EU VAT and tax veto review

The European Commission (EC) has proposed switching from unanimous to majority voting on EU VAT and other tax policies.  The aim is to progress fiscal reforms which face immovable opposition from just a limited number of member states. This would affect proposed reforms such as the Single VAT Area, Digital Services Tax, CCCTB and Financial Transaction Tax.

The EC is proposing to move to qualified majority voting (QMV) in the EU Council of Ministers tax matters. QMV requires a majority of 55% votes of states which account for at least 65% of the population of the EU – known as the ‘double majority’ rule.  Any policy change would not affect the right of states to set their own tax rates.

In presenting the reforms, EU Tax Commissioner, Pierre Moscovici, called out the €50bn VAT fraud issue and the need to bring forward the definitive VAT regime for the EU which has already been delayed to July 2022.

The Commission is proposing a four-step transition to QMV by 2025 in the following areas of tax policy:

1. Cooperation in the fight against tax fraud and evasion, plus harmonised reporting requirements
2. Public health and environmental reforms
3. VAT and excise duties
4. Tax policy ‘innovations’ such as CCCT and Digital Services Tax