EU tax policy focuses on supporting the smooth running of the single market, for example through varying harmonisation of different aspects of direct and indirect taxation, efforts to combat tax evasion, avoidance, and fraud, and the elimination of discriminatory tax barriers stemming from Member States’ national laws. That way, EU tax policy helps EU countries and the EU budget to mobilise revenue to fund public policies. It also helps citizens and companies reap the benefits of the single market.
How is EU tax law adopted?
The European Commission has the right of initiative to propose new EU law or amendments to existing EU tax law. Currently, EU tax law is adopted through the special legislative procedure.
Special legislative procedure
Under the special legislative procedure with consultation, the Council of the European Union (comprised of representatives of all EU countries) is, in practice, the sole legislator adopting proposals.
The European Parliament is consulted during the process and may approve, reject a proposal or propose amendments, but the Council is not legally obliged to consider the Parliament’s opinion. Nevertheless, the Council cannot proceed with adoption of an EU legal act until it has received Parliament's opinion.
Under the special procedure, draft laws are adopted by unanimous vote of the Council. This means that every EU country must give its green light to the proposed legislation for it to be adopted.
Proposal for Qualified Majority Voting
On 15 January 2019, the European Commission presented a communication on how to move gradually from unanimity voting under the special legislative procedure to qualified majority voting (QMV) under the ordinary legislative procedure.
In the latter, the European Parliament and the Council are co-legislators, and proposals are adopted in the Council by QMV. The ordinary legislative procedure is already used for more than 80% of EU legislative procedures. It gives Parliament and the Council equal say in adopting laws.
When the Council votes on a proposal, a qualified majority is reached if two conditions are met:
- 55% of Member States vote in favour
- the proposal is supported by Member States representing at least 65% of the EU population
Given that both conditions are necessary, this procedure is also known as the 'double majority' rule. A decision can still be stopped by a ‘blocking minority’, but this blocking minority must be formed by at least four Member States representing more than 35% of the EU population.
- Communication COM(2019) 8: Towards a more efficient and democratic decision making in EU tax policy
- Press release: Commission launches debate on a gradual transition to more efficient and democratic decision-making in EU tax policy
- Questions and answers: A gradual transition to more efficient and democratic decision-making in EU tax policy
- Factsheet: How do we gradually improve decision-making in EU tax policy?
Why change the current decision-making process?
The need for unanimous agreement makes it very difficult to reach compromises because the veto of just one Member State is enough to prevent agreement on a proposed EU tax law. This limits the potential of EU taxation policy to support a well-functioning EU single market.
This can lead to proposals requiring years for Member States to agree, or to proposals simply being blocked in the Council without any discussion taking place. Some EU countries even use unanimity as a bargaining chip against other demands they may have on separate files.
Even when agreement is reached with unanimity, it tends to be at the lowest common denominator level, limiting the positive impact for businesses and consumers, or making the implementation more cumbersome than necessary.
In addition, decisions taken by unanimity can only be reversed or changed by unanimity. This often makes EU countries overly cautious, dampening ambitions and weakening the final outcome.
What are the benefits of QMV?
Excluding the directly elected European Parliament from decision-making on a policy area as important as taxation is at odds with the democratic goals of the European Union.
A move to QMV, under the ordinary legislative procedure, would rectify the democratic deficit and allow the European Parliament to make a full contribution to shaping EU tax policy. As such, the move should help to strengthen democratic legitimacy and accountability in EU tax policy.
In addition, moving to QMV would make the decision process on tax proposals faster and more equipped to tackle upcoming issues efficiently, resulting in better cooperation amongst EU countries and thus better decision-making at EU level.
More coordinated and ambitious EU action would not only help to build a stronger and more dynamic single market, but also ensure a fairer tax environment at global level.