1 General arrangements
for excise
| (25532)
8241/04
COM(04) 227
| Commission Report on the application of Articles 7 to 10 of Directive 92/12/EEC
Draft Council Directive amending Directive 92/12/EEC on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products
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| Legal base | Article 93 EC; consultation; unanimity
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| Document originated | 2 April 2004
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| Deposited in Parliament | 7 April 2004
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| Department | Customs and Excise
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| Basis of consideration | EM of 28 April 2004
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| Previous Committee Report | None
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information requested
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Background
1.1 Council Directive 92/12/EEC, the Holding and Movement Directive,
provides for general arrangements for products subject to excise
duty and on the holding, movement and monitoring of such products.
The Directive required the Council to review the application
of Articles 7 to 10 of the Directive by 1 January 1997 on the
basis of a report from the Commission. These articles deal with
cross-border shopping by private individuals, distance selling
of excise goods and regulations and procedures relating to commercial
movements of duty-paid excise goods between traders located in
different Member States.
The document
1.2 The Commission's report begins with an explanation as to why
the 1 January 1997 deadline was not met. It then examines in
detail the application of Articles 7 to 10 of the Directive, identifying
a number of problems and examining possible solutions. In its
conclusion the Commission comments:
"Whilst it is true that the type of intra-Community movement
covered by [Articles 7 to 10 of Directive 92/12/EEC] represents
only a very small proportion of total intra-Community movements
of excisable products, it must nevertheless be stressed that this
type of movement mainly involves private individuals and small
traders without substantial financial resources and no commercial
infrastructure.
"Such parties are particularly aware of the
opportunities the single market should open up for them but, as
is clear from the problems described [earlier in the report],
they are finding it difficult to comply with the implementing
procedures of Articles 7 to 10, or even to understand the reasons
underlying the taxation principles reflected in these Articles.
"It has to be said that the present wording
of Articles 7 to 10 has allowed the application of national interpretations
which, depending on the Member State, are framed more liberally
or more restrictively than the provisions of those Articles.
The Commission considers that this is not entirely attributable
to any difficulty over how to read the Articles but due, rather,
to a protectionist reaction on the part of some Member States
which, in order to protect income accruing to their national budgets,
seek as far as possible to restrict the free movement of goods
brought about by the single market."
1.3 The Commission then says that it is proposing
a draft Directive to amend the present Directive. It says the
amendment is based on the same principles as those underlying
the present Articles 7 to 10, "namely:
- that excise duty must be paid
in the Member State of destination when excise products are moved
for commercial purposes; and
- the general principles governing the single market,
i.e. that excise duty on products moved for non-commercial purposes
by private individuals should always be paid in the Member State
where the goods were acquired."
1.4 The draft Directive itself has a number of elements,
designed to liberalise arrangements for cross-border movements
by private individuals and clarify and simplify procedures for
businesses involved in commercial cross-border movements. The
most significant of the changes are:
- in relation to commercial movements:
— new
assessment and penalty provisions for losses and irregularities
occurring during the movement of duty-paid excise goods; and
— widening the scope of persons classified
as "distance sellers" to include those traders located
in one Member State who personally move goods into the territory
of another Member State with the intention of selling the goods
on that territory;
- in relation to movements by
private individuals:
— introduction
of the concept of "distance-purchasing" of alcohol,
whereby products ordered by a private individual, for instance
by internet or telephone, for their own use would be taxed in
the Member State from which they are purchased, rather than in
the Member State in which the individual resides;
— removal of guide levels (minimum indicative
levels) available for Member States as an indication of a quantity
appropriate for personal use; and
— new provisions on the treatment of gifts
between private individuals located in different Member States.
The Government's view
1.5 The Financial Secretary to the Treasury (Ruth
Kelly) says:
"The Government is in favour of reducing administrative
burdens for business. However, the Government is opposed to the
Commission's 'distance-purchasing' elements of the proposal.
The proposals would result in the removal of an important 'indicator'
of whether the amount of excise goods is reasonable for personal
use. The proposed arrangements would significantly hinder UK
enforcement efforts, as smugglers, using the regulations to mask
their activities, would be potentially indistinguishable from
legitimate shoppers. The introduction of the arrangements requires
the unanimous agreement of all Member States. The Government
will firmly challenge these arrangements and is prepared to vote
against the proposal as it stands."
On the financial implications she continues:
"It is difficult to make an accurate estimate
of the potential financial implications of the proposal as these
would depend on a number of variables, including the behavioural
effects on consumers and businesses. However, if adopted, the
distance purchasing arrangements alone could put at risk a significant
amount of revenue from excise duties. Customs think that £2-3
billion or more is a reasonable estimate. This would be compounded
by measures that will hinder Customs anti-smuggling strategies,
which could have a negative effect on UK excise duties."
1.6 The Minister also says that the likely impact
on business does not warrant a Regulatory Impact Assessment.
But if development of the proposal implies a greater impact an
assessment will be completed.
Conclusion
1.7 This is a politically important document proposing
amendments of importance to revenue raising and the prevention
of smuggling but also of significance to individual citizens engaging
in cross-border shopping or small-scale trading.
1.8 We observe that the Minister makes no comment
in her Explanatory Memorandum about consultation on the Commission's
draft Directive. We are minded to recommend this document for
debate, but before doing so should like to hear from the Minister
as to the Government's intentions for consultation on the document.
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