COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL AND THE COUNCIL Towards a more efficient and democratic decision making in EU tax policy
Date: 2019-01-15
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: European tax cooperation, decision-making, drafting of EU law, majority voting, single market, tax, tax harmonisation, tax law, tax reform, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Strasbourg, 15.1.2019  COM(2019) 8 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL AND THE COUNCIL  Towards a more efficient and democratic decision making in EU tax policy  
 
 
1.  Introduction  

Taxation  is  essential  to  the  functioning  of  our  society  and  a  key  instrument  of  public 
policy at all levels of governance. It is the primary source of revenue for governments and is 
central to securing an efficient and stable economy in a fair and inclusive society. This is why 
measures  aimed  at  coordination,  approximation  or  harmonisation  of  national  legislations  in 
the field of taxation are an important tool for policy at EU level, within the bounds set by the 
Treaties  and  in  line  with  the  principle  of  subsidiarity.  Therefore,  already  the  1957  Treaty 
establishing  the  European  Economic  Community  provided  for  the  legal  bases  for  such 
measures, as a necessary element for European integration. Initially, EU tax policy focussed 
mostly  on  removing  obstacles  to  the  Single  Market1  and  on  preventing  distortions  to 
competition. This led to a number of success stories, such as legislation to minimise double 
taxation for cross-border businesses2, which have been instrumental to building the Internal 
Market.  

For  many  years,  legislation  in  the  field  of  taxation  has  been  closely  linked  to  national 
sovereignty, due to its role in national revenues, budgets and policy choices. Member States 
have defended this sovereignty and seen decision-making based on unanimity, entailing the 
possibility of a national veto, as a means of protecting it. As a result, the Treaties retained the 
general  rule  that  the  Council  must  decide  unanimously  on  proposals  in  the  area  of  taxation 
before they can be adopted at EU level, a requirement suited to a smaller Union with limited 
integration,  a  more  traditional  economy  and  fewer  cross-border  challenges  than  the  current 
Union. 

New  challenges  that  have  emerged,  in  the  EU  and  globally,  have  exposed  the  limits  of 
unanimity  in  tax  policy  at  both  EU  and  national  levels.  In  today’s  larger,  modern  and 
more integrated EU, a purely national approach to taxation no longer works and unanimity is 
neither a practical nor an effective way of decision-making. National and common interests 
are  intertwined.  The  increased  mobility  of  businesses  and  citizens  means  that  one  Member 
State’s tax decisions can significantly affect the revenues of the others and the scope to make 
their  own  policy  choices.  Globalisation  and  digitalisation  have  created  common  challenges 
that  need  common  solutions.  External  competitive  pressures,  such  as  the  recent  US  tax 
reform,  require  Member  States  to  act  together  to  safeguard  the  interests  of  the  Union  by 
reinforcing the competitiveness of the EU tax system. Coordinated EU action in taxation is 
essential  to  protect  Member  States’  revenues  and  ensure  a  fair  tax  environment  for  all.  In 
order to keep pace with today’s rapidly changing environment, EU tax policy must be able to 
react and adapt quickly. However, this is not possible when unanimity is the rule. Issues that 
could perhaps afford to be deliberated over several years in the past, today may need to be 
brought to conclusions in a matter of months. The scale of challenges facing Member States 

1   In particular by the non-discrimination clause in, now, Article 110 of the Treaty on the Functioning of the 
European Union (TFEU) as well as by the introduction of common rules such as for turnover taxes and the 
value added tax (VAT). 

2   For example the Parent-Subsidiary Directive, the Interest and Royalty Directive, and the Mergers Directive. 

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today  means  that  important  decisions  should  not  be  allowed  to  be  blocked  by  one  single 
Member State. 

Taxation  is  the  last  EU  policy  area  where  decision-making  exclusively  relies  on 
unanimity.  Through  successive  Treaty  changes  over  the  past  30  years,  decision-making 
procedures  in  other  areas  have  evolved  in  response  to  economic,  environmental,  social  and 
technological  changes  and  delivered  clear  results.  Qualified  majority  voting  is  now  the 
standard rule, including for policies that are just as politically sensitive as taxation3. Moving 
from unanimity to qualified majority voting in other policy areas was not easy to accept for 
Member States.  But they did  so because  they realised that  the EU needs efficient  decision-
making tools to respond effectively to modern challenges and to unleash the benefits of the 
Single  Market  and  of  the  Economic  and  Monetary  Union  more  broadly.  Some  of  the  most 
important  achievements  of  European  integration  in  the  last  decades  would  not  have  been 
possible without this change.  

Although  decision-making  by  qualified  majority  was  provided,  for  certain  policies,  in 
the  original  Treaties,  only  from  the  second  half  of  the  1980s  was  qualified  majority 
voting effectively applied, where possible. It was the shift to qualified majority voting for 
most  decisions  pertaining  to  the  Single  Market,  as  a  result  of  the  Single  European  Act  of 
1986, that acted as the main catalyst for the completion of the iconic project, instilling a fresh 
dynamism within the Community, with unprecedented results.  

