EU Commission postpones decision on unanimity requirement for tax votes

With the new year comes a new round of tax conversations with wide-reaching implications.

Most EU decisions require a majority before being adopted by the block. Tax matters, however, are different, requiring unanimous support from all 28 members — a tall order for such a diverse region.

Earlier this month, the EU commission met to discuss a proposed plan to change that veto protocol, making it easier to alter and streamline tax laws across the continent. While the commission’s recommendation to end the practice is part of a wider shift toward EU solidarity and the single market, the conversation resurfaced thanks to the proposed digital tax.

As part of the EU treaty, the unanimity requirement can be removed in all areas besides defense. The commission sees it as a barrier to a true single market in the area of taxation since gaining unanimity between all 28 members states is highly unlikely.

The Digital Tax

The controversial tax, proposed nearly a year ago, outlines a three percent tax on the revenues of large digital businesses — hence its nickname: GAFA Tax “Google, Apple, Facebook, Amazon.”

Opponents believe that the issue should be solved globally first, as the levy appears to target US entities and risks straining relations. Currently, these companies target companies that reduce their tax contributions, something deemed unfair by larger EU countries. In its recent January meeting, the commission decided to push back the digital tax decision from 2020 to 2025.

The digital tax law, largely spearheaded by France, could include a sunset clause that would see the revenue tax automatically replaced with a global solution once it is introduced. This addition is meant to convince countries like Ireland that are pushing for an international, rather than solely EU, solution.

In the meantime, France will move forward with its own digital tax.

So, to summarize, it is clear that the EU is committed to a single market, which inherently must include taxation. However, at the moment decisions on the EU-wide digital tax and changes to the unanimity requirement will be put on hold.

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