23/03/21

IRELAND: EU ‘skirting treaty’ with plans to remove digital tax vetoes.

As published on independent.ie, Tuesday 23 March, 2021.

An EU parliamentary committee has suggested removing national vetoes on a future digital tax.

In a vote on Tuesday, economic MEPs asked the European Commission “to explore all possibilities offered by the treaties” when tabling new tax laws.

The wording is code for using article 116 of the EU treaty, which allows for majority voting where national laws “distort” the single market.

Fianna Fáil MEP Billy Kelleher said such a move would be “skirting with the treaty itself”.

“The Commission has been trying to use article 116 as well, which is an issue that, from a strategic point of view, Ireland will have to robustly defend, and reject the use of that particular article, as it moves taxation out of the hands of sovereign governments,” he told the Irish Independent.

The vote was in a committee and has yet to be endorsed by the full 705-member Parliament.

It is not a legally binding document, but it garnered cross-party support, with a large majority of 48 votes to four (with six abstaining, including Mr Kelleher).

EU tax chief Paolo Gentiloni signalled last year that he would consider using the controversial article as a basis for future tax proposals.

Last month, Ireland was defeated in its bid to stop majority voting being used on another tax plan for multinational country-by-country reporting.

Tuesday’s report also calls on the EU to move ahead with plans for its own digital levy by June 2021, despite similar work being done by the Organisation for Economic Cooperation and Development (OECD).

A major obstacle to an OECD deal was removed last month when US Treasury Secretary Janet Yellen apparently dropped a so-called ‘safe harbour’ requirement, which would have allowed the US to opt out of any future deal.

Mr Kelleher said the EU should give US president Joe Biden’s re-engagement with the OECD some time to “bed down” before going its own way on digital taxes.

“If you act unilaterally, without having America on board, well, you could just undermine our attractiveness, our competitiveness, our location for investment, innovation and research,” he said.