The  only  remaining  current  exception  hampers  progress  in  achieving  EU  policy  goals 
and  completing  the  Single  Market.  It  is  time  to  align  decision-making  relating  to  tax 
legislation with that of other, equally important policy areas. 

Taxation is also one of the few policy areas where decisions are still taken by means of a 
special legislative procedure. Currently, and since 1958, EU initiatives on taxation are taken 
by  the  Council  following  a  proposal  from  the  Commission;  the  European  Parliament  has  a 
mere  consultative  role.  Excluding  the  directly  elected  European  Parliament  from  decision-
making in such an important policy area as taxation, is at odds with the democratic goals of 
the Union. A move to the ordinary legislative procedure would close this democratic deficit. 

Since  the  beginning  of  the  current  mandate,  the  Commission  has  pushed  for  a  fairer 
and  more  efficient  European  tax  system.  Member  States  have  agreed  to  a  series  of 
advanced new rules to protect their resources against corporate tax avoidance throughout the 
EU, while ensuring a fairer and more stable environment for businesses.  

It is against this background that, in his State of the Union Speeches of 2017 and 20184, 
President Juncker suggested moving to qualified majority voting on certain tax matters:  

3   The  Single  European  Act  of  1986  entered  in  force  on  1  July  1987  and  replaced  unanimity  by  qualified 
majority voting as the general rule for harmonising Single Market rules. This was followed by further steps 
qualified majority voting being extended to a wide range of policies including judicial cooperation in civil 
matters, harmonisation in the area of criminal law and police cooperation.  

4   https://ec.europa.eu/commission/priorities/state-union-speeches_en  

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“When it comes to important single market questions, I want decisions in the Council to be 
taken more often and more easily by qualified majority – with the equal involvement of the 
European  Parliament.  We  do  not  need  to  change  the  Treaties  for  this.  There  are  so-called 
“passerelle  clauses”  in  the  current  Treaties  which  allow  us  to  move  from  unanimity  to 
qualified  majority  voting  in  certain  cases  –  provided  the  European  Council  decides 
unanimously to do so. 

I  am  also  strongly  in  favour  of  moving  to  qualified  majority  voting  for  decisions  on  the 
common consolidated corporate tax base, on VAT, on fair taxes for the digital industry and 
on the financial transaction tax.”  

Accordingly,  the  present  Communication  does  not  intend  to  propose  any  change  to  the 
attribution  of  EU  competences  in  the  field  of  taxation.  Nor  does  it  aim  to  shift  towards  a 
system  of  harmonised  personal  and  corporate  tax  rates  across  the  EU.  The  current 
Communication is only proposing to modify the way the EU exercices its competences in the 
area of taxation. In particular, the Communication sets out a Roadmap to achieve this goal. It 
should trigger a broad policy debate and serve as a contribution to EU leaders, ahead of the 
next European elections. In the light of those discussions, and based on the priorities for the 
years ahead, the Commission will decide which concrete proposals should be made.  

2.  Why is there a need for change?  

2.1 Better tax policy for a stronger and more competitive Single Market  

Taxation cannot deliver its full potential to help preserve and deepen the Single Market 
and  to  support  inclusive  growth  across  countries  because  of  unanimity.  Taxation  is 
central to building a strong and dynamic Single Market, which supports businesses, attracts 
investors and can compete with the strongest global markets. It is critical for growth and jobs, 
given  its  influence  on  companies’  decisions  to  expand,  invest  and  employ.  In  addition, 
taxation is a key element in ensuring social justice for citizens and a level playing field for 
businesses  in  the  EU.  Indeed,  in  a  recent  Eurobarometer  survey5,  three  quarters  of  the 
respondents cited the fight against tax abuse as a priority area for EU action.  

Yet,  in  spite  of  the  positive  impact  it  can  have,  EU  tax  policy  is  failing  to  deliver  its  full 
potential. Within the Single Market, companies and consumers enjoy a common set of rules 
and standards, without any border. Within the European Monetary Union economic activity is 
facilitated by a single currency. However, direct and, although to a less extent, also indirect 
taxation,  remains  fragmented  into  28  different  national  legislations.  By  leaving  such 
fragmentation unaddressed, Member States impose huge compliance costs on EU businesses 
especially on SMEs and make the Single Market a less attractive place to invest in globally.  

Over the years, unanimity has hampered progress on important tax initiatives, needed 
to strengthen the Single Market and boost EU competitiveness.  

5   http://www.europarl.europa.eu/news/en/headlines/economy/20160707STO36204/tax-fraud-75-of-europeans-

want-eu-to-do-more-to-fight-it  

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The Common Consolidated Corporate Tax Base (CCCTB), for example, was first proposed 
in 2011, as a modern, business-friendly and fair corporate tax system for the entire EU. The 
CCCTB6, relaunched in 2016, 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 
negotiating table in the Council, as Member States continue to try to unanimously agree on 
the future of corporate taxation.  

