Select Committee on European Scrutiny Thirty-Third Report

44 Taxation: mutual assistance



COM(03) 446

Draft Directive amending Directive 77/799/EEC concerning mutual assistance in the field of direct and indirect taxation.

Legal baseArticle 95 EC; co-decision; QMV
Document originated28 July 2003
Deposited in Parliament20 August 2003
DepartmentInland Revenue and HM Customs and Excise
Basis of considerationEM of 10 September 2003
Previous Committee ReportNone; but see (22537) 10510/01: HC 152-xxxix (2001-02), paragraph 9 (23 October 2002)
To be discussed in CouncilNot known
Committee's assessmentPolitically important
Committee's decisionCleared


44.1 Directive 77/799/EEC of 1977, the Mutual Assistance Directive, provides the framework for mutual assistance and exchange of information between EU tax authorities, so as to help them apply their tax laws more effectively. It provides for three types of information exchange: on request, spontaneous, and automatic. It also provides safeguards to ensure that any exchange of information respects taxpayers' confidentiality. The Directive currently covers both indirect and direct taxation.

The document

44.2 The draft Directive is intended to amend and update the Mutual Assistance Directive. The aim is to improve the functioning of procedures, so as to enable Member States to deal more effectively with cross-border tax evasion and avoidance. The amending Directive would:

·   clarify certain provisions, where the meaning is not totally certain;

·  modernise information exchange procedures, more closely aligning those for direct tax and indirect tax; and

·  provide a new mechanism for co-operation and exchange of information via simultaneous multilateral controls (joint audits). Member States would be able to choose on a case by case basis whether or not to participate in controls.

44.3 Under a separate proposal on administrative cooperation,[87] exchange of information on Value Added Tax (VAT) would be dealt with under the new VAT Regulation and insurance premium taxes would be covered by the Mutual Assistance Directive. In addition, the Commission is expected to propose that exchange of information on excise duties should be covered in a separate instrument. This means that the Mutual Assistance Directive would, in future, focus on exchange of information on taxes on income, capital and insurance premiums.

The Government's view

44.4 The Paymaster General (Dawn Primarolo) tells us:

    "The UK Government strongly supports the use of exchange of information in combating cross-border tax evasion and avoidance.

    "The Mutual Assistance Directive has provided valuable benefits to the UK; and the UK has a good record on co-operation under the Directive with other Member States.

    "In general, HMG believes the procedures under the Directive have worked well and that any practical problems that arise in operating the Directive can be dealt with effectively by Member States' tax authorities. But the Government is willing to consider the modest changes proposed, to the extent that they can be shown to enhance the effectiveness of existing exchange of information.

    "The Commission have issued the draft Directive on an Article 95 legal base. This entails qualified majority voting and co-decision with the European Parliament. The Government's view is the legal base is incorrect; and that the proposal should have a unanimity legal base in line with the existing Directive's legal base, and in line with all previous amendments that Member States have agreed to the Directive. The UK will pursue this point in forthcoming meetings of the Council Working Groups."


44.5 We note that the Government, despite its view that the Mutual Assistance Directive works well and that any practical problems can be dealt with effectively by the tax authorities, is willing to consider the proposal if its utility can be demonstrated. We also note and support the Government's insistence that the proper legal base be used for this proposal. On that basis we are content to clear the document.

87   See headnote. Back

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