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European Union: Outgoing Juncker commission’s plans for tax until November 2019

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On September 12 2018, European Commission President Jean-Claude Juncker delivered his 2018 State of the European Union (EU) address at the European Parliament. Accompanying his speech were a number of more detailed policy documents, the most important of which was the Letter of Intent from Juncker and First VP Frans Timmermans to the presidents of the European Parliament and the Austrian EU Council presidency.

In his speech, Juncker outlined his vision for the EU and touched on key policy priorities for the remainder of his tenure at the helm of the commission, i.e. until October 31 2018, including on taxation.

Juncker declared that the EU will never be a fortress, turning its back on the world or those suffering within it, that the EU is not an island, and that it must and will champion multilateralism. He stated that the Juncker commission will use the 250 days before the European elections to prove to citizens that, acting as one, "this union is capable of delivering on expectations and on what we promised to achieve at the start of this mandate". Juncker held that Europeans taking to the polls in May 2019 "will not care that the commission made a proposal to make internet giants pay taxes where they create their profits – they want to see it happening for real. And they are right".

On the EU needing to become a stronger global actor, Juncker announced that the commission proposes to move to qualified majority voting in specific areas of its common foreign and security policy, such as, initially, human rights issues and civilian missions. He stated that this is possible on the basis of the current EU treaties and that he believed the time has come to make use of this "lost treasure" of the Lisbon Treaty. What was very interesting in the speech on this topic was the additional sentence saying: "I also think we should be able to decide on certain tax matters by qualified majority."

Within the EU, direct taxation falls within the competence of the EU member states, but they must exercise that competence consistently with EU law. At the same time, member states compete fiercely with each other, and with third countries, on tax. EU-level directives have been the preferred vehicle for implementing tax policy measures in the EU to ensure both legal certainty and proportionality in the level of harmonisation required by the EU's internal market. The very delicate balancing act among member states within the EU between tax coordination and tax competition means that everything relating to tax policy within the EU is politically very sensitive. The choice of the legal basis for EU legislative acts is therefore crucial from a political and procedural perspective. If the EU proposal is a direct tax issue, the EU-28 finance ministers must agree by unanimous vote in the ECOFIN Council. If the proposal is an internal market (not a tax or foreign policy) issue, the European Parliament and the Council of the EU must hammer out a final compromise text together as the EU's two co-legislators. How sensitive exactly this particular issue is for member states has been evidenced only very recently by the example of the commission's faltering proposal for public country-by-country reporting (CbCR). A representative of the EU Council confirmed in April this year at the European Parliament, two years down the road, that there were 'unresolved political issues' which prevent agreement in the Council.

Nevertheless, the Juncker commission has made this a strategic priority for the remainder of its mandate. In the Letter of Intent to the EU Parliament and the six-monthly rotating EU Council presidency, Juncker and Timmermans write: "The first priority for all three institutions – European Parliament, Council and Commission – must be to swiftly agree the legislative proposals still pending, and this in time before the European Parliament elections", the latter taking place in June 2019. They highlight a list, setting out in detail the pending proposals which the EU needs to adopt swiftly "and the new and complementary initiatives that are being presented together with or as a follow-up to the 2018 State of the Union Address". As the key tax initiatives for delivery before the European Parliament elections, they then mention adopting the proposals on fair taxation in the digital economy; on the common consolidated corporate tax base; and on the creation of a single EU value added tax definitive regime. Very tellingly, given what was explained above, there is no mentioning of the pending proposal on public CbCR. Furthermore, under "further initiatives to give perspective for the future of the Union", the commission lists "more efficient law-making in the field of taxation: identification of areas for a move to qualified majority voting (January/February 2019)". This clearly shows the strategic agenda followed by the outgoing Juncker commission working incrementally but surely towards introducing EU proposals for qualified majority voting on 'certain tax matters'.

EU Tax Commissioner Pierre Moscovici joined the fray in a recent tweet, announcing that of his four top priorities up to November 2019, two are related to tax policy, the first being "taxation of internet giants" and the second "moving from unanimity to qualified majority" ("Passer à la majorité qualifiée en matière de fiscalité").

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