Tax action

The prevention of fraud and tax evasion is being used by the European Commission as a political lever to amend EU treaties and to allow the EU Council of Ministers to reform European finance laws by qualified majority rather than by unanimity. At present, all European Union member states must back a proposal on financial and tax laws in the Council, for it to become EU law. The provision allowed the UK government to block plans to introduce an EU savings tax last year which Whitehall said would damage the interests of the City of London. However, the European Commission is now lobbying for some tax legislation to be agreed by the complex qualified majority system in the Council, in which each country has a series of votes according to the size of its population. It would apply especially to proposals for member states to derogate from EU VAT laws, where this would help the fight against fraud, as in the recent decision to allow the Netherlands to reform its legislation regarding investment gold. A Communication (white paper) from the Commission also said that majority voting could be used to pass measures that would stop businesses involved in cross-border trading from evading taxation in the two countries where they sell goods and services.