The  Standard  VAT  Return  is  another  proposal  that  would  have  radically  improved  the 
business  environment  in  the  Single  Market.  Through  a  simple  and  harmonised  system  for 
filing VAT declarations, this proposal offered to reduce the administrative burden for cross-
border companies by EUR 15 billion per year. However, in their struggle to reach unanimity, 
Member  States  veered  towards  an  outcome  that  completely  undermined  the  goal  of 
simplification. In the end, the Commission had to withdraw the proposal in 2016, leaving EU 
companies to deal with 28 different VAT return forms.  

 The Cost of Non-Action in EU Tax Policy  

The VAT Definitive Regime could help close the EUR 147 billion annual VAT gap7 due to 
tax  evasion  and  tax  avoidance,  as  well  as  reduce  VAT  fraud,  which  currently  costs  public 
budgets around EUR 50 billion per year8.  

The  Common  Consolidated  Corporate  Tax  Base  would  in  the  long-run  increase 
investment  in  the  EU  by  up  to  3.4%  and  lead  to  an  increase  in  growth  by  up  to  1.2% 
(corresponding to about EUR 180 billion9). 

The Financial Transactions Tax (FTT), as proposed10 by the Commission in 2011, would 
create EUR 57 billion in new revenues a year. 

The Digital Services Tax, as proposed11 in 2018 as a short-term solution, would raise around 
EUR 5 billion of annual revenues within the Union and help prevent the fragmentation of the 
Single Market12. 

6   COM(2016) 685 final of 25.10.2016.  
     https://ec.europa.eu/taxation_customs/sites/taxation/files/com_2016_685_en.pdf  
7  Study  and  Reports  on 
the  VAT  Gap 

in 

the  EU-28  Member  States  2018  Final  Report: 

https://ec.europa.eu/taxation_customs/sites/taxation/files/2018_vat_gap_report_en.pdf 
8   The global amount of the VAT gap for years 2011 to 2016 is more than EUR 960 billion. 
9   Considering the size of the EU economy in 2017. 
10   COM(2011) 594 final. After it became clear that this initial proposal for a harmonised FTT for the entire EU 
would  not  receive  unanimous  support  within  the  Council,  the  Commission,  at  the  request  of  11  Member 
States, tabled a proposal for authorising enhanced cooperation in that area (COM(2013)71final). 

11   COM(2018) 148 final. 
12   COM(2018) 146 final. The Commission’s Communication  “Time to establish a modern, fair and efficient 
taxation standard for the digital economy” indicates that companies with digital business models pay less 
than  half  the  tax  rate  of  businesses  with  traditional  business  models,  with  an  effective  average  tax  rate  of 
9.5% compared to 23.2%. 

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Unanimity  in  taxation  has  also  had  a  detrimental  effect  on  the  EU’s  wider  policy 
priorities. Taxation is also essential for many of the EU’s most ambitious projects, including 
the  Economic  and  Monetary  Union,  the  Capital  Markets  Union,  the  Digital  Single  Market, 
the  2030  Climate  and  Energy  Framework  or  the  Circular  Economy.  The  Commission’s 
proposal  to  revise  the  Energy  Tax  Directive13,  for  example,  aimed  to  support  the  EU's 
environmental, climate  and energy objectives,  by factoring  CO2 emissions  into the tax rate 
for  fuel.  It  would  have  maximised  the  potential  of  energy  taxation  to  deliver  on  climate 
change  commitments  and  to  support  sustainable  growth.  It  would  also  have  reversed  the 
paradoxical  situation  whereby  the  most  polluting  fuels  are  sometimes  the  least  taxed  in 
Europe. However, Member States failed to reach unanimity and the proposal was eventually 
withdrawn to avoid a text running against the objectives pursued. As a result, the EU’s legal 
framework for energy taxation today still contradicts the Union’s environmental and climate 
change  goals  and  the  Treaties’  principle  of  “polluter  pays”  is  not  fully  implemented. 
Harmonised  and  targeted  taxation  on  negative  social  and  environmental  externalities  in  the 
EU Single Market – such as in transport and energy – based on the “user pays” and “polluter 
pays”  principle  would  also  enable  the  EU  to  shift  towards  a  more  efficient  and  sustainable 
economy.  This  highlights  the  self-defeating  nature  of  unanimity  in  taxation  and  is  further 
evidence of the need for change. 

Despite unanimity, there has been some important progress in EU tax policy in recent 
years, but largely in response to public pressure. Since 2015, a raft of new legislation has 
been agreed on to boost tax transparency14, tackle tax abuse15, fight VAT fraud16 and reform 
the  VAT  rules  applied  to  electronic  commerce17.  Within  the  Council,  Member  States  have 
also  worked  together  to  produce  a  common  blacklist  of  non-cooperative  tax  jurisdictions. 
This proves that Member States do recognise the value of EU action in taxation and, with the 
right political will, are capable of reaching a consensus.  

