In July 2012, the UK government initiated its Balance of Competence Review, aiming to examine the impact of the UK’s membership of the EU on its national interests. Anzhela Yevgenyeva prepared a response to HM Treasury’s Call for Evidence on taxation, which was frequently cited in the Treasury’s subsequent report published in July 2013.
The CBT research drew six main conclusions. First, the basic balance of competences between the UK and the EU is secured by the unanimous voting requirement. The Treaty of Lisbon strengthened political control over EU legislative competence: any national parliament can raise objections if it alleges that the principle of subsidiarity is infringed by a draft legislative act. Second, the use of non- binding instruments in the process of tax policymaking at EU level has become wider, although this cannot directly threaten the balance of competences between the EU and its Member States. Third, the enhanced cooperation procedure carries more serious challenges to the balance of powers between the EU and its Member States. For example, in January 2012, authorisation to proceed with the enhanced cooperation in relation to the financial transaction tax (FTT) proposal was granted by the ECOFIN Council. Concerns arise over the wide ‘extraterritorial’ impact of the tax in the Commission’s proposal, particularly when the ‘non-participating states’ have a limited ability to influence its substance at the stage of adoption.
Fourth, the far-reaching and pro-integration approach of the Court of Justice of the European Union in direct tax cases has been widely criticised in the academic literature as invading the fiscal sovereignty of Member States. Fifth, the research draws attention to the ambiguity of the procedural framework of the infringement procedure which has been used proactively by the Commission in taxation, which is especially important for the UK since UK provisions are amongst the most frequently challenged. Sixth, the EU state aid rules shape the way in which Member States can exercise their sovereign taxing rights, in particular when they intend to grant tax advantages of a ‘selective’ nature.
Anzhela Yevgenyeva, The balance of competences between the United Kingdom and the European Union: Taxation, CBT Report