Who will make future tax policy in the European Union (EU)?

Tax is the last policy area where every single EU country must agree before a new EU wide policy is adopted. And before the EU Council of Ministers has to make its unanimous decision there has to be consultation with the European Parliament.

The European Commission has published a roadmap which will be followed by a communication setting out proposals for change. The communication is likely to be published the week of 14 January, possibly on Tuesday 15 January.

The rationale for a qualified majority voting system in taxation, as is the regime in other policy areas, is set out in the roadmap as follows:

“Since the treaty of Rome (1958), decisions on taxation in the European Union have been taken by unanimity. Taxation is the last policy domain where unanimity is the sole rule.

Taxation is also an area subject to a special legislative procedure i.e. unanimity in Council after consultation of the European Parliament. This is in contrast to most other policy areas, where the ordinary legislative procedure has increasingly been used.

The historical justification for this exception has been that unanimity (with special legislative procedure) is the only way to guarantee national sovereignty over tax matters. Reality, however, turned out to be more complex. Subsequent case law (CJEU) has shown that the Treaty freedoms and principle of non-discrimination create limits on national sovereignty in taxation. With today’s degree of economic and financial integration, national tax policies can have important effects on other Member States and Union policies. As a result, Member States are increasingly constrained in their capacity to raise revenues to finance expenditures programmes in line with their national preferences.

Unanimity in taxation is an obstacle to efficient decision-making and as a result that there is no effective Single Market in taxation.”

The objective of the initiative is explained in the roadmap as follows:

“The main objective of this Communication is to explore possibilities to make EU law-making in taxation policy more efficient by using qualified majority voting. This would enable the EU to keep pace with the rapid economic, social and competitive changes which taxation policy needs to respond to. The Communication aims to trigger a debate within the European Council and European Parliament and with interested stakeholders on how to make law making in taxation policy more efficient within the opportunities available in the current Treaties.

More efficient law-making in the field of taxation policy would respond to the expectations of Union citizens, who have cited fair taxation as one of the priority areas for EU action.”