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                                T A X A T I O N

   1. Direct taxation


   -  Commission  Recommendation on the taxation of certain items of  income
      received  by non-residents in a Member State other than that in  which
      they are resident. (Elimination of discrimination seriously  affecting
      persons  residing in a Member State different from that in which  they
      exercise their activity - Memo P(93)63).  In 1994, the measures  taken
      by  the  Member  States  to comply with  the  Recommendation  will  be
      monitored; a report is to be presented at the beginning of 1995.


   -  Proposal for a Directive on a common system of taxation applicable  to
      interest  and  royalty  payments made  between  parent  companies  and
      subsidiaries in different Member States

        The  aim  is  to abolish withholding tax on  such  payments  between
        parent companies and subsidiaries.  This will lead to a considerable
        reduction  in  companies' financial burden, given the scale  of  the
        payments  in  question,  and will ensure that  all  double  taxation
        affecting them is eliminated.

        The  Ecofin Council meeting of December 1993 produced  agreement  on
        almost all of the technical questions.

        Three problems still have to be resolved.  Firstly, the scope of the
        Directive, i.e. the enterprises it covers, must be defined.  Second,
        Greece and Portugal have asked to be granted a fairly long period of
        derogation because they are net importers of capital and technology.

        Third,  most Member States do not wish to see the Directive  applied
        to payments made to enterprises which enjoy favourable tax treatment
        in  the  Member State in which they are established,  in  particular
        enterprises  established  at the  International  Financial  Services
        Centre in Dublin.

        In accordance with the conclusions of the Ecofin Council meeting  of
        13 December 1993, the proposal is to be presented to the Council for
        adoption in March 1994.

   -  Proposal  for a Directive concerning arrangements for the taking  into
      account by enterprises of the losses of their permanent establishments
      and subsidiaries situated in other Member States

        The aim of this proposal is to eliminate one of the obstacles  which
        can  hamper the activities of enterprises in a common market  having
        the same characteristics as a national market.  Member States  would
        have  to introduce provisions enabling their enterprises  to  deduct
        from   their  profits  any  losses  incurred  by   their   permanent
        establishments and subsidiaries situated in another Member State.

        This will benefit not only large groups but also, and in particular,
        small and medium-sized enterprises, which at present are  confronted
        with  a  tax  obstacle which seriously  hampers  their  cross-border

        The  proposal  covers  the losses of  permanent  establishments  and
        subsidiaries.  However,  during negotiations within the  Council  in
        1992  most delegations were in favour of limiting its scope  to  the
        losses of permanent establishments.

        Discussions within the Council working party were interrupted  after
        1992.  They  should  resume  under the Greek Presidency  so  that  a
        compromise text can be proposed to the ministers towards the end  of
        the first half of 1994 in accordance with the timetable proposed  by
        Mrs Scrivener.

   -  Proposal  for  a Council Directive amending  Directive  90/435/EEC  of
      23 July 1990  on the common system of taxation applicable in the  case
      of parent companies and subsidiaries of different Member States  (Memo

        In  its  communication  of  26 June 1992  to  the  Council  and   to
        Parliament  subsequent  to the conclusions of the  Ruding  Committee
        indicating  guidelines  on company taxation linked  to  the  further
        development  of the internal market, the Commission stated its  view
        that  extending  the scope of  the  "parent  companies/subsidiaries"
        Directive  along  the  lines suggested  in  the  Ruding  Committee's
        report1  would  be highly desirable as a means of  further  reducing
        the   double  taxation  which  most  penalizes   the   international
        activities of companies.

        Indeed,  it does not seem justified to exclude from the  Directive's
        scope  certain forms of companies which have not been introduced  by
        some  Member States in the list annexed thereto but which  meet  all
        the  other  conditions.  For  example, not all  Member  States  have
        listed cooperatives or public savings banks.

