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In the Community farm sector, a number of Member States operate systems of "parafiscal" charges as well as general systems of taxes and social security contributions. "Parafiscal" charges are charges levied by public or private agencies on the production of marketing of agricultural products with a view to financing activities for the benefit of the sector as a whole. They are levied, for example, in France, by the Comites Interprofessionnels, in the Netherlands, by the Produktschappen and in the United Kingdom, by the Milk Marketing Boards. The proceeds are used for a wide variety of purposes, such as quality control, advertising and promotion, research and training, and for the running of agricultural bodies and welfare expenditure. The economic effects of the measures financed by "parafiscal" charges levied on agricultural products are far from negligible in some Member States. In the Netherlands, for example, the Produktschappen budget for 1986 is HFL 192 million. The amounts charged vary widely. A large proportion is used to finance national aids. The Commission is examining the question of the compatibility with Community law of these charges. It has issued new guidelines for Commission intervention in this area so as to single out the charges which are incompatible with the rules of the Treaty and to put an end to the widespread suspicion generated by this source of financing. The guidelines are attached. In applying them the Commission has studied a number of specific cases. It has decided to initiate the procedure provided for in Article 93 of the Treaty in respect of a series of aids financed out of "parafiscal" charges granted by the Produkschappen in the Netherlands. On the basis of the information available to it, it has not been able to find the measures applied in the Netherlands compatible. GENERAL GUIDELINES CONCERNING "PARAFISCAL" CHARGES 1. Community law does not proscribe the principle of "parafiscality" itself but imposes the following restrictions on such charges: - they must not be discriminatory (Articles 12 and 95 of the EEC Treaty) - they must not finance activities which are contrary to Community law (Articles 30-36 and 92 and 93 of the EEC Treaty). 2. Without prejudice to the prohibition on discrimination provided for in Articles 12 et seq. of the EEC Treaty, the compatibility of such charges, once they apply equally to domestic and imported products, must be assessed in the light of the provisions of Article 95 of the EEC Treaty on the one hand, and of the Agricultural rules on the other. (a) With regard to compatibility under Article 95 of the EEC Treaty, this is to be evaluated on a case-by-case basis by the Commission in the light of general evidence. Measures financed out of income derived from the charges must not benefit domestic products solely or predominantly, where the funds are derived from a levy on all products, both domestic and imported. (b) With regard to the compatibility with the agricultural rules, the Commission considers: - that normally the reduction in income attributable to the imposition of a "parafiscal" charge is not as such contrary to the provisions of the Treaty. On this point, therefore, the Commission has adopted the same approach as in the case of adjustments to direct taxation; The Commission reserves the right in exceptional circumstances to challenge the compatibility of a "parafiscal" charge if it became evident that by virtue of its rate, duration or basis of assessment, a member state deliberately intended to interfere with the Community objective of guaranteeing a particular income for a category of farmers by means of the guaranteed prices mechanism; In carrying out such a check, the Commission will ignore very small charges. - that a charge is incompatible with Community law if its aim is to: . finance market support measures where Community rules have introduced a comprehensive support system; . subsidize exports, in particular intra-Community exports, by means of Community aids or rebates on transport costs. . encourage surplus production which the rules aim at controlling. - 3 - Conversely, if the Community rules do not cover the activity in question because the Community legislator has sought to safeguard the freedom of action of Member States or has been unable to adopt the provisions originally planned, the "parafiscal" charge is not in principle incompatible with the agricultural rules. Thus, such charges may be admissible if they are intended to improve product quality, facilitate research or training, and so on. 3. Monitoring of "parafiscal" charges by the Commission The Commission will ask all Member States, on the basis of Article 5 of the Treaty, to send a list of their agricultural "parafiscal"charges, giving details, for each product, of the rate, yield, taxable persons, purpose and the latest budget of the agency on whose behalf the charge is made. The information will enable the Commission to examine the aids financed at present out of such charges. For charges the proceeds of which are intended to finance State aids, the Member States will be required under Article 93(3) of the Treaty to inform the Commission of their aid plans. The Commission has decided to oppose the implementation of aids which may be contrary to Article 95 of the EEC Treaty or which would be incompatible with the agricultural rules in the light of the criteria set out at point 2 above. It will be recalled that Article 95 of the Treaty is directly applicable and consequently establishes rights for third parties, who may avail themselves thereof in the national courts. later stage, the Commission may initiate at any time the procedure provided for in Article 169 of the EEC Treaty.