Juncker pressures the Council: Will we see the end of the veto power in fiscal matters?

Unanimity has traditionally been one of the most recognisable characteristics of the Council. The reason: it is much easier for any member State to hand over part of its sovereignty in certain matters if in exchange it receives veto power over any decision that is taken in that same matter. As the European Union (EU) has lived through a process of consolidation, the Council has evolved towards a qualified majority system, which at present is the most used by the institution. However, there are still sensitive subjects in which today any member State can block an initiative if it considers it to be against its interests. That is the case of the indirect taxation system, a subject matter where the Twenty-Eight keep their veto capacity very much intact.

But this may yet change. For the Commission, the challenge presented by a unanimous vote in the Council is becoming increasingly apparent: it is truly difficult that all member States agree on fiscal matters. Some measures, such as the effort to create a common consolidated corporate tax base (CCCTB) have been blocked. There is also increasing criticism that the European Parliament is only playing a consultative role in these matters.

For this reason, Jean Claude Juncker in his last speech on the State of the Union defended the need that member States abandon unanimity in fiscal matters.

This intent took the form of the Communication announced on January 15th by Pierre Moscovici called “Towards a more efficient and democratic decision making in EU policy”.  The Commissioner of Economic and Financial affairs requested the member States consider transitioning gradually to a qualified majority vote in fiscal matters. Under this system an obligatory measure would only need the support of sixteen of the twenty-eight member States to be approved (if they represent at least 65% of the EU population). In the press conference Moscovici stated that “the rule of unanimity in fiscal matters seems increasingly politically anachronic, juridically problematic and economically counter productive”.

A transition in stages

The Commission proposes the Council to gradually abandom the unanimous voting system and proposes a plan to partially implement the ordinary legislative procedure in certain fiscal matters. In this way, these decisions of the Council would be taken by a qualified majority (with the resulting disappearance of the member State’s veto power) and the European Parliament´s opinions in these matters would become binding.

The Commission is proposing a progressive road map broken down into four stages to gradually replace the unanimous vote with qualified majority. These different stages would evolve from a first phase in which a qualified majority would only be applied in less problematic fiscal matters where no major disagreements would be expected, to the last phase where the system would be applied to complex fiscal proposals such as the CCCTB or a new potential tax base for the digital economy. The proposal aims for these four stages to be completed before 2025.

Eliminating the veto by Unanimity

The main hurdle which the proposal faces is precisely that ending the member State’s veto requires the unanimous consent of the Twenty-Eight. The change in the Council decision making would be implemented with the so called “passerelle” clause (art. 48 (7) TEU), which allows the Council to unanimously approve to change its voting system with the previous consent of the European and national Parliaments.

Given that many member States have presented serious objections to further relinquish their sovereignty, it is likely that the same vetos the Commission is trying to overcome will end up being the cause that this proposal remains shelved.

Since Moscovici’s announcement it was expected that member States that are enjoying more favourable fiscal arrangements, such as Luxembourg, Ireland, or the Netherlands, would oppose the measure. Indeed, the Commission’s proposal has run into opposition from several countries during the first debate about the matter during the meeting held on February 12th between the EU Ministers of Economy and Finance (Ecofin). Only the representatives of France and Germany (Bruno Le Maire and Olaf Scholz) defended the Commission’s perspective.

For the EU Commissio, making decisions in fiscal matters on the basis of a qualified majority system seems essential to ensure the survival of the European Project. However, the Council has no legal obligation to even consider the Commission’s proposal. In the face of this, it seems likely that Moscovici’s communication will remain unanswered  for now although the next legislature may well decide to put the subject of renouncing Council Unanimity back on the table.