However,  the  recent  momentum  in  taxation  has  been  largely  driven  by  public  pressure  and 
external  influences.  In  the  wake  of  the  financial  crisis  and  media  tax  scandals18,  citizens 

13   COM(2011) 169 final. 
14   https://ec.europa.eu/taxation_customs/business/company-tax/tax-transparency-package_en  
15   Council Directive (EU) 2016/1164 of 12 July 2016  laying down rules against tax avoidance practices that 
directly affect the functioning of the Internal Market (ATAD1) OJ L 193, 19.7.2016, p. 1–14 and Council 
Directive  (EU)  2017/952  of  29  May  2017  amending  Directive  (EU)  2016/1164  as  regards  hybrid 
mismatches with third countries (ATAD2) OJ L 144, 7.6.2017, p. 1–11. 

16   Council  Regulation  (EU)  2017/2454  of  5  December  2017  amending  Regulation  (EU)  No  904/2010  on 
administrative cooperation and combating fraud in the field of value added tax, OJ L 348, 29.12.2017, p. 1–
6;  Council  Regulation  (EU)  2018/1541  of  2  October  2018  amending  Regulations  (EU)  No  904/2010  and 
(EU) 2017/2454 as regards measures to strengthen administrative cooperation in the field of value added tax, 
OJ L 259, 16.10.2018, p. 1–11; Agreement between  the  European Union and  the Kingdom of  Norway  on 
administrative  cooperation, combating fraud and recovery of claims in the field of value added tax, OJ L 
195, 1.8.2018, p. 3–22. 

17   Council  Directive  (EU)  2017/2455  of  5  December  2017  amending  Directive  2006/112/EC  and  Directive 
2009/132/EC  as  regards  certain  value  added  tax  obligations  for  supplies  of  services  and  distance  sales  of 
goods, OJ L 348, 29.12.2017, p. 7–22. 

18   Offshore  leaks  (April  2013),  Lux  leaks  (November  2014),  Swiss  Leaks  (February  2015),  Panama  Papers 
(April  2015),  Bahamas  Leaks  (September  2016),  Football  Leaks  I  (November  2016),  Paradise  Papers 

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demanded fairer and more  effective taxation, and put pressure on Member States to deliver 
much needed reforms. Developments in the international tax arena, such as the G20/OECD 
Base Erosion and Profit Shifting (BEPS) project, also encouraged Member States to respond 
with EU action. However, EU tax policy should not be reliant on public outrage or external 
partners’  agendas  in  order  to  effectively  address  shortcomings  and  make  progress  towards 
common objectives. Some very important tax proposals aiming to boost the efficiency of the 
Single Market are still not adopted. The pace of EU tax policy should match the ambition of 
the goals it is supporting. Member States should be able to deliver the right measures at the 
right  time,  to  shape  a  forward-looking  tax  framework  and  to  respond  successfully  to  new 
challenges. To facilitate this, a more effective decision-making process is needed.   

2.2 Pooled sovereignty to protect national tax sovereignties   

Taxation  is  strongly  related  to  national  sovereignty.  Together  with  budgets,  taxes  are 
perceived  by  Member  States  as  directly  attached  to  eminently  political  choices  requiring 
accountability in relation to national constituencies. The Member States’ authorities have also 
full responsibility for tax collection and control on their territory in order to ensure budgetary 
needs.  In  addition,  Member  States  can  perceive  taxation  as  a  national  security  issue  in  a 
number of critical areas such as energy supply. In that sense, some Member States consider 
that the unanimity rule guarantees the respect of national sovereignty on taxation against any 
undesired change decided at EU level. Some also fear that without the unanimity rule the EU 
would  go  beyond  its  competences  and  interfere  with  corporate  tax  rates,  personal  income 
taxes or other taxes that have no bearing on the Single Market. These fears are unjustified. 

In order for EU tax policy to deliver to its full potential, it is time to adapt the decision-
making process so as to allow the Council to adopt in a timely manner fiscal measures 
which  correspond  to  a  Single  Market  with  highly  integrated  economies.  In  a  world  of 
mobile  businesses,  digitalised  activities  and  intangible  assets,  tax  policy  can  no  longer  be 
managed  solely  within  national  borders.  Modern  threats  to  Member  States’  tax  bases, 
including  harmful  tax  competition  and  aggressive  tax  planning,  cannot  be  averted 
unilaterally. Increasingly, the only way that Member States can achieve their policy goals and 
fend off threats to their tax bases is by working together.  

The coordination of tax policies at EU level can actually protect Member States’ ability 
to  act  and  deliver,  and  thereby  their  sovereign  rights.  As  a  result  of  Treaty  freedoms, 
Member  States  have  pooled  part  of  their  sovereignty  on  taxation.  Moving  to  qualified 
majority decision-making would not in any manner reduce the competences of the Member 
States  on  taxation  or  change  the  competence  of  the  EU  in  this  matter.  It  would  however 
provide  for  more  efficient  decision-making  to  exercise  pooled  sovereignty  at  EU  level, 
offering  Member  States  the  strength  to  address  shared  challenges,  protect  their  revenues, 
pursue  growth-friendly  tax  policies  and  counteract  external  threats  to  their  tax  bases.  For 
example, joint EU action is the only way to combat the cross-border problems of VAT fraud, 

(November  2017),  Dubaï  Papers  (September  2018),  Football  Leaks  II  (November  2018),  Cum-Ex  Files 
(November 2018). 

