Brussels, 23rd May 2001
Taxation: Commission outlines its priorities
The European Commission has presented a comprehensive strategy for the EU's future taxation policy. The Commission considers that the Community must ensure that tax policy supports broader EU policy objectives such as the goal set by the Lisbon European Council of making the EU the most competitive economy in the world by 2010. Increased tax co-ordination would help Member States to meet these objectives. But while a large measure of harmonisation is necessary in the VAT and excises fields, in other tax fields tax co-ordination does not imply tax harmonisation. The Commission intends to focus more attention in particular on the tax problems facing individuals and businesses operating within the Internal Market. It will soon present options for co-ordinated action to tackle tax obstacles and inefficiencies in the company tax field, as well as reports concerning alcohol taxation and vehicle taxation. To achieve progress, the Commission intends to be more pro-active in taking legal action where Member States' national tax rules or practices do not comply with the Treaty. In addition, "enhanced co-operation" and non-binding approaches such as recommendations could be utilised instead of legislative proposals where appropriate.
Commenting on the new strategy, Taxation Commissioner Frits Bolkestein said "We must eliminate the tax problems facing individuals and businesses operating within the Internal Market. Eight years after the target date for completion of the Internal Market it is unacceptable that taxpayers still encounter so many cross-border tax obstacles. This strategy paper establishes clear and specific EU tax policy objectives to rectify this situation."
Tax policies must support wider EU objectives
The Commission suggests that tax policy should be geared towards meeting more general EU policy goals. Tax policy must contribute to achieving the goal established at the Lisbon European Council of March 2000 and confirmed at the Stockholm European Council in March of this year of making the Union the most competitive and dynamic knowledge-based economy in the world by 2010. This means that efforts must be made to achieve a durable reduction in the overall tax burden in the EU, by ensuring a balance between cutting taxes, investing in public services and sustaining fiscal consolidation. At the same time, tax policy must be fully consistent with other EU policies such economic, employment, health and consumer protection, innovation, environmental and energy policies. But in particular tax systems must allow individuals and businesses to benefit fully from the Internal Market. This implies a need to focus on eliminating the inefficiencies due to the co-existence of 15 different tax systems within the EU and on making those tax systems simpler and more comprehensible to taxpayers.
The Commission outlines specific tax policy co-ordination objectives, with a particular focus on the practical tax problems for individuals and businesses operating within the Single Market. The main goals are as follows:
The Commission will present a study on company taxation in the EU and an analysis of the results of the study and related tax policy implications later this year. The study will consider differences in effective corporate taxation in the Community and remaining tax obstacles which prevent companies from fully benefiting from the Internal Market. At present, companies engaged in cross-border activities can face problems such as discriminatory tax rules, double taxation, excessive administrative costs owing to complication administrative procedures and delays in tax refunds. While the Commission does not advocate harmonisation of company taxation, there is a need for a certain degree of co-ordination to resolve these cross-border tax issues. One of the important questions that the study will raise will be whether solutions to tax obstacles should be achieved on an individual basis or whether a more comprehensive politically ambitious solution should be attempted such as providing companies with the option of a single set of corporate tax base rules which would be applicable on an EU-wide basis. Whatever solution is pursued, it is clear that the removal of tax obstacles would contribute substantially to improving the competitiveness of EU business.
The Commission has, in its recent Communication (see IP/01/575), proposed a comprehensive strategy to address the tax obstacles that currently can act as a major disincentive to individuals wishing to contribute to pension schemes outside their home Member State and pension institutions that wish to provide pensions across borders. It intends to follow this up with Member States. In particular, it will monitor Member States' rules in the field of pensions taxation and take the necessary steps to ensure their compliance with the Treaty and, where necessary, initiate legal action against Member States.
The Commission intends to present a Communication on vehicle taxation in the EU towards the end of this year, in order to launch a discussion with Member States and Community Institutions on future options for action at Community and national levels. The Communication will, for example, deal with issues such as double payment or non-refund of registration tax paid when private motor vehicles are moved permanently from one Member State to another. The Communication will also examine the very different levels of vehicle tax in Member States and the problems which these differences can create for the free movement of goods in the Internal Market. Furthermore, the Commission's work will take account of new parameters relating to the Community's environmental objectives and in particular the objective of differentiating the financial burden associated with the purchase or ownership of a car as a function of its carbon dioxide emissions.
Alcohol and tobacco excises
The Commission proposed a Directive introducing significant revisions to the rates and structure of excise duties on manufactured tobacco in March this year (see IP/01/368). If agreed by Member States the measures proposed should enhance convergence between the tax levels of the different Member States and restrict fraud and smuggling within the Internal Market. The Commission will present a report concerning alcohol taxation later this year, in which it will address issues such as the proper functioning of the Internal Market in this field, competition between the different categories of alcoholic drinks, the real value of the rates of duty and the wider objectives of the treaty such as health and agricultural policy.
Computerising the excise system
The Commission intends to present a proposal this year for the introduction of a computerised excise movement and control system between Member States to replace the existing paper system of monitoring products moving between Member States under excise-duty suspension arrangements. A computerised system would assist Member States in preventing fraud. It would also assist traders in that it would simplify formalities, make trading more secure and ensure the quicker release of guarantees.
The Commission intends to work intensively to bring about the changes that it proposed under its VAT legislative strategy in June 2000 (see IP/00/615) in order to bring about a pragmatic improvement in the VAT system. An action programme has been put in place under that strategy which focuses on simplification, modernisation and more uniform application of present arrangements and closer administrative co-operation, while retaining the move to an origin-based VAT system as the long-term Community goal. Following that action programme, the Commission intends to push for rapid implementation of proposals already made, such as that concerning the taxation of services provided by electronic means (see IP/00/583). A review and rationalisation of the rules and derogations applying to the definition of reduced VAT rates will be considered after an evaluation at the end of 2002 of the results of the introduction of an experimental reduced VAT rate on certain labour-intensive services in 2000.
Progress in agreeing proposals for Directives in the tax field has always been slow, because of the unanimity voting requirement in the tax field. With enlargement it will be even more difficult to reach agreement on tax matters. Therefore the Commission suggests that, to implement its new strategy, a range of mechanisms in addition to Community legislation should be utilised. In particular, the Commission intends to be more pro-active and targeted in initiating legal action where it believes that Member States' tax measures infringe Community law. It will also consider making an increased use of non-legislative approaches such as recommendations. The route of closer co-operation between sub-groups of like-minded Member States should also be considered where appropriate. The Commission suggests that this "enhanced co-operation" approach could in particular be considered in the field of environmental and energy taxation, where a majority of Member States have indicated a strong desire for co-ordinated action.
The full text of the Communication "Tax policy in the European Union Priorities for the Years Ahead" will be available on the Europa internet site: