Vulcan Insight

European Commission seeks ways to give Parliament tax voting rights

7 August 2020

What has long been one of the last “sovereign” bastions of Council decision making, EU tax policy may soon be subject to the EU’s “ordinary legislative procedure” – something long called for by Parliamentarians.

When the Commission adopted its Action Plan on fighting tax evasion and making tax simple and easy, the proposals were mainly overshadowed by the European Court of Justice’s landmark Apple ruling.

In just a few words of a side paragraph, however, the Commission proposed one of the most called-for and deep reforms of tax policy at EU level. Exploring “all legal options” to allow proposals on taxation to be adopted by ordinary legislative procedure, including article 116 TFEU. As highlighted before, the use of the article 116TFEU would remove the much loathed unanimity requirements in the Council, while making the European Parliament a full co-legislator on tax questions.

For the ECOFIN Council, in which traditionally EU tax proposals, such as the Financial Transaction Tax (FTT) or country-by-country (CCCTB) reporting rules, have faced a slow death, this would undoubtedly be a worst-case scenario. This is particularly true for countries such as Ireland, the Netherlands, or Luxembourg which have traditionally opposed any reform, and in particular the loss of veto rights, of EU taxation policy.

In response to a Parliamentary question by S&D MEPs Marek Belka and Jonás Fernández, Commissioner for the Economy Paolo Gentiloni on 6 July confirmed that the Commission is investigating its options of triggering article 116TFEU to give MEPs a vote on tax matters.

Mr. Gentiloni’s letter was in response to an initial question by the two S&D members on whether the Commission could find a way to introduce new EU own resources agreed to in the MFF, without the threat of it being blocked by any one national government. In their final compromise on the next long-term EU budget, EU Heads of State and Government agreed on new own resources based on a plastics tax from 2021, as well as potential taxes based on a carbon border adjustment mechanism, a digital services tax, a revised emissions trading system, as well as a financial transaction tax.

While the Commission’s push would, for now, be limited to EU own resources, it would mark a significant shift in not just democratising tax policy at the EU level but increasing much sought-after transparency.

It is yet unclear whether the Commission push to remove the tax veto and give Parliamentarians an equal vote on matters of EU own resources will succeed, but it can be expected to be a major discussion point in the European Parliament’s new subcommittee on tax matters, which is set to have its first meeting in September.