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which costs public revenues EUR 50 billion a year, and tax evasion and avoidance, estimated 
to cost EUR 50-70 billion a year. As such, Member States’ sovereignty to act at EU level on 
key tax issues is often more useful than their individual national sovereignty in this area in 
the new international context. 

However,  Member  States  have  used  sovereignty  and  unanimity  as  the  basis  for  their 
arguments to protect specific national interests to the detriment of the Single Market. It 
allows  Member  States  to  build  their  economic  models  around  the  concept  of  a  tax  system 
designed to attract certain activities or consumers, such as very low excise rates for tobacco 
and alcohol or attractive tax regimes for corporates or wealthy individuals. In order to protect 
their interests in specific areas, Member States have sometimes blocked progress on certain 
tax files, whereas a collective approach would go further and protect the wider EU interests. 
For example, the Savings Tax Directive19 took  more  than fourteen years to  be adopted and 
and two additional years to be implemented. An amendment proposed in 200820 to make this 
Directive fully effective in tackling tax evasion was blocked for a further 6 years. It is fair to 
ask whether a situation where one Member State alone can block initiatives wanted by the 27 
other ones is beneficial to national sovereignty of all the 27 other ones. 

Tax competition is not in itself a bad thing. However, in some cases, it may also reduce 
the policy choices of all Member States. For example, tax measures in one Member State 
aiming to attract mobile tax bases such as capital income tend to reduce the level of taxation 
on this kind of income in all Member States. In order to compensate for this reduction, these 
member  States  often  have  to  increase  the  taxation  of  less  mobile  tax  bases,  such  as  labour 
income  or  consumption.  As  a  result,  a  heavier  burden  falls  on  workers,  consumers  and 
domestic  businesses.  This  undermines  the  fairness  of  Member  States’  tax  systems  and  the 
growth-friendly agenda of the EU as a whole. Qualified majority voting would therefore help 
in mitigating the cross border effects of tax competition. 

EU  tax  policy  should  not  be  dependent  on  a  unanimity  rule  that  can  be  misused  for 
purely national interests, at the expense of the Single Market and other Member States’ 
needs.  A  move  to  qualified  majority  voting  in  taxation  would  enable  Member  States  to 
control  more  effectively  the  part  of  their  sovereignty  that  they  have  pooled  together  in  the 
interests of the Union as a whole and for greater collective and individual results.   

2.3 Better decision-making for better decisions and stronger democratic 
legitimacy 

A  move  to  qualified  majority  voting  would  improve  the  quality  of  the  Council’s 
decisions in taxation. Unanimity tends to create a quadruple obstacle to efficient decision-
making.  

19   Council Directive 2003/48 of 3 June 2003 on taxation of savings income in the form of interest payments, 

OJ L 157/38, 26.6.2003, p. 38-48. 

20   Proposal for a Council Directive amending Directive 2003/48/EC on taxation of savings income in the 

form of interest payments,13.11.2008, COM(2008) 727 final. 
https://ec.europa.eu/taxation_customs/individuals/personal-taxation_en 

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Firstly, it makes  it very  difficult to  reach any compromise at  all, as only one  Member 
State is required to prevent agreement. In that sense, Member States often hold back from 
seriously  negotiating  solutions  in  the  Council,  as  they  know  that  they  can  simply  veto  any 
result that they do not like. This “unanimity culture” sometimes encourages Member States, 
Ministers and national administrations to focus on the preservation of their domestic systems, 
instead of seeking to reach a necessary compromise to safeguard the EU’s general interests. 
This explains why many taxation proposals require years for Member States to agree, or are 
simply blocked in the Council without any discussion taking place.  

Secondly,  even  when  agreement  is  reached  with  unanimity  in  the  field  of  taxation,  it 
tends to be at the level of the lowest common denominator, limiting the positive impact 
for  businesses  and  consumers,  or  making  the  implementation  more  cumbersome.  For 
example,  the  VAT  Invoicing  Directive21  was  adopted  at  the  cost  of  disparities  between 
invoicing requirements stemming from options left to the Member States. 

Thirdly,  unanimity  in  the  field  of  taxationhas  brought  some  undesired  effects  in  the 
decision-making  process,  as  some  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. This  was the case, for example, 
when agreement on the Anti-Tax Avoidance Directive was held up by certain Member States 
seeking permission for a VAT reverse charge.  

Finally, unanimity in the field of taxation is self-defeating. Decisions taken by unanimity 
can  only  be  undone  by  unanimity.  This  often  makes  Member  States  overly  cautious, 
dampening ambitions and weakening the final outcome. Member States fear a situation where 
they  would  agree  on  a  directive  that  would  prevent  them  from  collecting  taxes  properly  or 
that would then grant an unwanted advantage to another Member State, as in such situation 
they would not be able to rectify the legislation without the agreement of such Member State.  

