Juncker challenges unanimity on fiscal policy

Heads of state must unanimously agree to pass to qualified majority on fiscal matters in the Council of Europe. [Glen Photo/Shutterstock]

To break the deadlock on fiscal issues caused by the EU’s absolute majority requirements, Jean-Claude Juncker has resurrected a clause in the Lisbon Treaty that allows for a qualified majority instead. EURACTIV France reports.

The thorny question of taxing tech giants, sometimes known as GAFA (Google, Apple, Facebook, Amazon) was again on the agenda of EU finance ministers this weekend (15-16 September).

The proposal is to have EU-wide rules on taxing the digital sector, ensuring that tech giants will pay their share where they earn their profits – but all 28 member states have to agree.

Fiscal matters require unanimous support in the EU, as taxation remains the preserve of nation states.

“The rule of unanimity is 27 vetoes,” a European Commission source summed up. A situation that halts all efforts on fiscal harmonisation within the EU and that Commission President Juncker would like to see solved before the end of his mandate in 2019.

No treaty change needed

“On important questions surrounding this matter, I would like for key decisions to be taken in the Council with a qualified majority, and for a similar rule to apply to the European Parliament,” Juncker said during his speech on the State of the Union.

This shift towards qualified majority voting in the fiscal domain would allow for a relaxation of the decision-making process, but also to include the Parliament, so far relegated to a consultative role on fiscal policy.

This change could be delivered without changing the treaties, thanks to a “passerelle” clause, allowing for the alteration of a legislative procedure without a formal amendment of the treaties, included in the Treaty of Lisbon.

An option that “would allow to shift to a majority vote on fiscal matters, but only if the Council voted unanimously in favour”, said Juncker.

The passerelle clause gives heads of state the option to authorise the adoption of certain motions “according to the ordinary legislative procedure”.

According to the Commission president, “the common tax base coming from companies’ taxation, VAT, and a fair levy on digital industries and on fiscal transactions” should benefit from this procedure.

A Brexit side-effect

The passerelle clause has not be deployed since its creation, and for good reason. “This clause was introduced in the new treaty, provided that states unanimously agree to abandon the unanimity rule,” said French MEP Alain Lamassoure (EPP), who took part in the rewriting of the treaty.

But in the wake of the Lisbon treaty, “the British adopted a national law forbidding heads of government to authorise the use of passerelle clause on EU matters”, the Frenchman explained.

A decision that effectively invalidated the clause.

But with Brexit, the British veto will be a thing of the past. “I think that Juncker wanted to remind European heads of state of the existence of this clause. Tell them to stop talking about new treaties, and instead exploit the opportunities in the existing one,” Lamassoure added.

Uncharted ground

Juncker’s reminder to European leaders could have a short-lived effect: to use the passerelle clause, there needs to be unanimity among EU heads of state. A hurdle comparable to that faced within the Council of ministers.

“It seems clear that the European Council will not let go of unanimity on all fiscal matters”, commented Lamassoure.

“Member states find fiscal policy too important to be treated under ordinary legislative rules,” a Commission source added.

“But the president has cited a number of concrete options, it is a softer approach to lift unanimity on certain dossiers than across the board.”

Enhanced cooperation

Concretely, unanimity rule is already lifted on enhanced cooperation. Another innovation from the Lisbon treaty, it allows for a minimum of nine member states to agree on common legislation.

Implemented to allow for the taxation of financial transactions, it could also enable the Common Consolidated Corporate Tax Base (CCCTB) to see the light of day. And some believe it is a credible option.

As the EU waits for member states to let go of their fiscal sovereignty, political will is the only force that can advance European integration.

Whereas certain structural subjects like VAT harmonisation or CCCTB have been adopted by unanimity for years, others have been passed in a few months only.

It is the case for subjects on tax evasion, where “the political will and pressure from public opinion have quickly created a consensus” confirmed a Brussels source.