Enhanced cooperation: A way forward for tax harmonization in the EU?


This paper examines the evolution of enhanced cooperation at the legislative and judicial levels and then identifies the challenges and opportunities created by these developments in the politically sensitive field of taxation. It starts by explaining how the Treaty provisions were gradually amended to simplify the application of enhanced cooperation. Following the Treaty of Lisbon, some scholars critically maintained that ‘the procedural hurdles are still fairly high’; yet, as this contribution shows, the process of ‘liberalisation’ continued through the Court’s lenient interpretation of the Treaty provisions on enhanced cooperation. The first judgments in Spain and Italy v. Council (Joined Cases C-274 and 295/11) and UK v. Council (Case C-209/13) demonstrate that the Court joined the Treaty makers in their attempt to make the procedure more workable. The downside of this development is that greater effectiveness has been achieved through the dilution of special safeguards envisaged by the EU Treaties with regard to the use of flexible regulatory instruments in European governance. The potential impact of these changes on the dynamics of tax integration in the EU is discussed in the final section.

Research Highlight 2016

Enhanced co-operation: a way forward for EU tax integration?

The traditional understanding of European integration is closely associated with the concept of unity. Legislative acts adopted by EU lawmakers, as well as interpretation of the EU Treaties and other legal instruments provided by the Court of Justice of the European Union, are seen as aiming to create uniform rules and principles that are applicable throughout the European Union. This perception, however, oversimplifies the complexity of integration processes in the European Union. With the growing heterogeneity of competences, countries and, consequently, interests, the “onesize-fits-all” approach had to be adjusted to create more space for differentiated integration.

One of the central roles in accommodating this growing demand for differentiation was given to the “enhanced cooperation” procedure (ECP), which was introduced by the Treaty of Amsterdam (1997). Thus far, the use of enhanced cooperation has been authorised by the Council of the European Union on three occasions, i.e. in relation to divorce and legal separation, the creation of unitary patent protection, and the financial transaction tax. These pilot projects have gained great attention as a “driving test” that will largely determine the role which this mode of integration will play in the European Union. Particularly high expectations can be found in the fields where the process of integration has been slow due to the lack of political agreement between EU Member States, such as taxation.

Against this background, this paper looks at the application of enhanced cooperation to date and draws some preliminary conclusions on the prospect of differentiated tax integration under this procedure. The analysis seeks to identify the gaps and imbalances in the legal settings of the ECP that may cause difficulties in the use of this route for the purpose of tax integration. One of the key problems highlighted is the lack of mechanisms that would ensure that the interests of nonparticipating countries are taken into account, which limits the capacity of the ECP to encourage the progressive participation of other Member States and may cause continued litigation in the Court of Justice. Following this critical evaluation, the ECP is contrasted with two alternatives: intergovernmental treaties and non-binding coordination. The paper concludes that although the ECP is often pictured as the mechanism that can help to overcome the decision-making deadlock and is capable of reinforcing tax integration in the EU, these expectations are premature.

Anzhela Yevgenyeva, ‘Enhanced cooperation: a way forward for tax harmonisation in the EU?’ in J. Englisch (ed), International Tax Law and New Challenges by Constitutional and Legal Pluralism (IBFD, 2016, 165-206)

Anzhela Cédelle (née Yevgenyeva). CBT Working Paper 15/33


Anzhela Cédelle, (née Yevgenyeva)