Europe Politics

A new fight over tax is starting to boil over in the EU: Here's what you need to know

Key Points
  • At the moment, new tax rules only move forward if there is a complete consensus.
  • Changing from unanimity to a qualified majority would bring faster tax changes, including those on big tech companies.
  • Four EU countries blocked a new tax on digital companies, which could have affected firms such as Facebook.
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The European Union is considering a new approach to taxation rules, but certain member nations are already voicing their opposition.

The European Commission, the EU's executive body, suggested that the 28 countries should start taking decisions by a qualified majority when it comes to taxation — this means it must represent a minimum of 65 percent of the EU's population.

At the moment, new tax rules only move forward if there is a complete consensus. Changing from unanimity to a qualified majority would bring faster tax changes, including those on big tech companies.

However, the Dutch finance minister told CNBC exclusively that he is against changing the rules.

"I think if you look back, there's plenty of evidence that the current way of decision making actually works, also in the area of tax," Wopke Hoekstra, head of the Dutch finance ministry, said Friday.

"I don't think that's very helpful," he added.

Commissioner Pierre Moscovici, in charge of taxation in the EU, told CNBC last month that qualified majority would help the EU address taxation matters more urgently.

"If we want a very strong Europe, we need to move from unanimity on those issues … to qualified majority … that's democracy and that is also efficiency."

His proposal to update the rulebook came after certain EU countries blocked a new tax on digital companies, which could have affected firms such as Facebook and Alphabet's Google. Four out of the 28 European countries, including The Netherlands, stopped the initiative in March, arguing that the first steps for a digital levy should happen at the OECD (Organisation for Economic Co-operation and Development) level.

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Speaking earlier this week to CNBC, Margrethe Vestager, the EU's competition chief also said that moving to qualified majority would help.

"Sometimes qualified majority helps you to get unanimity, because if you know that you can be voted down, your incentive to be part of the conversation, to be part of finding solution, is much stronger," she said.

Acording to Vestager, the EU's taking a "big risk" by not moving ahead with a EU-wide digital tax, and instead waiting for an international approach.

"If corporate taxation doesn't sort of understand modern ways of doing business, modern ways of creating value, modern ways of being present in the country, then of course state budgets will lose out," Vestager said.

Austrian Finance Minister Hartwig Loger told CNBC Friday that there is a need to be clearer about what sort of decisions should be taken by majority.

"What I see is there is the need, maybe, to be clear in which topics we will stay in unanimity, which sometimes as we have seen in the past has the chance for blocking … What I am supporting is to change this blocking system we have now," he said in an exclusive interview.