ELIMINATION OF TAX OBSTACLES TO THE CROSS-BORDER
PROVISION OF OCCUPATIONAL PENSIONS
Commission Communication on the elimination of tax obstacles to the cross-border provision of occupational pensions.
||19 April 2001|
|Deposited in Parliament:
||27 April 2001|
|Basis of consideration:
||EM of 5 May 2001|
|Previous Committee Report:
|Discussed in Council:
||7 May 2001 ECOFIN
30.1 The Commission estimates that around 25%
of the Union's active population is covered by an occupational
pension scheme and that around 5.1 million European citizens aged
15 years and over reside in a Member State other than their Member
State of origin. At present, tax obstacles to cross-border provision
of occupational pensions can impede citizens who wish to take
up employment or residence outside their home state. These tax
obstacles prevent a fully functioning single market in occupational
pensions and may also prevent European businesses from choosing
the most efficient way of providing pensions for their employees
by centralising their pension provision.
30.2 Although the Communication has no legal
status, it gives the Commission's view on how Member States should
strike a balance between their Treaty obligation to allow persons,
services and capital to move freely within the internal Market
and their legitimate social policy aims pursued through tax policies
relating to occupational pensions.
30.3 The Commission argues that the EC Treaty
obliges Member States to eliminate discrimination against pension
institutions established in other Member States. It also argues
that recent case law from the European Court of Justice supports
this view. It considers that the most effective and immediate
method of tackling tax obstacles to cross-border pension provision
is to apply the rules that already exist in Articles 39, 43, 49
and 66 of the EC Treaty on free movement of capital, free movement
of labour and the freedom to provide services. The Commission
considers that national rules should grant the same tax deductions
for contributions to domestic pension institutions as for contributions
to those established in other Member States, and that, for tax
purposes, benefits should be treated equally.
The Government's view
30.4 In her Explanatory Memorandum of 5 May 2001,
the then Economic Secretary to the Treasury (Melanie Johnson)
told us that in principle the UK Government supports efforts to
overcome tax obstacles to the cross-border provision of occupational
pensions. The Minister outlined the action called for by the Commission
and the Government's position:
"The Commission calls
for action on:
" Alignment of tax treatment to
exempt contributions to a scheme, exempt Investment Income within
the scheme and tax the pension and benefits. As the UK already
uses this tax treatment no new legislation would be required.
" Elimination of discrimination
against schemes established in other Member States. The Government
already makes available generous reliefs to overseas schemes,
where those schemes are similar to UK established schemes. The
Government will however consider any areas that could be construed
as being discriminatory.
" Protection of Member States
tax revenues from pensions through Exchange of Information (EoI)
using existing provisions in Mutual Assistance Directive (77/799/EEC)
of 19 December 1977. The Government is responsible for instigating
EoI under the proposed Savings Directive and intends to contribute
fully to the discussions on how to react to this Communication.
" Proposals for unilateral, bilateral
and multi-lateral approaches to removing double taxation and exemption.
The UK has already included in Double Taxation Agreements specific
rules that deal with the taxation treatment of contributions and
" Part of the new strategy, which
the Commission adopted on 28 February this year to open up pan-European
labour markets by 2005. The Government will consider these
30.5 We understand that no progress was made
in ECOFIN on 7 May 2001 and that France remains firmly opposed
to the Commission's proposals.
30.6 We broadly support the aim of removing
tax obstacles to cross-border provision of occupational pensions.
We note that, in pursuit of this aim, the Commission has adopted
a non-legislative approach, which we welcome. Finally, we note
that the approach will have limited effect in the UK. We clear