An end to the tax veto in Europe

The EC have released a proposal to move to qualified majority voting on tax proposals instead of the existing position where approval of all member states is required. This is not a surprise as the Commission have always expressed frustration that member states can stop tax proposals with their veto.

I can see that this proposal might be more appropriate for Eurozone members as they have a common currency and the proposal would fit in the proposed architecture for a Finance Minister for the Eurozone proposed by Emperor Macron as and when this comes into being. It shows the direction of travel for Eurozone countries in the view of the Commission. Tax would become a majority issue and in due course a Commission competency. One has to remember that the Maastricht Treaty increased the number of competences decided by majority voting from 113 to 155. Adding tax as a Commission competency would be consistent with the direction of travel and the aspirations of the Commission.

However, for non-Eurozone countries this makes no sense unless they intend to join in ever closer union and ultimately losing control of their fiscal policy, so I would imagine that the Nordic and Eastern European countries would oppose this measure strongly.

Countries might want to consider where the drive for this comes from – who wants it? Do their citizens? A proposal to create an EU Finance Minister together with majority voting on tax remove some control over their fiscal policy from member states. This would limit the tax policy decisions which member states can make independently to those taxes which are not Commission competences such as Income taxes (CT, VAT and Energy Taxes are included in the proposal).

What is interesting in the EC factsheet is how economical the EC is about the benefits of the proposal. Four major projects are listed at the end in the Cost of Inaction section. The VAT definitive Regime, a Financial Transaction Tax, CCCTB and a Digital Services Tax. The CCCTB “leads to a 1.2% increase in growth”.

You might wonder why the growth benefits of the other three are not trumpeted? Well the Commission’s own evaluation shows that the FTT has a negative impact on growth so its not surprising that the Commission wouldn’t highlight that. Unless the FTT were introduced by other financial centres outside the EU, it would result in transactions moving to those other centres. The FTT and Digital Services Tax are also proposed as revenue sources for the Commission.

While I fully understand the frustration which the Commission feels on tax policy, this does not mean that they should appropriate this area. The impact on growth is not fully analysed. If member state control of Fiscal Policy is weakened (and that looks to be the intention going forward) this will reduce the power and relevance of member states within the Eurozone, and possibly, within the EU as a whole.

Given political currents one has to question whether European citizens support this direction of travel?




Blog warning

© Chris Lenon and  2014-2019. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chris Lenon and with appropriate and specific direction to the original content.

No comments yet.

Leave a Reply