Involving the European Parliament would also enhance decision-making in taxation. In 
recent years, as tax scandals made press headlines every six months, the European Parliament 
has  had  a  significant  impact  on  EU  tax  policy.  It  has  used  its  political  weight  to  push  an 
ambitious agenda for fair taxation, through many ad hoc committees. However, the European 
Parliament  has  no  voting  rights  under  the  current  special  legislative  procedure  in  taxation. 
Therefore,  political  pressure  is  the  only  tool  it  has  to  influence  EU  tax  decisions.  A  move 
towards qualified majority, under ordinary legislative procedure, would allow the European 
Parliament  to  make  a  full  contribution  to  shaping  EU  tax  policy.  Unbound  by  national 
pressures  and  interests,  the  European  Parliament  could  provide  fresh  input  into  tax 
negotiations, which  could better reflect the needs  of the Union as  a whole. If the European 
Parliament had equal weight in deciding the final shape of EU tax policy initiatives, it would 
help create an environment for Member States to negotiate in earnest. Ultimately, a move to 
qualified  majority  voting  under  the  ordinary  legislative  procedure  could  lead  to  more 
effective, relevant and ambitious outcomes for EU tax policy.  

21   Council Directive 2010/45/EU of 13 July 2010 amending Directive 2006/112/EC on the common system of 

value added tax as regards the rules on invoicing, OJ L 189, 22.7.2010, p. 1–8. 

8 

 
 
                                                            
3.  What options exist in the EU Treaties to move from unanimity to qualified 

majority voting?  

This is not the first time that unanimity in taxation has been called into question. The 
Commission – backed by the European Parliament – has proposed several times to move to 
qualified majority voting in EU tax policy, in the context of Treaty changes. Some Member 
States  made  this  a  “red-line  issue”,  however,  and  the  matter  was  left  unresolved.  It  is  time 
now to open the discussion again, given the growing need for more effective decision-making 
in taxation, for all the reasons outlined above.  

The EU Treaties are clear when it comes to how decisions must be taken on proposals in 
the  field  of  taxation.  The  general  rule  is  that  the  Council  must  unanimously  agree  on  tax 
proposals,  under  the  special  legislative  procedure  (Articles  113  and  115  of  the  Treaty  on 
the  Functioning  of  the  European  Union  (TFEU)22).    However,  the  Treaties  also  contain 
other  provisions,  which  give  flexibility  to  use  procedures  other  than  unanimity,  without 
having to revise the Treaties themselves. 
For a start, the enhanced cooperation procedure23 allows a group of at least nine Member 
States to move ahead with a proposed initiative together when it proves impossible to achieve 
unanimous  agreement  in  the  Council.  In  2013,  enhanced  cooperation  was  proposed  for  the 
Financial  Transaction  Tax  (FTT),  which  had  been  discussed  by  all  Member  States  since 
2011. This proposal continues to be negotiated by the ten Member States involved, in order to 
find  a  unanimous  compromise.  Enhanced  cooperation  can  be  a  good  option  to  advance 
certain EU initiatives  with  a smaller group  of countries, but it is  not an optimal solution  to 
overcome the broader problems with unanimity in EU tax policy, or to ensure progress and 
consistency for the Single Market as a whole. 

The Treaties also contain two targeted articles that allow for qualified majority voting 
under specific circumstances. With Article 116 TFEU, qualified majority voting under the 
ordinary legislative procedure is possible in order to eliminate distortions of competition due 
to  different  tax  rules  if  the  distortion  could  not  be  removed  in  concertation  with  Member 
States. This provision is subject to the strict conditions above however, and cannot address all 
the shortcomings that arise from unanimity today. Article 116 TFEU has not been used so far, 
although the Commission is ready to employ it should the specific necessity arise. Qualified 
majority voting can also be used for measures to tackle fraud affecting the financial interests 
of the Union (Article 325 TFEU). This could be used for certain measures to combat VAT 
fraud, given that VAT is an EU Own Resource, but the scope of the initiative would need to 
be well targetted.   

The most practical way to move from unanimity to qualified majority voting in taxation 
would  be  to  use  the  “passerelle”  clauses  in  the  Treaties.  These  would  allow  for  a  more 
structured way of moving away from unanimity than the options outlined above.   

22   Article  192(2),  first  subparagraph,  and  Article  194(3)  TFEU  also  provide  that  provisions/measures 
"primarily of a fiscal nature" in the areas of environment and energy are to be adopted unanimously by the 
Council in accordance with a special legislative procedure. 

23   Article 20 TEU and Articles 326 to 334 TFEU. 

9 

 
 
                                                            
Passerelle Clauses  

Article  48(7)  of  the  Treaty  on  European  Union  (TEU)  provides  for  a  general 
passerelle  clause.  This  allows  measures  in  the  area  concerned,  subject  until  then  to 
unanimity,  to  be  adopted  henceforth  by  the  Council  by  a  qualified  majority  voting  or 
through the ordinary legislative procedure.  

To  activate  this  clause,  the  European  Council  has  to  take  the  initiative,  indicating  the 
scope of the envisaged change in the decision-making procedure, and to  notify it to the 
national  Parliaments.  If  there  is  no  opposition  from  any  national  Parliament  within  six 
months, the European Council can adopt, by unanimity, that decision, after obtaining the 
consent of the European Parliament.  