   1  Report of the Committee of Experts on Company Taxation, March 1992.

        Parliament  and  the  Economic and Social  Committee  are  currently
        examining this proposal and will give their opinions at the start of

   -  Proposal  for  a Council Directive amending  Directive  90/434/EEC  of
      23 July 1990  on the common system of taxation applicable to  mergers,
      divisions,  transfers  of assets and exchanges  of  shares  concerning
      companies of different Member States (Memo IP(93) 637)

        The  Ruding  Committee  also  recommended that  the  scope  of  this
        Directive  be extended to all companies subject to corporation  tax,
        whatever  their  legal  form.  This  proposal  is  similar  to  that
        concerning   the  scope  of  the   "parent   companies/subsidiaries"

        Parliament  and  the  Economic and Social  Committee  are  therefore
        currently  examining this proposal and will give their  opinions  at
        the start of 1994.

   -  Proposal  for  a Directive on a common system of  withholding  tax  on
      interest income (taxation of savings)

        This  proposal  sets out to ensure a minimum level  of  taxation  of
        income from savings for all Community residents.

        The  work  was resumed in 1993, with the Commission  being  given  a
        mandate at the Ecofin Council meeting of 13 December 1993 to explore
        the  willingness  of  non-member  countries  to  participate  in   a
        Community   solution.  An  interim  report  is  expected  from   the
        Commission in March 1994, and the final report is due in June 1994.

        In  the  meantime,  work will continue on  certain  aspects  already
        identified   (e.g.  the  "paying  agent"  system,   application   of
        withholding tax on various types of bonds, etc.).

   2. Indirect taxation


   -  Commission  proposal for a number of simplifications to the  new  "VAT
      without frontiers" arrangements

        Measures  to  simplify  the transitional VAT  arrangements  will  be
        proposed in two stages.  The first will take the form of an  initial
        proposal to be presented during the first quarter of 1994.

        This  will  involve provisions introducing  certain  simplifications
        (chain transactions, national portion of intra-Community  transport)
        aimed at making the transitional VAT arrangements easier to operate.

        The second stage will see the adoption by the Commission of a second
        proposal for a Directive at the end of the first half of 1994.  This
        proposal will relate essentially to tax representatives and works on
        movable tangible property.

        As  will  be remembered a first set of simplifications  was  already
        adopted in 1992 (Memo IP(92)878).

   -  Proposal concerning the definitive VAT arrangements

      Mrs Scrivener will propose the precise rules of the future  definitive
      VAT arrangements to the Commission during the second half of 1994.

   -  Mrs  Scrivener also attaches great importance to the adoption  by  the
      Council of certain proposals for Directives:

      - passenger transport,
      - the arrangements applicable to gold.

      Apart from the fact that they contribute towards the harmonization  of
      the  common system of VAT, these proposals are among  those  necessary
      for the proper functioning of the internal market.

      The  proposal  for a companion directive to the  Eighteenth  Directive
      (abolition of certain VAT exemptions by the Member States), which aims
      to complete the common system of VAT, must also be adopted this year.

   -  The  special  scheme applicable to small and  medium-sized  businesses
      sets  out to simplify the VAT obligations incumbent on SMEs.  A  study
      has recently been launched on this subject, with the findings expected
      to  be  available  by  the end of March  1994.  They  might  lead  the
      Commission to amend its proposal for a Directive currently before  the
      Council  (22nd  Directive).  Mrs Scrivener also intends  to  launch  a
      number  of  fresh initiatives such as giving unincorporated  SMEs  the
      right  to  opt for corporation tax, easing  taxation  of  cross-border
      business successions and lowering taxation of venture capital.


