Should we abolish the unanimity rule for tax issues in the EU?

European Council blue piggy bank taxation unanimity rule
Numéro 1

Learn the ropes

How does the European Union decide on taxes?
Taxation measures were first mentioned already in the Treaty of Rome. This Treaty established the European Economic Community in 1957, which became the European Union through consecutive evolutions many years after. At first, measures which have been imagined for taxation aimed at coordination and harmonisation of national legislations of the Member States. They were imagined mainly to avoid distortions to competition and to remove obstacles to the Single Market, such us double-taxation on international firms.

Taxation has always been a sensible issue for the Member States, as taxes are an expression of national sovereignty. They represent a big source of ressources to national budgets and the EU members agreed to protect their sovereignty on this type of legislation. Every Member State represented in the European Council has the possibility of a national veto – so decisions on tax issues have to be taken unanimously by the 28 Member States.

Why is this decision-making challenged?
With enlargements of the European Union throughout the years, the number of Member States represented in the European Council has increased. This has made the decision-making process ineffective and unreactive. Moreover, the new challenges that the EU is facing today are caused by accelerated globalisation and digitalisation. These challenges are mostly common to the EU Member States.

Also, the institutional context has changed over the years. Decision-making in the EU was largely reformed, favoring qualified majority vote over the unanimity rule. This rule progressively became an exception, or in other words, a “special legislative procedure”.

Why do we talk about it today?
For a long time this topic has been left aside, as the general thought was that a reform would require to modify the European Treaties. Although, the president of the European Commission, Jean-Claude Juncker, announced a will to reform the decision-making process in 2017 and 2018. On the 15th of January 2019, the European Commission published a communication proposing a gradual shift to qualified majority voting on taxation. The Commission wants to use “passerelle clauses”, which would make possible a reform of the decision-making process without modifying the Treaties.
Numéro 2

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The proposal for simpler and more democratic decision-making on EU tax policy is welcomed

Unanimity rule taxes European Council

Petra Völkerer

Head of Office, Austrian Federal Chamber of Labour – Brussels Office

The European Commission has recently published a Communication with the intention of reforming the rules for decision-making on EU tax policy. Currently EU fiscal legislation is based on unanimity within a special legislative procedure. Therefore, the European Parliament has no voting rights on taxation matters. This means that each single Member State can block urgently-needed decisions. But changed conditions make it necessary for the tax policy of the European Union to be able to respond rapidly to changes.

The sovereignty of Member States is only to be found on paper

The requirement of unanimity is regularly justified by claiming that Member States must not lose their sovereignty on such a key issue as taxation. However, things look different in reality: Globalisation and digitisation have resulted in mobile factors (capital) being able to elude taxation relatively easily because of the fact that tax legislation is a matter for the Member States and hence no harmonisation has taken place. On the contrary, some EU countries have consciously adapted their tax systems so that the tax base is attracted from other (Member) States to the detriment of those states, whether through particularly low corporate or capital gains tax rates, through special preferential treatment in corporate taxation (such as patent boxes, for example), or advantageous double taxation agreement with tax havens (no withholding tax, etc). This trend has ultimately also led to a situation where the sovereignty of Member States is only to be found on paper.

Numerous tax scandals have come to light in recent years. Confidential documents on the tax dodges of companies and the super-rich, such as LuxLeaks, the Panama Papers and Paradise Papers, show the dimensions that tax evasion and tax fraud have already assumed. According to the calculations of the economist Gabriel Zucman, tax dodges by multinationals lose EU countries around one fifth of the possible tax yield each year from taxes on earnings.

Important projects in the field of tax policy are blocked or severely delayed

The unanimity rule means that important projects in the field of tax policy are blocked or severely delayed at the EU level. This is linked to high costs caused by tax deficits, which in the end have to be borne by the public. This also means that funding is lacking for social policy projects and the pursuit of other socio-political goals. Regarding corporate tax, the Commission notes that the Common Consolidated Corporate Tax Base (CCCTB) could bring about a hike in economic growth by up to 1.2 percent of GDP or 180 bn euros. Consumers and Workers organisations as the Chamber of Labour ( have thus long called for reforms in tax matters such as the introduction of a common consolidated corporate tax base, which should also result in setting a minimum corporate tax rate. Although negotiations have been ongoing for many years, so far no agreement has been reached at the EU level.

Therefore the proposal of the Commission for simpler and more democratic decision-making in legislative proposals on EU tax policy through a qualified majority and including the European Parliament is expressly welcomed.


Instead of getting rid of tax unanimity, the EU should defend tax competition

Kai Weiss Unanimity rule taxation European Council

Kai Weiss

Research and Outreach Coordinator, Austrian Economics Center / Board Member, Friedrich A. v. Hayek Institute

At the beginning of this year, the European Commission made a new push to replace unanimity votes in the Council for qualified majority voting. Several sensitive areas would be touched by this, including foreign and defense policy. But especially the Commission’s attack on unanimity on tax policy has caused major backlash. While some countries like France are fully in board, many others, mostly Northern and Baltic countries have rebelled against these proposals.

This is not overly surprising, as they fear that abolishing unanimity on these issues would put tax policy in the hands of Brussels, not only threatening the national sovereignty in this area which is crucial for any country’s economic and fiscal policies, but also possibly leading to harmonization of tax rates, such as a minimum corporate tax rate which has already been proposed by the French Finance Minister, Bruno Le Maire.

Tax unanimity secures tax competition

Instead, the EU and member states should defend the principle of tax unanimity as a bulwark against ever-increasing centralization. Not only because setting your own taxes is a fundamental principle of sovereignty, though that is also true. But more importantly, tax unanimity secures tax competition.

In most countries in the Western world, the tax burden is today astronomically high, often surpassing 50 percent – that is, an average individual or company has to pay half of his or her income to the government. This is not only true for “Big Business,” but also for the small enterprise, the average income earner, or the factory worker. One way of preventing this from even deteriorating – and a way to make breathing rooms of lower taxation possible, is tax competition. When free movement and more than one country exists – like in the EU today, competition between states is inevitable. Those offering the most attractive environment to live, trade, work, and do business in, will win people over. Sooner or later, this will put pressure on other states to offer similar perks.

When free movement and more than one country exists – like in the EU today, competition between states is inevitable

A case in point: Ireland – or Estonia or Latvia. These countries have offered lower taxes and lured companies and individuals to their countries. The question for the Commission is: should it leave competition intact and force Germany and France to follow by cutting taxes, letting people keep more of their income and spurring economic growth? Or should it force everyone to have similarly high tax rates, thus chasing away everyone else from Europe in its entirety?

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