There are various arguments against this harmonisation per se, and the use of QMV to achieve it, many of which have been raised by organisations in different Member States through the Commission feedback process. This includes national sovereignty itself, and the importance of tax competition for smaller countries especially: there has recently been growing scholarly interest in the role of tax competition in boosting consumption and investment in central and eastern Europe, for instance (see Chirculescu, 2018), while the IEA has argued against harmonised financial regulation generally.
A number of these organisations have outlined the fundamental dangers in these proposals. The Lithuanian Tax Payers’ Association (Lietuvos mokesčių mokėtojų asociacija) has raised the “loss of national sovereignty” and likelihood of negative impacts to “the business competitiveness of small countries in the Single Market”. Indeed, recent research by the Tax Foundation found that large industrialised nations tend to have higher statutory corporate income tax rates than developing countries.
Moving to QMV meanwhile risks “a few large countries… pushing for tax issues in their favour”. IME Bulgaria also has “[increasing concern] about some initiatives that aim to shift the union away from its founding principles”. Ibec (of Ireland12) has raised the question of procedure: “the speed with which the legislative process takes place”, and the end point of “proportionate, fair and balanced legislation”, with further use of QMV would represent a threat to the principle of subsidiarity.
First, the lack of substantive evidence for the need for greater use of QMV or the improvement which could be expected; meanwhile Member States have not been stopped from increasing tax revenues as a proportion of their economy, their tax to GDP ratio reaching 40.2% in 2017, the joint highest on record. Next, unanimity has already allowed significant changes, including the Anti Tax-Avoidance (ATAD) Directive and changes to VAT treatment. Spain’s Instituto de Estudios Bursátiles (IEB) has proposed that fiscal policy is “the final instrument that can be used by each Member State to deal with asymmetric shocks”; Spain's Unión de Contribuyentes (Taxpayers Union) also states that tax harmonisation will mean higher taxes.
Thus far, among Member States, the Hungarian and Irish governments have opposed the proposal to harmonise taxes specifically, saying this damages competition in the single market. Hungary is heavily dependent on foreign investment, with the EU’s lowest corporate tax rate at 9 percent; Ireland’s is 12.5 percent. Germany and France support the proposal. Regarding the move to QMV itself, France, Spain, Italy, Portugal and Belgium support the proposal, while Poland, Sweden, the Netherlands, Malta, Cyprus and Luxembourg oppose it.
Moving to QMV on taxation issues and restricting tax competition between Member States will harm the overall competitiveness of European economies, further deepening the divisions between large and smaller Member States. The Commission should therefore avoid this proposed move.
The views and opinions expressed here are entirely those of the author(s) and do not reflect the official opinion of the European Commission. The Commission cannot guarantee the accuracy of the information contained in them. Neither the Commission, nor any person acting on the Commission’s behalf, may be held responsible for the content or the information posted here. Views and opinions that violate the Commission’s feedback rules will be removed from the site.