                           E X C I S E   D U T I E S

   -  Biofuels    (proposal   for   a   Directive;   COM(92)36   final    of
      28 February 1992) Memo P(92)38

      The  proposal  aims  to reduce at Community level  the  excise  duties
      applied   to  fuels  of  agricultural  origin.  This   meets   various
      objectives  in  the  energy,  agricultural-policy  and   environmental

        At  present,  the  tax  treatment  of  biofuels  is  determined   by
        Article 8(2)(d)   of  Directive  92/81/EEC.  Under   that   Article,
        Member States may apply exemptions or reductions in the rate of duty
        on  biofuels  only  in  the  context  of  pilot  projects  for   the
        technological development of more environmentally-friendly products.

        The   proposal  must  be  adopted  as  soon  as  possible  so   that
        Member States  can be given a legal basis for introducing a  general
        tax  incentive in favour of biofuels not limited to pilot  projects.
        Parliament should deliver its opinion in February 1994.

   -  Simplification of the new excise-duty arrangements

      A proposal will be presented by Mrs Scrivener in the first quarter  of
      1994.  Its  aim  will be to introduce simplifications to  the  general
      arrangements governing the movement and monitoring of products subject
      to  excise duty and to the structure of excise duty on  mineral  oils.
      These simplifications relate to:

      - dispensation for authorized warehousekeepers from the requirement to
        provide  a  guarantee in the case of  intra-Community  movements  of
        mineral oils, depending on the means of transport used;

      - transmission  by fax of the copy of the accompanying document to  be

      - the  tax treatment of fuels in additional fuel tanks other than  the
        normal fuel tanks of commercial vehicles;

      - a  reduction  of the scope of excise duties on mineral oils  to  the
        effect  that the excise-duty arrangements do not apply  to  products
        which will never be used as fuels;

      - compulsory  exemption for mineral oils injected into blast  furnaces
        for the purposes of chemical reduction, etc.

   -  Proposal  for a Council Directive on the marking for tax  purposes  of
      diesel oil

      - Community rules must be adopted concerning the colouring and marking
        of mineral oils subject to a reduced rate of excise duty.

        With the abolition of frontier checks on 1 January 1993, there is an
        increased risk that marked diesel oil might be transported from  one
        Member States to another for fraudulent purposes.  Consequently,  it
        is  proposed that Member States adopt a common marking standard  for
        all  types of diesel oil released for home use within the  Community
        after having been charged to an excise-duty rate different from  the
        rate normally applicable to diesel.

        This  proposal  was adopted by the Commission  on  16 December 1993.
        The   Council  will  have  to  take  a  decision  at  the   earliest


                             O T H E R   T A X E S

   -  CO2/energy tax

        This tax is being proposed as part of the overall Community strategy
        to reduce CO2 emissions.

        The Economic and Social Committee has come out in its favour,  while
        the  European Parliament has not yet delivered it opinion,  although
        the report presented by the Committee on the Environment also  seems
        to be favourable.

        At  the Ecofin Council meeting of 13 December 1993, it  was  decided
        that  the ad hoc group should continue its discussions on the  basis
        of  the  proposal for a Directive, the conclusion  of  the  European
        Council and the views expressed by Member States.

   -  Annual tax on motor vehicles

        The purpose of this proposal envisaged by the Commission is to  take
        account  of  environmental  criteria in establishing  the  base  for
        taxing vehicles and to harmonize the structure of the tax.

        Studies are in progress which should allow common denominators to be
        found which incorporate these environmental criteria.


                                 C U S T O M S

   1. Counterfeit goods - fraud prevention

   -  Proposal for a Council Regulation laying down measures to prohibit the
      release  for  free circulation, export or transit of  counterfeit  and
      pirated goods (Memo P(93)31)

        The  essential  aim of this proposal is to extend, in the  light  of
        experience,  the  scope  of Regulation (EEC)  No  3842/86  to  other
        intellectual-property  rights  by providing for  protection  at  the
        external  frontiers of goods covered by copyright or a  neighbouring
        right  or by design rights.  It also strengthens customs  officials'
        powers to stop goods.

