3 Taxation
| (32401)
5037/11
+ ADD 1
COM(10) 769
| Commission Communication: Removing cross-border tax obstacles for EU citizens
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| Legal base | —
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| Document originated | 20 December 2010
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| Deposited in Parliament | 6 January 2011
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| Department | HM Treasury
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| Basis of consideration | EM of 18 January 2011
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| Previous Committee Report | None
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| To be discussed in Council | None planned
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| Committee's assessment | Politically important
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| Committee's decision | For debate in European Committee B
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Background
3.1 Amongst other matters the Europe 2020 Strategy emphasises
the importance of empowering EU citizens to play a full part in
the single market. The Commission's "EU Citizenship Report
2010: Dismantling the obstacles to EU citizens' rights"[13]
and its Communication on the Single Market Act[14]
both identified several cross-border taxation issues that the
Commission believes pose a barrier to EU citizens operating in
the single market.
The document
3.2 In this Communication the Commission identifies what it
perceives to be the most pressing cross-border tax problems that
EU citizens face and outlines possible solutions. Several of the
tax obstacles the Commission highlights are ones which it has
previously identified in the two earlier Communications. The present
Communication is accompanied by a staff working document that
provides more detail of instruments available to citizens for
resolving cross-border tax obstacles and of previous instances
where the Commission believes that Member States' tax laws have
been in conflict with EU law and have caused problems for citizens
in cross-border situations.
3.3 The tax obstacles identified by the Commission
in the Communication are based on complaints it has received from
EU citizens and relate to the following broad categories:
- the complexity of foreign tax
rules and the difficulties in obtaining information on them;
- the application of local taxes on foreign residents;
- the difficulties faced by cross-border workers
(that is, those who move abroad to work temporarily or permanently
or cross borders every day to go to work);
- cross-border property taxation issues;
- difficulties in obtaining relief from withholding
taxes on foreign moveable assets;
- cross-border pension taxation issues;
- cross-border inheritance tax issues;
- double registration taxes and/or circulation
taxes for cars;
- tax obstacles to cross-border shopping (including
e-commerce);
- difficulties faced by artists, musicians and
other independent service providers; and
- barriers hindering the recruitment of employees
from across borders.
3.4 Given the obstacles it outlines, the Commission
says that:
- EU action, for example closer
cooperation and coordination between Member States, is needed
to make the tax systems of different Member States more compatible
and to facilitate the ease of cross-border transactions for EU
citizens;
- it will actively pursue citizens' complaints
about Member States' tax laws and ensure greater transparency
and information, including through the EU citizens' advice services;
and
- it undertakes to continue monitoring Member States'
tax legislation and to systematically require (and monitor) the
rectification of any incompatibilities with EU law.
3.5 The Commission also highlights actions it
plans in order to address what it perceives to be the most important
unresolved tax problems faced by EU citizens in cross-border situations:
- presenting a detailed analysis
of double taxation problems in 2011 and working on a definitive
solution for 2012 (based on an impact assessment), such as a binding
dispute resolution mechanism between Member States;
- proposing solutions to cross-border inheritance
tax problems in 2011 (based on an impact assessment);
- proposing solutions in 2012 to problems arising
from taxation of cross-border dividend payments (based on an impact
assessment);
- proposing solutions concerning the cross-border
problems for EU citizens in the field of passenger car taxation;
- preparing future action based on stakeholder
responses to the Green Paper on the future of VAT, including the
One Stop Shop concept, which could help reduce tax and reporting
obligations on cross-border shopping;[15]
and
- launching a debate with Member States in 2011,
in a working group of tax experts, on ways of simplifying tax
compliance in cross-border situations.
The Government's view
3.6 The Exchequer Secretary to the Treasury (Mr
David Gauke), noting that the Communication is a discussion document
and, as such, makes no legislative proposals, says that:
- if any legislative proposals
in this area were to be put forward, they would need to be examined
carefully for any implications for UK tax policy;
- any such proposals would be subject to the usual
scrutiny process; and
- as tax matters, the Government would expect decisions
on such proposals within the EU to be subject to unanimity.
3.7 Noting that many of the issues addressed
in the Communication relate to direct taxation, the Minister comments
that:
- the Commission may bring forward
direct tax proposals if it believes it is necessary for the functioning
of the single market;
- the European Court of Justice has, however, consistently
held that direct taxation falls within the competence of Member
States, though Member States must nonetheless exercise that competence
consistently with EU law;
- the Government remains of the view that direct
taxation falls primarily within the competence of Member States;
and
- it would consider any proposal from the Commission
in that light.
In relation to the Commission's advocacy of coordination
and cooperation between Member States to address issues such as
double taxation and incompatibilities between different tax systems
the Minister says that:
- the Government has expressed
its continued commitment to addressing double taxation where it
occurs and remains willing to engage with the Commission and other
Member States on this issue; however
- it would require any proposals for action at
EU level to be supported by clear evidence that there are problems
which cannot be effectively dealt with by existing Directives,
bilateral agreements and countries' unilateral relief arrangements.
3.8 The Minister tells us that the staff working
document accompanying the Communication covers several issues
where there are ongoing infraction or court proceedings against
the UK or other Member States. He comments that:
- the Government would be cautious
of any policy development in these areas that appeared to pre-empt
the outcome of the legal process; and
- there is a risk that the European Court of Justice
could come to a different conclusion, which would then have primacy
over any policy communication by the Commission.
3.9 Finally the Minister says that the Government
will continue to engage with the Commission as this work develops
and will consider the details of any communications or proposals
on specific aspects of cross-border taxation it brings forward.
Conclusion
3.10 This Communication deals with important
issues and touches on potentially troublesome matters. We note
both that it is, as the Minister says, a discussion document and
that the Government is taking a robust stance in relation to any
potential encroachment on national tax sovereignty. Nevertheless
we recommend the document for debate in European Committee B so
that Members may reinforce the need to avoid any encroachment
on national tax sovereignty.
13 (32139) 15936/10: see HC 428-xiii (2010-11), chapter
1 (19 January 2011). Back
14
(32132) 13977/10: see HC 428-x (2010-11), chapter 11 (8 December
2010). Back
15
(32317) 17491/10 + ADD 1: see HC 428-xiii (2010-11), chapter 7
(19 January 2011). Back
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