The general passerelle clause gives the option of introducing qualified majority voting but 
remaining  under  the  special  legislative  procedure  –  where  the  European  Parliament  is 
only  consulted.  It  also  gives  the  option  of  qualified  majority  voting  under  ordinary 
legislative procedure – with co-decision by the European Parliament.  

Article  192(2)  TFEU  contains  a  specific  passerelle  clause  for  measures  in  the 
environmental  field  currently  subject  to  unanimous  voting,  including  provisions 
“primarily  of  a  fiscal  nature”.  This  possibility  is  relevant,  in  particular,  for  the  fight 
against climate change and for the achievement of the environmental policy goals. 

In order to switch to ordinary legislative procedure for tax measures in this domain, the 
Council must unanimously agree to do so, based on a proposal from the Commission and 
after  consulting  the  European  Parliament,  the  Economic  and  Social  Committee  and  the 
Committee of the Regions.  

As previously mentioned in relation to the question of sovereignty, moving to qualified 
majority voting would not affect the current competences of Member States in the field 
of taxation. Indeed, the Treaty of Lisbon includes a Protocol24 which states that nothing in 
that  Treaty  makes  any  change  to  the  extent  or  operation  of  EU  competence  in  relation  to 
taxation.  The  progressive  transition  from  unanimity  to  qualified  majority  voting  in  some 
areas of taxation would be consistent with this principle. The respective competences of the 
Member States and of the Union remain unchanged. There would simply be a change in the 
decision-making procedure for the future, unanimously agreed to by the Member States in the 
exercise of their sovereignty.  

Moving to qualified majority voting would in any case be a democratic decision entirely 
under  the  control  of  Member  States.  It  was  their  unanimous  decision  to  include  the 
passerelle  clause  in  the  Lisbon  Treaty.  It  will  take  another  unanimous  decision  of  the 
European Council to activate the paserelle. In addition, any national Parliament may object to 
this change and the European Parliament would have to validate it.  

24   Protocol  on  the  concerns  of  the  Irish  people  on  the  Treaty  of  Lisbon,  OJ  L  60,  2.3.2013,  p.  131–139, 

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:22013A0302(01)&rid=4  

10 

 
 
 
 
                                                            
4.  The way forward: a roadmap for a progressive and targeted transition 

For  the  Commission,  the  question  is  no  longer  whether  there  is  a  need  to  move  away 
from unanimity in taxation, but rather how and when to do it. The European Parliament, 
many  Member  States  and  stakeholders  have  expressed  the  same  view25.  Qualified  majority 
voting would allow reaching the full potential of EU tax policy and allow Member States to 
reach  quicker,  more  effective  and  more  democratic  compromises.  A  switch  to  ordinary 
legislative  procedure  would  also  ensure  that  taxation  decisions  benefit  from  concrete  input 
from the European Parliament, representing citizens' views and increasing accountability.  
The  best  way  to  move  towards  this  goal  would  be  through  a  progressive  and  targeted 
approach,  with  clear  milestones.  This  would  allow  Member  States  to  adapt  and  feed  into 
the process collectively and avoid any shocks and conflicts that an immediate change could 
create.  The  Commission  therefore  proposes  a  step-by-step  transition  towards  qualified 
majority voting under the ordinary legislative procedure for EU tax policy.  

In the first step, qualified majority voting should be employed for measures that have 
no  direct  impact  on  Member  States’  taxing  rights,  bases  or  rates,  but  are  critical  for 
combatting  tax  fraud,  evasion  and  avoidance  and  in  facilitating  tax  compliance  for 
businesses  in  the  Single  Market.  This  would  include  measures  to  improve  the 
administrative  cooperation  and  mutual  assistance  between  Member  States  in  fighting  tax 
fraud,  tax  evasion  and  tax  avoidance.  It  should  also  cover  the  conclusion  of  international 
agreements between the EU and third countries in this area. Initiatives to combat tax abuse, 
which Member States have already agreed to at international level, such as those discussed in 
the context of the OECD Base Erosion and Profit Shifting (BEPS) Actions26, would also fall 
into  this  category.  In  addition,  the  first  step  should  cover  initiatives  primarily  designed  to 
facilitate tax compliance for businesses  in  the  Single Market, such  as  harmonised reporting 
obligations. These tax issues tend to be less contentious for Member States and there is clear 
recognition  of  the  need  for  EU  action.  They  have  usually  only  been  blocked  by  unanimity 
when  they  have  been  held  hostage  by  other  interests  or  files.  Moving  to  qualified  majority 
voting  in  these  areas  would  therefore  allow  for  a  speedier  and  more  efficient  process  to 
agreeing largely consensual matters.   

