by Julie Martin, MNE Tax
The EU Commission today proposed a four-step plan to end by 2025 existing procedures that require EU decisions on taxation matters to be unanimous.
Under the EU plan, tax proposals would be instead be approved by a qualified majority. This means that the proposal would need the support of 55% or more of EU states and at least 65% of the EU population. The decision can be vetoed by a ‘blocking minority,’ comprised of four or more member states that represent more than 35% of the EU population.
The EU proposal also calls for co-decision by the European Parliament.
“The unanimity rule in taxation increasingly appears as politically anachronistic, legally problematic, and economically counterproductive. I am fully aware of how sensitive an issue this is, but that cannot mean that the discussion is off limits,” said Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici, introducing the plan.
The proposal faces an uphill battle as it has already been rejected by Ireland.
“Ireland does not support any change being made on how tax issues are agreed at EU level,” a spokesperson for Irish Finance Minister Paschal Donohoe said just after the EU release.
Under the Commission’s plan, Member States would first establish qualified majority decision-making for measures that improve cooperation and mutual assistance between the member states in fighting tax fraud, tax evasion, and tax avoidance. These measures would have no impact on a state’s rights, tax bases, or rates.
Step two envisions extending qualified majority voting to instances where taxation supports other policy goals, such as climate change, protecting the environment, or improving public health.
In the third stage, the new voting plan would also apply to provisions that modernize already harmonized EU rules, particularly VAT and excise duty rules.
It is not until the final stage when qualified majority voting would be extended to the most difficult issues.
In Step four, other tax projects needed for the Single Market and fair and competitive taxation would become EU law through qualified majority vote. Proposals for an EU-wide common consolidated corporate base (CCCB) and a common system for taxing the digital economy, which have been impossible to pass under the current system of unanimity, would now be voted using qualified majority.
The goal is steps 3 and 4 to be in place by the end of 2025.