Select Committee on European Scrutiny Twenty-Second Report




COM(02) 10

Commission Communication on the desirability of continuing a programme of action to ameliorate the taxation systems of the internal market

Draft Decision of the European Parliament and of the Council adopting a Community programme to improve the operation of taxation systems in the internal market (Fiscalis 2007 Programme).

Legal base:Article 95 EC; co-decision; qualified majority voting
Document originated:17 January 2002
Forwarded to the Council:17 January 2002
Department:HM Customs and Excise and Inland Revenue
Basis of consideration:EM of 28 February 2002
Previous Committee Report:None
To be discussed in Council:Not known
Committee's assessment:Legally and politically important
Committee's decision:Not cleared; request to be kept informed


  11.1  The existing Fiscalis programme was established in 1998 for five years with the objectives of improving co-operation between Member States and candidate countries in the field of indirect taxation, disseminating best practice and helping officials to reach a high level of knowledge of EU indirect tax law.

  11.2  The importance of such co-operation is underlined by the Commission, which argues that in the absence of full co-operation between national tax authorities, large-scale fraud is possible because goods transported by commercial operators from one Member State to another cross Member States' borders free of VAT or excise duty. In 2001 an interim evaluation of the Fiscalis programme concluded that significant knowledge and experience had been disseminated to participants in the programme, which had helped in the fight against fraud. The present programme ends on 31 December 2002.

The document

  11.3  The proposal is for the creation of a new five-year programme for administrative co-operation on tax (Fiscalis 2007). The Paymaster-General (Dawn Primarolo) outlines the key changes to the programme in her Explanatory Memorandum of 28 February 2002:

  • a closer linking of the programme objective with EU tax strategy;

  • an extension to include direct tax;

  • an extension to include insurance premium tax,

  • allowing EU applicants to participate for part of the programme prior to accession and the full programme after accession; and

  • an increase in funding from _40m (£24m) to _56m (£34m).

  11.4  Fiscalis 2007 will support improved electronic systems for the exchange of information between national tax administrations, co­operation in investigations, training seminars and exchanges of officials between national administrations.

The Government's view

  11.5  The Paymaster-General tells us that the Government recognises the importance of administrative co-operation in countering fraud and generally supports the Fiscalis programme. However, the Government disagrees with the proposed extensions to direct tax and Insurance Tax Premium (IPT). The Minister says:

"The Government does not consider that the Commission has put forward any convincing arguments, or evidence, that such an extension is justified and would be of any real benefit to Member States. On the contrary it will impose additional costs on the programme budget and on Member States' tax administrations. The circumstances of direct tax and VAT/excise duties are very different, since VAT and excise share a common body of European law with other Member States whilst neither IPT nor direct tax legislation have the same common grounding.

"Like the existing Fiscalis programme, the proposal is on an Article 95 legal base. In several respects the proposed new programme is different from the existing one, and the appropriate legal base will depend on the final scope of the provision."


  11.6  Last week we cleared a document relating to Customs 2007, which amongst other things, aims to reduce customs fraud and compliance costs by promoting the development of an electronic customs system in Member States and candidate countries. Fiscalis 2007 encourages Member States and candidate countries to co­operate similarly when combatting tax fraud. Both programmes are generally to be welcomed.

  11.7  However, like the Government, we are concerned that the Commission is seeking to extend the scope of the Fiscalis programme to direct tax (income and corporation tax) without providing adequate justification. The Commission seems to be trying to make a link between coordinating and harmonising of direct taxation and a properly functioning single market. We question the validity of such a link. Like the Government, we also question whether closer co-operation on direct taxation lies within the competence of the Commission. We fully support the Government's position on these matters.

  11.8  We leave the document uncleared and request to be kept fully informed of progress on it.

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Prepared 28 March 2002