In the second step, qualified majority voting should cover measures primarily of a fiscal 
nature  designed  to  support  other  policy  goals.  This  may  include  in  particular  the  fight 
against  climate  change,  protecting  the  environment  or  improving  public  health  or  transport 
policy.  More  efficient  tax-related  decisions  in  these  areas  would  make  it  possible  to 
implement an environmentally friendly energy policy, for example, to support ambitious EU 
goals on climate change. The specific passerelle clause in the Treaties27 in the environment 
field,  which  in  particular  covers  provisions  of  a  primarily  fiscal  nature,  offers  an  obvious 
route  to  move  from  unanimity  in  this  area.  Although  never  used  so  far,  the  Commission  is 

25   EP  recommendation  of  13  December  2017  to  the  Council  and  the  Commission  following  the  inquiry  into 
money  laundering,  tax  avoidance  and  tax  evasion  (2016/3044(RSP)),  §205.  See  also  EP  resolution  of  16 
February 2017 on improving the functioning of the European Union building on the potential of the Lisbon 
Treaty (2014/2249(INI)), §27. 

26   http://www.oecd.org/tax/beps/beps-actions.htm  
27   Article 192 (2) TFEU. 

11 

 
                                                            
ready  to  activate  this  passerelle  clause,  should  the  necessity  arise.  The  general  passerelle 
clause would be needed for all other policy areas. 

The  third  step  would  be  to  focus  on  areas  of  taxation  that  are  already  largely 
harmonised,  and  which  must  evolve  and  adapt  to  new  circumstances.  This  would,  in 
particular,  cover  VAT  and  excise  duties.  Faster  EU  decision-making  in  these  areas  would 
allow  Member  States’  tax  administrations  and  tax  systems  to  keep  up  with  the  latest 
technological developments and market changes. For example, 25 years after the introduction 
of the Single Market, the EU still has a VAT system designed over 40 years, which is overly 
cumbersome for businesses and administrations and prone to fraud. This will not change until 
Member  States  agree  on  the  definitive  regime  to  create  a  sustainable,  fraud-proof  and 
business-friendly  VAT  system  in  the  future.  Innovation  in  the  tobacco and  alcohol  markets 
also requires a swift response to ensure that the new products are properly regulated from a 
tax perspective. Qualified majority voting would ensure that the modernisation of harmonised 
EU rules is not stalled by a few blocking Member States. The fact that VAT is an EU Own 
Resource reinforces the need for more effective decision making in this area.  

The fourth step would be to introduce qualified majority voting on other initiatives in 
the  taxation  area,  which  are  necessary  for  the  Single  Market  and  for  fair  and 
competitive taxation in Europe. Some major tax projects are needed to complete the Single 
Market  from  a  tax  perspective.  As  mentioned  above,  the  CCCTB  is  still  progressing  very 
slowly  as  a  result  of  unanimity,  despite  the  fact  that  it  would  provide  the  future-proof, 
competitive and fair corporate tax system that the EU needs to compete globally. Qualified 
majority voting could help end this impasse, and provide certainty and stability for businesses 
across  the  EU.  The  need  for  a  comprehensive  solution  for  the  taxation  of  the  Digital 
Economy is also a pressing issue. Solid EU legislation is required to ensure that companies 
engaged in digital activities are taxed fairly and effectively. The Union cannot afford delays 
in  this  area  as  Member  States  struggle  to  reach  a  unanimous  agreement.  A  move  towards 
qualified  majority  voting  on  a  comprehensive  solution  for  digital  taxation  would  help  to 
enhance  the  fairness  and  sustainability  of  tax  systems,  while  also  contributing  to  a  stable 
Digital Single Market.  

5.  Next steps 

The case for the need for more efficient law making in EU tax policy is clear. The Single 
Market and the Economic and Monetary Union require a tax policy that enables everyone to 
benefit from the EU’s growing economic and financial integration. The fast-paced changes in 
the international tax environment, as well as in business and consumer behaviours, call for an 
EU tax system that is capable of keeping up and competing on the global stage. The wider 
European  goals  to  fight  climate  change,  promote  sustainable  growth,  jobs  and  investment, 
harness  the  benefits  of  digitalisation  and  secure  a  fair  and  sustainable  social  model,  need 
swift and effective tax measures to support them.    

The  special  legislative  procedure  with  unanimity  rule  and  only  a  consultation  of  the 
European Parliament for taxation is out of line with the realities confronting this policy 
today.  Through  this  Communication,  the  Commission  calls  on  the  European  Council,  the 

12 

 
 
 
European Parliament, the Council and all stakeholders to launch an open debate on qualified 
majority voting in EU tax policy with an increased involvement of the European Parliament, 
and to define a timely and pragmatic approach for its implementation.   

The Commission invites EU leaders: 

  To endorse the Roadmap set out in this Communication.  

  To decide swiftly on the use of the general passerelle clause (Article 48(7) 
TEU) for step 1 on issues that have no direct impact on Member States taxing 
rights, tax bases or rates and step 2 where taxation supports other policy goals,  
in  order  to  move  to  qualified  majority  voting  and  the  ordinary  legislative 
procedure. To this end, the European Council is invited to notify the national 
Parliaments of its initiative and seek the consent of the European Parliament. 

  To consider the use of the general passerelle clause (Article 48(7) TEU) for 
step  3,  areas  where  taxation  is  already  largely  harmonised  and  step  4,  other 
initiatives that are necessary for the single market and fair taxation , by the end 
of  2025,  in  order  to  move  to  qualified  majority  voting  and  the  ordinary 
legislative procedure in these domains. 

13