Saturday, May 08, 2004

No protection on taxation

Blair has consistently told us that the power to control our own taxes is one of his “red lines” – notwithstanding that VAT rates already have to be approved by the EU.

In the original draft constitution, however, this “red line” appears to be breached. Article III-62 gives the EU powers to make law concerning the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation.

Under paragraph 1, it requires the Council to act unanimously, ostensibly protecting Blair's "red line", except that (and the devil is always in the detail) the existing para (2) reads:

“Where the Council, acting unanimously on a proposal from the Commission, finds that the measures referred to in paragraph 1 relate to administrative co-operation or combating tax fraud and tax evasion, it shall act, notwithstanding paragraph 1, by a qualified majority when adopting the European law or framework law adopting these measures.”

This is regarded as the "back door" to harmonised taxes, as virtually anything to do with taxation can have a fraud dimension. As it stands, therefore, this provision drives a cart and horse through Blair's "red line". Therefore, Blair has promised that this provision would be strengthened.

In the new Irish draft, we thus we get an amendment, which now reads (with the amendment in bold):

“Where the Council, acting unanimously on a proposal from the Commission, finds that the measures referred to in paragraph 1 relate to administrative co-operation or combatting tax fraud and tax evasion and that they do not affect the fiscal regimes of the Member States, it shall act, notwithstanding paragraph 1 by a qualified majority when adopting the European law or framework law adopting these measures.

The problem with this is that it is so completely woolly that it does not only leave the barn door open. It tears down the walls as well.

Although the Council appears to be required to act unanimously, the moment it "finds" that the measures it wants to legislate against "do not affect the fiscal regimes of the Member States", it can act by qualified majority voting.

The problem here - and the gaping hole - is that there is no precise mechanism specified which governs the procedure by which the Council comes to its conclusion. It is wholly unclear as to whether its "finding" must be by consensus, by QMV, simple majority vote, unanimity or what.

But what is clear is that, once it does "find" that this condition is satisfied, it can act by QMV. So ambiguous is this provision that this amendment falls very far short of giving a "copper-bottomed guarantee" that the “red line” on taxation is protected.

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