Tax Policy in the European Union Priorities for the years ahead
||23 May 2001|
|Forwarded to the Council:
||30 May 2001|
|Deposited in Parliament:
||20 June 2001 |
||HM Treasury |
|Basis of consideration:
||EM of 22 June 2001
|Previous Committee Report:
|To be discussed in Council:
||No date known|
33.1 For some years, the Commission has argued that
there is much more to be done in the area of tax coordination.
For example, at the informal ECOFIN meeting at Verona in April
1996, the Commission identified three interlinked and mutually
reinforcing challenges for the EU: the stabilisation of Member
States' tax revenues; the smooth functioning of the Internal Market;
and promoting employment. The Commission proposed greater tax
co-ordination in its Communication of October 1997.
33.2 However, despite the Commission's interest
in developing closer co-ordination of tax policy, there are very
few specific examples of tax policy amongst the Member States
being closely co-ordinated. One example is the tax package agreed
at the Council meeting on 2627 November 2000 which, amongst
other things, sought to curb harmful tax competition through the
Code of Conduct for business taxation and the proposals on the
taxation of income from savings. Our predecessors cleared the
report from the Commission on the subject of harmful tax competition
in December 1998.
They also cleared the third progress report on reinforced tax
policy cooperation on 9 February 2000.
33.3 This Communication contains no new legislative
proposals about tax policy. Instead it describes a number of recent
agreements on tax and urges Member States to make progress on
a range of general issues, such as the fight against harmful tax
competition and a durable reduction in the overall tax burden.
More specifically, the document concludes that the Commission
wishes to pursue a number of tax policy objectives, such as setting
out a clear VAT legislative strategy for the next five years,
examining environmental and energy taxation, and considering measures
promoting convergence between the excise duty levels in the Member
States on tobacco, while consulting in relation to excise duty
33.4 The Commission considers that the tax systems
of Member States need to meet a number of challenges, such as
completion of the Internal Market, Economic and Monetary Union
and enlargement, and to provide for a coherent energy tax policy,
while serving the interests of citizens and businesses. The Commission
"Tax cuts should be
focused on areas where they have beneficial supply side effects
and they should be accompanied by reforms to benefit systems in
order to increase growth potential and employment. Emphasis has
been put on the need to reduce the fiscal pressure on labour and
nonwage labour costs, in particular on relatively unskilled
and lowpaid labour. This approach is reflected in the BEPGs
[Broad Economic Policy Guidelines] 2001 and in the European
Employment Strategy, with specific recommendations for each Member
State and provision for monitoring at EU level.
"It is also essential to get the balance right
between cutting taxes, investing in public services and sustaining
fiscal consolidation so as to achieve a durable reduction in the
overall tax burden."
33.5 As regards tax harmonisation, the Commission
"It is clear that there
is no need for an across the board harmonisation of Member States'
tax systems. Provided that they respect Community rules, Member
States are free to choose the tax systems that they consider most
appropriate and according to their preferences. The level of public
expenditure is equally a matter for national preferences as long
as this is adequately met by revenues in such a way that budget
positions remain close to balance or in surplus. It is essential
to underline that in many tax fields harmonisation is neither
necessary nor desirable in view of the widely differing characteristics
of Member States' tax systems and different national preferences.
However, Member States' choices do not take place in isolation
and international aspects need to be taken into account. So, for
instance, EU tax coordination should generally contribute
to the coherence of Member States' positions in international
fora like the OECD."
The Government's view
33.6 In her Memorandum of 22 June 2001, the Paymaster
General (Dawn Primarolo) says:
"The Government notes
that the objective set out at the Lisbon European Council to make
the EU 'the most competitive and dynamic knowledgebased
economy in the world' is at the heart of the Commission's approach
"The Commission fully endorses the UK's policy
of promoting fair tax competition while seeking to tackle harmful
and discriminatory tax practices and evasion.
"As the Communication makes clear, this approach
has made substantial progress. For example, agreement has been
reached on the substantive content of the Directive on taxation
of savings based on UK proposals for exchange of information.
This provides the basis for a Directive which will combat tax
evasion without putting Europe's global competitiveness at risk.
"The Government will continue to scrutinise
closely any specific policy proposals to ensure that they match
up to the programme of economic reform set out at Lisbon. For
example, on VAT reform, while welcoming the Commission's emphasis
on simplifying and modernising VAT arrangements, the Government
will press for a prioritised work programme which ensures that
the limited resources of the Commission and Member States are
focused on reforms that provide real benefits to EU businesses
and help improve the functioning of the Single Market.
"On ecommerce, the Government will press
for a workable, electronic system for taxing international ecommerce
supplies which promotes Europe's competitiveness without placing
undue burdens on business.
"The Government does not accept the Commission's
view that the need for unanimity has made progress on tax issues
unduly slow. At the Nice European Council, the Government successfully
ensured that tax would remain subject to unanimity both on grounds
that tax is a matter for national governments and that only unanimity
ensures that the complex details of tax proposals are considered
sufficiently seriously to protect Europe's competitiveness.
"As the recent agreement on the tax package
showed, important agreements on tax can be secured through unanimity
even when great national interests are at stake. Directives have
been agreed on indirect tax to minimise distortions, reduce burdens
on business, simplify rules for trade and avoid cases of double
taxation. Accordingly, the Government will continue to insist
that tax remains subject to unanimity and does not envisage any
departure from the existing decision making process."
33.7 Although tax policy remains a sensitive
subject, the document itself does not contain any legislative
proposals and does not seem to contain anything new. We note the
Government's position that it will continue to scrutinise closely
any specific policy proposals to ensure that they match up to
the programme of economic reform set out at Lisbon (i.e. to make
the EU "the most competitive and dynamic knowledgebased
economy in the world") and to the Government's insistence
that tax remain subject to unanimity. We clear the document.
80 (19576) - ; see HC 34ii (199899), paragraph
8 (2 December 1998). Back