Navigation path

Left navigation

Additional tools

Other available languages: FR DE

   The  high-level Committee on company taxation chaired by Mr Onno  Ruding,
   Vice-President   of  City  Corp,  today  presented  its  report  to   the
   Commission.  This  study of ways of reforming the taxation  of  Community
   companies in an increasingly unified internal market has been carried out
   at  the instigation of Mrs Scrivener, the Member of the  Commission  with
   special  responsibility  for  taxation, the  customs  union  and  matters
   relating to the overall tax burden.
   The  conclusions  of this report to the Commission set out  a  series  of
   practical recommendations together with a three-phase timetable for their
   implementation.  "The  Commission", Mrs Scrivener stated, "will now  draw
   up  its  own guidelines for company taxation policy.  This  report  is  a
   milestone  in  the  current process of devising a body  of  tax  measures
   conducive to free enterprise in a Community without frontiers."
   In  April  1990, the Commission adopted guidelines on  company  taxation1
   which provided for a two-stage programme:
   (a)   From  1990 to the end of 1992: launching of the measures  essential
         for  completing  the internal market, i.e. the elimination  of  the
         double taxation which penalizes companies operating in a number  of
         different  countries.  This has been achieved through the  adoption
         in  July 1990  of  three  proposals  for  abolishing  such   double
         taxation,2  supplemented  by  two proposals  for  Directives  which
         should  be  adopted  by the Council by the end  of  the  Portuguese
   1 COM(90) 601 final.
   2 The   "parent   companies  and   subsidiaries"   Directive   abolishing
     withholding  taxes  on dividends; the  "mergers"  Directive  abolishing
     double taxation in the case of mergers, divisions, transfers of  assets
     and exchanges of shares; a Community arbitration convention.
   3 Directive on the abolition of withholding taxes on interest and royalty
     payments  between  parent companies and their  subsidiaries;  Directive
     concerning  arrangements for the taking into account by enterprises  of
     the losses of their permanent establishments and subsidiaries  situated
     in other Member States.
                                     - 2 -
   (b)   After  1992:  measures  to enable companies  to  benefit  from  the
         economic  potential  of the single market through  improvements  to
         their  tax environment.  With this in mind, Mrs Scrivener took  the
         initiative of setting up a committee of independent experts chaired
         by  Mr Onno Ruding and of giving it the task of assessing the  need
         for  further  harmonization  of company taxation  in  the  European
         Community.  It  is  the conclusions of this Committee's  work  that
         Mr Ruding is today submitting to Mrs Scrivener.
     The Commission will produce its own guidelines for the post-1992 period
     in  the light of those conclusions but also on the basis  of  important
     work carried out elsewhere: by the OECD, the United States Treasury and
     the Commission's departments.
   The report presented today represents the sum of a considerable amount of
   high-quality  work  carried  out  by  a  specialist  in  these   matters,
   Mr Onno Ruding,  former  Dutch Minister of Finance, with the  help  of  a
   group of high-level experts.
   The  members  of the Committee are heads of  companies,  economists,  tax
   experts and university professors.  The originality of the report lies in
   the  fact  that  it  sets  out  both  practical  recommendations  and   a
   three-phase timetable for implementing those recommendations.
   1.    In  order  to  carry out the task assigned it,  the  Committee  has
         principally addressed three questions:
     (a) Do  differences  in  taxation between  Member  States  cause  major
         distortions in the functioning of the internal market, particularly
         with  respect  to investment  decisions  and  competition?  Special
         attention   was   focused  on  those   distortions   that   involve
     (b) In  so  far  as such distortions do arise, are they  likely  to  be
         eliminated  simply through the interplay of market forces  and  tax
         competition between Member States, or is action at Community  level
     (c) What  specific measures are necessary at Community level to  remove
         or mitigate these distortions?
   The Committee began by drawing up a list of the main differences  between
   the  rates, tax-base rules and dividend-taxation systems applied  by  the
   Member States.  It also studied specific differences in the tax treatment
   of cross-frontier flows of income (dividends, interest and royalties).  A
   simulation  study measuring the size of the tax component of the cost  of
   capital  to  companies  in  the Community and  companies'  replies  to  a
   questionnaire on the impact of taxation on investment location  decisions
   show  that  tax differences between Member States can  affect  investment
   location   and   distort  competition,  thereby   undermining   efficient
   allocation of resources in the Community.
                                     - 3 -
   2.    The Committee's conclusions
   Despite the tax convergence which has occurred over the past decade,  the
   Committee  considers it unlikely that Member States acting  independently
   of  each  other  can  bring  about  any  significant  reduction  in   the
   distortions  affecting  the functioning of the  internal  market.  Action
   must therefore be taken at Community level.
   In  view of the importance of taxation for Member   States'  sovereignty,
   the  Committee  argues in favour of Community action focused on  what  is
   strictly  necessary  and so puts forward a programme  of  recommendations
   aimed in particular at:
   - eliminating   the   elements  of  discrimination  and   distortion   in
     Member States' tax systems, which impede cross-frontier investment  and
     shareholdings.  This   means  those  measures  which  favour   domestic
     companies  or which discourage investment in other  Communty  countries
     (for   example,  more  favourable  tax  treatment  of   domestic-source
     dividends than of foreign-source dividends);
   - setting  a minimum corporation tax rate of 30% and laying  down  common
     rules  for  determining  a  minimum  tax  base  in  order  to   prevent
     Member States from engaging in excessive competition to attract  mobile
     investment, which tends to erode the tax base throughout the Community.
   The  detailed recommendations are grouped into three phases according  to
   urgency of implementation.  In the Committee's view, some measures should
   be adopted immediately, while others should coincide with the second  and
   third tages of economic and monetary union.
                           MEMBERS OF THE COMMITTEE
   Mr Jean-Louis Descours    Chairman of the "André" Group, France
   Mr Lorenzo Gascon         Vice-Chairman   of  the  Group  "La   Seda   de
                             Barcelona SA", Spain
   Mr Carlo Gatto            Managing Director of the "FIAT" Group, Italy
   Mr Albert Raedler          Professor at the University of Hamburg, Germany
   Mr Ken Messere            Former Director at the OECD's Financial, Fiscal
                             and  Enterprise  Affairs  Directorate,   United
   Mr Frans Vanistendael     Professor at the University of Leuven, Belgium
   Mr Donal De Buitleir      A.I.B., Head of Group Taxation, Ireland
* * *

Side Bar