November 30, 2017 / 12:14 PM / in a year

EU works on anti-veto measures to combat tax dodging

BRUSSELS (Reuters) - European Union governments could be stripped of their veto power on EU tax rules under proposals being prepared by the EU’s executive arm, an unprecedented move that could unblock reforms long resisted by smaller states.

European Commissioner for Economic and Financial Affairs Pierre Moscovici presents the EU executive's autumn economic forecasts during a news conference at the EU Commission headquarters in Brussels, Belgium November 9, 2017. REUTERS/Yves Herman

In a bid to boost tax revenues and address a public outcry after disclosures of widespread use of tax avoidance schemes by corporations and wealthy individuals, bigger EU states are pushing for reforms that would reduce tax dodging.

But the most ambitious plans have been blocked mainly by smaller countries, such as Luxembourg, Malta and Ireland, which fear stricter rules could hit their economies.

The stalemate could be brought to an end by the European Commission, which is considering triggering a neglected article of the EU constitutional treaty to suspend states’ veto powers on tax matters.

“We certainly don’t exclude using it. We will work on it. We will make proposals in that direction,” EU tax commissioner Pierre Moscovici told a news conference on Thursday.

This could also apply to measures under discussion aimed at forcing tech giants like Amazon (AMZN.O) and Facebook (FB.O) to pay higher taxes in the EU, a move championed by France but opposed by smaller states before a debate at a meeting of EU finance ministers on Tuesday.

Under article 116 of the EU Lisbon treaty, the European Commission can compel states to drop the unanimity rule and take decisions on tax matters by majority when competition in the EU market is distorted.

“We will work on Article 116 having in mind the idea of having results, not to make a coup,” Moscovici said, warning of likely opposition in some EU capitals to a provision which has never so far been invoked.

One EU official called it “the nuclear option” on tax issues because it could break prolonged legislative deadlocks. But it could also be seen as an interference with national powers, especially in smaller countries.

If decided by majority, planned changes on taxing digital firms are likely to be quickly agreed, having the backing of a large group of EU governments which accuse tech companies of paying too little by rerouting their EU profits to low-tax states like Luxembourg or Ireland.

Proposals for an EU common tax base and for stricter rules on tax advisers who help devise aggressive tax schemes could also be unlocked.

Luxembourg and the Netherlands have a flourishing industry of tax advisers which help global corporations hold about 10 trillion euros ($11.9 trillion) in the two countries for tax purposes.

Reporting by Francesco Guarascio; Editing by Richard Balmforth

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