EU Completes Lisbon Treaty Ratification

by Ulrika Lomas, Tax-News.com, Brussels

09 November 2009

The European Parliament has announced that it is preparing for increased powers after the Czech Republic became the last European Union (EU) member state to sign the controversial Lisbon Treaty, although powers over national tax affairs shouldn't be one of them.

The Parliament's internal rules need to be reformed to take account of the arrival of 18 new MEPs (Members of the European Parliament), increased legislative powers and a new procedure for adopting the EU budget which puts Parliament on an equal footing with the Council.

Because, under the Lisbon Treaty, almost all issues will fall under the "ordinary legislative procedure," Parliament will have significantly increased legislative powers once the terms of the treaty come into effect.

Budget rules are also being revised, as previously stated, in order for Parliament to enjoy full parity with the Council in deciding the EU budget. In addition, the procedure of appointing the Commission President has to be modified as more power is given to Parliament in the matter.

The changes must now be adopted by the full Parliament, which is expected during the November plenary.

The Lisbon Treaty is designed to replace the ill-fated European Constitution, which was scuppered by referendums in France and the Netherlands in 2005, although the new Treaty retains much of its forerunner’s text.

The Treaty claims to increase the rights of EU citizens, give more say to the European Parliament, and generally strengthen the role of democracy in the EU.

But, on the other hand, it also simplifies political decision-making by extending ‘qualified majority voting’ in the European Council to policy areas in which member states now have a veto. This means that decisions in the Council of Ministers will need the support of 55% of member states - currently 15 out of 27 EU countries. The EU stresses, though, that “unanimity will be retained in areas including tax, foreign policy, defence and social security.”

The Lisbon Treaty was concluded at the end of 2007, but its ratification process was held up by two referendums in a sceptical Ireland, where many politicians, business groups and other anti-treaty lobbyists were convinced that the Treaty would lead to a loss of sovereignty over tax policy and endanger the country's ability to set its own tax rates.

This is a precious issue in Ireland, which has attributed much of its economic success as the 'Celtic Tiger' in the 1990s and early 2000s to the decision to cut the rate of corporate tax to 12.5% - a rate which remains one of the world's lowest.

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