The European Commission (EC) published a non-legislative communication to the European Parliament, European Council and the Council. The communication, named “Towards a more efficient and democratic decision making in EU tax policy”, calls on EU leaders to consider moving from unanimity to qualified majority voting (QMV) in EU taxation policy.
The main reasons for this communication are:
- New challenges that have emerged, in the EU and globally, have exposed the limits of unanimity in tax policy at both EU and national levels. Coordinated EU action in taxation is essential to protect Member States’ revenues and ensure a fair tax environment for all. The scale of challenges facing Member States today means that important decisions should not be allowed to be held hostage by one single Member State.
- Taxation is the last EU policy area where decision-making exclusively relies on unanimity. This hampers progress in achieving EU policy goals, completing the Single Market and in support inclusive growth across countries.
- Over the years, unanimity has hampered progress on important tax initiatives needed to strengthen the Single Market and to boost EU competitiveness: the Common Consolidated Corporate Tax Base (CCCTB), the Financial Transactions Tax (FTT), The Digital Services Tax (DST), the VAT Definite Regime.
- The coordination of tax policies at EU level can actually protect Member States’ ability to act and deliver, and thereby their sovereign rights. However, Member States have often used sovereignty and unanimity as the basis for their arguments to protect specific national interests to the detriment of the Single Market.
In the EC’s view, a move to qualified majority voting would improve the quality of the Council’s decisions and involving the European Parliament would also enhance the decision-making process in taxation: “For the Commission, the question is no longer whether there is a need to move away from unanimity in taxation, but rather how and when to do it”.
The EC states that the most practical way to move from unanimity to QMV in taxation would be to use the “passerelle” clauses in the Treaties, as provided by Article 48(7) TEU. These would allow for a more structured way of moving away from unanimity than the options outlined above. The move to QMV should be done in a step-by-step approach: 2
- In the first step, QMV should be employed for measures that have no direct impact on Member States’ taxing rights, bases or rates, but are critical for combatting tax fraud, evasion and avoidance and in facilitating tax compliance for businesses in the Single Market.
- In the second step, QMV should cover measures primarily of a fiscal nature designed to support other policy goals (e.g. fight against climate change, improving public health or transport policy).
- The third step would be to focus on areas of taxation that are already largely harmonised, and which must evolve and adapt to new circumstances (e.g. VAT and excise duties).
- The fourth step would be to introduce qualified majority voting on other initiatives in the taxation area, which are necessary for the Single Market and for fair and competitive taxation in Europe (e.g. CCCTB, FTT, DST).
The EC invites EU leaders to:
- Decide swiftly on the use of the general passerelle clause in Article 48(7) TEU for steps 1 and 2 above, in order to move to QMV and the ordinary legislative procedure. To this end, the European Council is invited to notify the national Parliaments of its initiative and seek the consent of the European Parliament.
- Consider the use of the general passerelle clause in Article 48(7) TEU for steps 3 and 4 above, by the end of 2025, in order to move to QMV and the ordinary legislative procedure in these domains.
But, while the EC’s communication is important for political reasons, activating the passerelle clause in Article 48(7) TEU also requires unanimity, making the Commission’s plan vulnerable to any Member State’s veto power. And several Member States have already expressed opposition to any change in the way taxation matters are decided at EU level.