EU Seeks More Power Over Tax Policy in Move Likely to Spark Feud

(Bloomberg) -- The European Union’s executive arm will propose the abolition of national vetoes on tax policy, in plans which EU governments are almost certain to reject and which could trigger a backlash from populists protesting the encroachment on the sovereignty of member states ahead of key bloc-wide elections in May.

EU decisions on taxation require unanimity among governments, which is often hard to achieve as advocates of low taxation, like Ireland, oppose policies seen as undermining their economic competitiveness. The latest victim of the bloc’s inability to reach consensus was the plan to introduce a 3 percent levy on the European revenue on tech giants, like Amazon.com Inc. and Facebook Inc.

“Unanimity has hampered progress on important tax initiatives needed to strengthen the single market and boost EU competitiveness” while also having a “damaging effect” on wider policies, the European Commission, the bloc’s executive arm in Brussels, will say in the draft of a policy document to be unveiled on Tuesday. Unanimity “is self-defeating,” according to the document obtained by Bloomberg, which cites the tech tax and the financial transactions tax as examples of collective failures to act at a cost of billions for state coffers.

The commission will propose that EU governments agree to gradually relinquish their national vetoes starting this year with policies that do not have an impact on national taxing rights, such as measures to combat fraud, according to the document. Member states should agree to take decisions by supermajority in more sensitive areas by the end of 2020, according to the paper.

“The only contribution to tax policy by member states like Ireland, Luxembourg and the Netherlands consists of systematically blocking any sort of progress,” Markus Ferber, a conservative lawmaker in the European Parliament, said by email. Majority voting would be most helpful in closing loopholes and improving the cooperation of tax authorities, he said.

Qualified Majority

Replacing unanimity by a so-called qualified majority vote would need the approval of all EU national governments, and no objections from national parliaments, under Article 48 of the Treaty of the EU, according to the commission document. Such consensus is unlikely to be reached, according to a person familiar with a meeting of national envoys in Brussels who discussed the issue last week with European Commissioner for Economic Affairs Pierre Moscovici.

Even though the plan is unlikely to make it into law, it could hand ammunition to nationalist leaders seeking to make inroads in May’s European Parliament elections and “command by negation,” blocking initiatives that could expand the EU’s powers. France’s anti-immigration leader Marine Le Pen launched her party’s campaign for the ballot on Sunday, saying she and her allies want the EU to return more power to nations and the “people.’’

The commission argues that the EU needs to be able to tax big companies if it’s to win the trust of the people.

“The commission is determined to move debates -- and rightly so,” Guntram Wolff, director of the Brussels-based Bruegel research group said in an email. “The reality is that corporate tax competition in the EU is becoming a problem for many governments and they are not sovereign at all as taxable income moves away.”

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