crucial for the European project and Member States’ development.
Our perspective is not a simplistic approval or disapproval of QMV per se. Acknowledging that this is part of the natural evolution of the Union, especially in a turbulent global context, we should not see QMV as a European panacea, keeping in mind that the real issues need real solutions.
We would like to draw to your attention a few aspects we consider to be important (and not only us, as we are pleased to see from other organisations’ feedback):
1. About the big picture
We were aware of the imminence of QMV, based on the messages sent in recent years by the Commission, and even by European Parliament representatives, regarding the revolutionary CCCTB process and digital taxation.
As tax professionals acting in the field of cross-border transactions, we regard these tax issues as an aggressive way of removing the old and valuable market-based (arm’s length) principles, to be replaced by an administrative approach regarding profit allocation between Member States. It’s not hard to imagine why it takes so long to foster unanimity around measures which will dramatically change national taxation systems, eroding the local competitive framework. The smaller economies, especially those dependent on the transfer of technologies to cover the development gap, need to be convinced that there is a way to compensate for CCCTB in order to attract value-added investments, since local fiscal policy attributes are increasingly transferred to the EU level.
Instead of presenting the big picture, however, the Commission chose to present CCCTB unilaterally just as a measure which “would deliver unprecedented simplicity, ease of business and legal certainty for companies, while also ensuring that multinationals paid a fair share of tax proportionate to where they generate their profits. However, the CCCTB remains on the negotiable table in the Council, as Member States continue to try to unanimously agree on the future of corporate taxation” (Commission Communication, 15.01.19). But again, this reluctant attitude from some member states is not so inexplicable.
2. About open communication
The fact is, when it is perceived as fair, when it is well explained and understood, a good measure doesn’t really need QMV to be adopted.
By acknowledging that ATAD was achieved by unanimity, the Commission is immediately adding that the adoption “was fuelled by the public and political reaction to high-profile tax scandals, rather than by a common vision on how EU tax policy should advance”. We don’t see any contradiction here, because finally any vision /the best vision needs public final approval.
The Commission provides more details in the ATAD case, however, stating that, “Agreement on ATAD was held up by certain Member States seeking permission for a VAT reverse charge”. That is presented as a counter-argument for the viability of the unanimity system, where “Member States can use important tax proposals as a bargaining chip against other demands they may have on completely separate files, or to put pressure on the Commission to make legislative proposals”.
Some questions arise from this unexpected statement. Has legislation been proposed that was not entirely in the European interest, being just for negotiation’s sake? Is this the case for the VAT reverse charge? Since QVM means at least gathering a majority, does it follow that we don’t have a guarantee that such unscrupulous negotiation games couldn’t happen again?
For the first 30 years, at least, the European project worked based on the sole mechanism of unanimity through negotiation - making concessions for receiving something in return. If this mechanism is not welcome anymore, has the EU put in place another instrument for accommodating the different perspectives from different economic structures and development levels?
3. About building trust
The Commission is correct in acknowledging “that sovereignty on tax matter is already limited by the Treaty freedoms and the principle of non-discrimination”. We can add here the long list of recent investigations conducted by DG Competition on tax rulings, with decisions based on the premise that, for example, the market-value principle is part of the TFEU (art.107). The court verdict is pending.
But despite this sovereign limitation, citizens still want to have more national control over their money, especially when they learn that “measures can be carried if supported by a minimum number of EU countries, representing a minimum share of the EU population”.
Through QMV on taxation, the Commission is now assuming an even more administrative approach in imposing a vision for the member states’ (fiscal) future, when a few (especially the larger economies) will decide for the rest of the Union in the most sensitive domain, suspending the old and valuable principle of unanimity. In many respects, this unanimity principle was the only guarantee that the measures agreed work for the benefit of all the members, no matter their size and power. By removing unanimity, QMV must put in place trust, besides efficiency.
The discrepancies, the gap development – this is the real issue that should be addressed by the Commission in order to be more efficient in convincing European citizens about moving to one way or another.
Behind the generous wording “QMV as a useful tool to progress measures in which taxation supports other policy goals, e.g. fighting climate change, protecting the environment, or improving public health”, more of us could understand that QMV is no more than an efficient way of imposing the same European duties for all European taxpayers, irrespective of their economic capabilities.
In building trust, QMV should also be an efficient way of imposing the same European rights for taxpayers – why not a Common and Consolidate Fiscal Procedures and Rights Base? Paradoxically, in a more administrative Europe, we don’t yet have a unitary code of conduct for a European-type tax administration. The improvement of local tax administrations would be an effective way to ensure a level playing field.
In order to be more convincing regarding the urgency of QMV, the European authorities should precisely limit the area of applicability to some well-explained measures, and not leave the door open for unclear “certain tax issues”. QMV should be presented in a more realistic way, always as the solution of last resort, and always keeping in mind that real issues need real solutions. Solutions which need to work for the entire European family!