Member states shield national vetoes on tax matters

The opposition of few member states to the digital tax is one of the main reasons argued by the Commission to propose the gradual introduction of qualified majority in tax issues. [:D/Flickr]

A large majority of EU governments opposed on Tuesday (12 February) the European Commission’s proposal to end the unanimity required to pass legislation on taxation, saying they want to protect national sovereignty and avoid having decisions forced on reluctant countries.

The European Commission proposed in January a gradual transition toward the introduction of the qualified majority on tax matters.

However, only the largest European countries – including France, Germany and Spain – supported the plan after the first discussion, held during the meeting of the EU finance ministers (Ecofin Council).

Italy was more ambiguous, as it supported the idea in general terms but considered it premature, EU officials explained.

In contrast, a large majority of countries failed to back the proposal during the closed-door meeting, officials added.

EU wants end to member state veto on tax

The European Commission on Tuesday (15 January) proposed to end the veto power member states have over EU tax matters, an idea rejected by several smaller countries including low-tax hub Ireland.

Commission vice-president for the euro, Valdis Dombrovskis, said after the discussion that “many member states welcomed starting the debate”. However, he admitted that the views were “very different”.

He argued that “there is scope for discussion” and the “need” for it, given the bloc’s inability to progress on important tax files, including the digital tax.

In particular, Dombrovskis detected more “openness” among member states to discuss the first stage of the proposal, which would imply introducing the qualified majority for measures to fight against tax fraud and tax evasion.

A qualified majority means at least 16 member states representing 65% of the population.

In a second stage, the Commission proposed breaking the unanimity in other tax-related dossiers that support the EU’s common goals, such as the fight against climate change or public health.

In the third stage, the qualified majority would be adopted for modernising already harmonised EU rules, for example in the field of VAT.

The final step would introduce this system for ambitious proposals, including the digital tax or the common consolidated corporate tax base (CCCTB).

The final decision lies in the hands of EU leaders, and opposition from only one of them would be enough to block the proposal.

Romanian Finance Minister Eugen Orlando Teodorovici, whose country chairs the Council meetings, said that “tax sovereignty is of primary importance to many member states and the unanimity rule often leads to fast decision making”.

Teodorovici also argued that taxation is only one of the areas where the EU should explore how to improve the decision-making process.

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Franco-German backing

Only France and Germany spoke in favour of the proposal on their way into the meeting.

French Finance Minister Bruno Le Maire defended the idea as a way to increase the “efficiency” of the EU on tax matters.

His German colleague, Olaf Scholz, said he was a long time supporter of the idea of introducing qualified majority on foreign affairs, but also on tax matters.

Spanish Prime Minister Pedro Sanchez said last month that the Commission should break the unanimity rule not only on foreign and tax issues but also on the procedure to sanction countries breaching the rule of law or to approve the EU’s long-term budget.

On the opposite camp, Luxembourg’s Finance Minister Pierre Gramegna said the progress made over the past four years to pass tax-related legislation “shows that we can move even with unanimity”.

He defended national vetoes on taxation because “it is the core sovereignty of the countries that is at stake”.

Moscovici: We are quite close to an agreement on the digital tax

The introduction of national digital taxes across Europe is not detrimental to the Commission’s European proposal, the Commissioner for Economic Affairs, Pierre Moscovici, told, adding that he believes an agreement on the issue is “quite close”.

His Maltese counterpart, Edward Scicluna, rejected passing new measures by force if some countries remained unconvinced.

Rather than resolve discrepancies over qualified majorities, he said that national governments should address them “by explaining, convincing and thinking it out, and then convince the others, as we did in the past”.

The Swedish Finance Minister Magdalena Andersson weighed in, saying “it is not more democratic to have less power”.

“There will be a lot of scepticism for many countries and many parliaments across Europe,” she added.

Looking at the progress made over the past years in this field, Menno Snel, state secretary for finance of the Netherlands, said his government was happy with the situation as it is.

Country-by-country reporting to affect only 10% of multinationals

The European Parliament has adopted a draft directive that would see 90% of multinational companies escape compulsory country-by-country reporting requirements. EURACTIV France reports.

During this mandate, the Commission has passed legislation to fight tax erosion and tax evasion, including measures to improve how companies report on their profits.

However, more ambitious proposals, such as a digital tax on internet giants, a financial transaction tax or a common consolidated corporate tax base, remain stuck at the Council’s table.

[Edited by Zoran Radosavljevic]

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