Tax policy is one of the EU’s few policy areas, which for historical reasons, is still characterised by the unanimity principle. Due to this, measures against tax avoidance and tax evasion are regularly blocked by individual Member States. In its Position Paper, the Chamber of Labour supports the proposal of the European Commission to adopt the qualified majority principle in tax issues to drive forward fairer solutions at European level.
The current system of EU tax policy, which still requires unanimity of all Member States at decision making, has resulted in urgent problems in the area of taxation, which in the end are at the expense of employees and consumers. The competition by Member States to impose the lowest corporate tax and the systematic tax avoidance of companies and the super rich are constantly leading to enormous tax deficits, thereby putting the welfare systems in Europe at risk.
Unanimity principle detrimental to employees and consumers
The numerous tax scandals during the past years, headed by Panama Papers, LuxLeaks and Cum Ex transactions have shown the scale of tax avoidance and tax evasion. According to a Study commissioned by the European Parliament, in the case of the tax haven Panama alone, EU Member States lost 237 billion Euros in tax, which was not paid by companies and the super rich. According to estimates of the economist Gabriel Zucman, about a fifth of the possible tax revenue of income tax is also channelled past EU countries due to the tax tricks of multinationals on an annual basis. In order to be able to act jointly and to react to such urgent challenges, the AK welcomes and supports the proposal of the European Commission to move away from the unanimity principle in EU tax policy and to implement in future - by means of the “Passerelle Clause” of Article 48(7) TEU - the qualified majority.
In spite of broad agreement in EU-Parliament no implementation foreseeable
The plenary session of the European Parliament in Strasbourg on 13.2.2019 showed broad cross-party agreement for a change towards a qualified majority in tax issues. However, with regard to this policy area, the EU Parliament has not yet any co-decision power as compared to the orderly legislative procedure, as tax issues are still negotiated in so-called consultation procedures. The Parliament must be heard during the procedure; however, in the end the Finance Ministers in the European Council take the decision by means of unanimous resolution. This form of decision making does not only lead to a democracy deficit, as no directly elected actors participate in the decision; at the same time, the requirement of unanimity in the Council also stifles legislation, as in practice to get all Member States to agree is almost impossible. However, the envisaged change of the unanimity principle in tax issues by the European Commission is currently also blocked. The so-called “Passerelle Clause” would enable a change of the current legislative procedures towards a qualified majority; however, this once more requires a unanimous resolution in the Council. Certain Member States such as Luxembourg, Ireland, Malta or the Netherlands do not want to give up their tax competition advantages. The EU Commission proposes the implementation of the transition towards a qualified majority by 2025. However, due to the urgency of the matter, the AK demands a more ambitious attitude and a change of the provisions by the end of 2022 at the latest.
Chance for more sovereignty by abolishing unanimity
A frequent argument of a few Member States against abolishing unanimity is the significance of tax sovereignty as one of the most important taxation elements of national governments. However, current developments clearly show that some areas may experience huge difficulties if the tax sovereignty within a community of states lies with the Member States: some EU States used the tax competition in Europe to their own advantage and have introduced particularly low corporate tax and capital gains tax rates respectively and privileges to attract companies and capital from other Member States. In the end, this resulted in an enormous competition for the lowest tax and a massive restriction of the scope concerning the taxation of international companies, which one could already refer to as a loss of sovereignty. If the Member States would now take the necessary step and move away from the unanimity principle, it would be possible to recreate more scope for all EU States, which overall would lead to a gain of sovereignty. At the same time, this would be an important step towards a social Europe, where big companies would make an appropriate contribution to the tax revenue and to the general welfare. Based on this, it would be possible to implement the reforms in tax policy matters, long demanded by the AK, such as the implementation of a Financial Transaction Tax, a Digital Tax and a Common Consolidated Corporate Tax Base, which are also supported by the European Commission and the European Parliament.
AK EUROPA: Position Paper on the EU tax policy
AK EUROPA: Reaching unanimity in tax issues no longer a contemporary measure
European Commission:Towards a more efficient and democratic decision making in EU tax policy
EU Proposal on harmonising corporate taxation only works through cooperation