TAXATION IN THE NEW INTERNAL MARKET STRATEGY
(a)
(20297)
9493/99
—
(b)
(20553)
11788/99
COM(99) 464
|
Commission Working Document — Single Market Scoreboard.
Commission Communication on the strategy for Europe's Internal Market.
|
| Legal base: |
— |
| |
| Department: |
Trade and Industry |
| Basis of consideration:
| Minister's letters of 1 December and 16 December 1999
|
| Previous Committee Report:
| (a) HC 34-xxviii (1998-99), paragraph 11 (20 October 1999)
(b) HC 23-i (1999-2000), paragraph 5 (24 November 1999)
|
| To be discussed in Council:
| (b) 7 December 1999 |
| Committee's assessment:
| Politically important |
| Committee's decision:
| Cleared |
Background
5.1 On 21 October 1999, we reported on the
latest version of the Commission's "Single Market Scoreboard",
document (a). The aim of the Scoreboard is to monitor the functioning
of the Single Market and to allow Member States to compare their
performance in key areas on a six monthly basis. It includes a
report on progress with relevant draft directives and lists areas
where further action is required. We noted that the Government
rebutted statements made about taxation in the document, but did
not identify them. We asked the Minister for Energy and Competitiveness
in Europe (The Rt. Hon. Helen Liddell) to do so, and left the
document uncleared.
5.2 On 24 November 1999, we reported on
a consultation paper from the Commission on a new approach to
the Internal Market Strategy for Europe, document (b). In her
Explanatory Memorandum of 9 November 1999, the Minister was generally
supportive of the aims of the document. However, she commented
that:
"In a small minority
of areas, such as taxation, the UK does not accept either the
case for action made by the Commission on direct taxation, or
their priorities for indirect taxation".
5.3 The Minister said that the Government
would make suggestions to improve the strategy in this area. In
our Report, we noted that the Commission intended to issue a final
version of the strategy before the Internal Council meeting on
7 December 1999, though this would leave too little time for effective
scrutiny. We asked the Minister to inform us as quickly as possible
of any proposal in the final version which it regards as contentious
and, in particular, of any proposals for action on taxation. We
also asked her to provide an assessment of the likelihood of the
final version being endorsed by the Council, perhaps in the form
of conclusions. Meanwhile, we left the document uncleared.
The Minister's response
5.4 In her letter of 1 December 1999, the
Minister says, in respect of the Scoreboard document, that:
"On the Scoreboard,
the Committee asked for clarification of the issues on which the
Government disagreed with the Commission. The main issue is outlined
on pages 14-15 where the document states that:-
'... wide differences
between the levels of national VAT rates, continue to distort
the Single Market. Moreover the present system, largely based
on the destination principle and special régimes, does
not allow market forces to reduce the divergences. Economic operators
are thus confronted with various specific and complex régimes'.
"The Government believes that the present VAT
destination system does not distort cross-border trade, nor is
it inherently more complex than an origin-based system would be.
The Commission themselves acknowledged in their explanatory memorandum
to the VAT standard rates proposal last December that 'there has
been no significant distortion of competition on a macro-economic
level within the Community or any deflection of trade caused by
excessive disparities in VAT rates between Member States'.
"In addition, we have concerns about the description
of strategic target 2 on page 30. The Government does not recognise
the Commission assertion of 'some progress achieved' in meeting
the target in the Commission's 1997 Single Market Action Plan
on 'Elimination of distortions in the area of indirect tax legislation'.
There has been no discussion in the Tax Policy Group of the serious
distortions in indirect tax areas such as alcohol and tobacco
taxation.
"The Scoreboard is a Commission document containing
a variety of useful information, including the views of business,
about the operation of the Single Market. It is for the Commission
to decide what to include in its own documents, but in our regular
contacts with Commission officials we have made clear that we
believe the Scoreboard should contain information which will help
Member States monitor the areas which will contribute most to
the improved operation of the Single Market, e.g. utilities liberalisation,
reducing state aids, opening up services markets, expanding the
application of mutual recognition and implementation and enforcement
of Single Market Directives".
5.5 In respect of the Single Market Strategy
report, the Minister says:
"The draft Single Market
Strategy included analysis of tax issues along similar lines to
that of the Scoreboard and our Explanatory Memorandum pointed
out the areas where we disagreed with the Commission. The draft
strategy, unlike the Scoreboard, was a consultation document and
we made our views on the tax (and many other) elements clear to
the Commission during the consultation process. As a result, the
section on tax has been considerably altered in ways which we
regard as helpful. Nevertheless, the final version of the new
strategy, which we received at the end of last week (and a copy
of which I attach), still contains some elements on which we do
not agree with the Commission. In particular these are:
"— the reference to the draft Directive
on the taxation of savings, which the UK opposes; and
"— the wording on the Code of Conduct,
which is inconsistent with the ECOFIN Conclusions of 1 December
1997.
"In addition, there are some non-tax elements
of the strategy which the UK opposes, notably the proposed target
action on agreeing a Directive on Information and Consultation
of Employees. I will therefore point out at the Internal Market
Council [IMC] meeting next week that whilst most of the analysis
and proposed actions in the strategy are welcome and will contribute
to the improved operation of the Single Market, there are a number
of actions foreseen in the strategy, such as on tax and the Information
and Consultation Directive, to which the UK will not be able to
agree when they are discussed in the appropriate formation of
the Council. The strategy also contains a target action to agree
the Directive on Artists' Resale Rights, to which we are opposed
in its present form, but this will in any case be discussed substantively
at the IMC".
5.6 We were unable to consider the Minister's
comments on either of these documents before the Internal Market
Council meeting on 7 December 1999. However, the Minister wrote
to us on 16 December to bring us up-to-date on the tax aspects
of the Internal Market Strategy. She says:
"During the course of
the discussions at the IMC on 7 December, I emphasised that while
welcoming the strategy overall, I could not endorse all of the
target actions laid out in the document, including those on tax.
Other Member States took a similarly balanced view. The Commission
helpfully made clear at the Council, as they have done throughout
the process, that endorsement of the strategy by the Council would
not be taken as support for all the target actions. In addition,
all target actions would need to be considered by the relevant
formation of the Council. The Government will continue to make
clear to the Commission our views on tax, including that tax issues
are a matter for ECOFIN. Notwithstanding this, the Internal Market
Strategy, which has now been welcomed by the European Council
at the Helsinki Summit, is likely to make a significant contribution
to meeting UK aims for the internal market and economic reform
in the European Union".
Conclusions
5.7 We thank the Minister for her responses.
We have no comments on the Minister's explanation of the Government's
concerns about the Scoreboard document. We note what she
says about the Government's position as set out at the Internal
Market Council on 7 December 1999. It is helpful to know of the
Commission's clarification that endorsement of the strategy by
the Council would not be taken as support for all the target actions.
We are aware also of the failure to reach agreement on the savings
directive at ECOFIN in December, or at the subsequent Helsinki
European Council. We note that, in that respect, the European
Council concluded that:
"... all citizens
resident in a Member State of the European Union should pay the
tax due on all their savings income";
and agreed that a High Level Working Group should
consider how that principle can be implemented most effectively.
We see that the Group is charged to report to the Council before
the European Council in June 2000 on that matter and also other
elements of the "tax package" (the Code of Conduct on
Business Taxation and the draft Directive on Interest and Royalties).
We shall continue to monitor progress on these matters. However,
the Minister's responses answer the questions we had raised and
we clear the documents accordingly.
|