        Parliament, which has been consulted on an optional basis, should be
        able to deliver its opinion at its 7-11 February 1994 part-session.

        The  Member  States consider that the broad thrust of  the  proposal
        should  be endorsed and that it should be possible for the  text  of
        the  Regulation to be adopted by the time the first Internal  Market
        Council  meeting is held on 10 March 1994.  Mrs Scrivener points  to
        the  speed  of  the adoption procedure in this  case,  the  proposal
        having been presented to the Council in July 1993.

   -  Development  of  the  Textile  Anti-Fraud  Initiative  -  TAFI   (Memo

   2. Relocation  of  production:  Outward processing  arrangements  in  the
      textile and clothing sectors

        On  13 July 1993 the Commission presented to the Council a  proposal
        for  a  Regulation  amending  Council  Regulation  (EEC)  No  636/82
        establishing  outward processing arrangements applicable to  certain
        textile  and clothing products reimported into the  Community  after
        working or processing in certain third countries (Memo(93)32).

        The  proposal deals with the conditions under which  these  products
        can be reimported into the Community after working or processing  in
        a third country.  The outward processing arrangements respond to the
        needs  of  the textile industry, particularly the  clothing  sector,
        which  employs a large workforce.  To keep this sector  competitive,
        outward  processing  allows  the industry to transfer  part  of  its
        manufacturing  to  third countries with lower labour  costs  without
        losing  control  of  the production process,  working  on  Community
        materials  and  continuing to carry out a significant  part  of  the
        process in the Community.

        The proposal clearly spells out the link that exists between imports
        under  the  outward  processing  arrangements  and  production   for
        beneficiaries in the Community.  Production in the Community must in
        principle account for 50% of turnover.

   3. Strengthening   of   customs  cooperation   and   mutual   assistance:
      improvement  of  the CIS computerized system, MATTHAEUS  programme  of
      exchanges  and  training of customs officials,  cooperation  with  the
      United States customs authorities.

   4. New proposal on the harmonization of customs sanctions as part of  the
      customs code to be adopted by the Commission during 1994.


                         C O N S U M E R   P O L I C Y

   1. Proposals for Directives

   -  The  proposal  for  a  Directive on timeshare was  the  subject  of  a
      political  agreement  on a common position at the Council  meeting  of
      19 November 1993.  Once the common position has actually been adopted,
      the  proposal  will  pass  through  the  co-decision  procedure   with

   -  The  Council,  meeting  on  19 November 1993, did  not  lay  down  any
      political  guidelines  on the proposal for a  Directive  on  distance-
      selling.  However, the positions have become clearer, and a compromise
      can be expected early in the Greek Presidency.  It should be  possible
      to adopt a common position during the first half of the year.

        The  proposal for a Directive on comparative advertising  (following
        Parliament's  opinion of November 1992), which takes account of  the
        conclusions of the Edinburgh European Council, should be adopted  in

   2. Consultation

        January-June 1994:  drafting in conjunction with banks and  consumer
        groups of a Joint Charter on transfrontier payments.

        June  1994: meeting of the first European Consumer Forum,  at  which
        the  subjects  of consumers' access to justice  and  guarantees  and
        after-sales  service will be discussed.  The deadlines for  comments
        on the two Green Papers published on these subjects (IP(93)1004  and
        897 respectively) are 31 May 1994 and 30 April 1994 respectively.

   3. Information

   -  Publication in March 1994 of the Consumer Guide to the large market.

   -  Development of cross-border information centres.

   -  European Home and Leisure Accident Surveillance System (EHLASS)

        A new proposal for a decision will be drawn up by the Commission for
        the  period 1994-98.  It should be adopted by the Commission in  the
        first  quarter of 1994 for transmission to the  Council.  The  legal
        basis  for  the proposal will be Article 129a of the EC  Treaty,  as
        amended  by  the  Treaty  on  European  Union,  which  involves  the
        co-decision procedure with Parliament.

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