the communication is just a first move in a long-term game.


By Antoine Kremer, ABBL & ALFI Head of European Affairs


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