Documents considered by the Committee on 21 November - European Scrutiny Committee Contents


12   Customs and taxation

(a)

(34197)

13265/12

COM(12) 464

(b)

(34202)

13346/12

COM(12) 465


Amended draft Regulation establishing an action programme for customs in the European Union for the period 2014-2020 (Customs 2020) and repealing Decision No 624/207/EC

Amended draft Regulation establishing an action programme for taxation in the European Union for the period 2014-2020 (Fiscalis 2020) and repealing Decision No 1482/2007/EC

Legal base(a) Article 33 TFEU; co-decision; QMV

(b) Articles 114, 197 and 212 TFEU; co-decision; QMV

DepartmentHM Revenue and Customs
Basis of considerationMinister's letter of 10 November 2012
Previous Committee Report(a) and (b) HC 86-xiii (2012-13), chapter 12 (17 October 2012)
Discussion in CouncilNot known
Committee's assessmentLegally and politically important
Committee's decision(a) and (b) Not cleared; further information requested

Background

12.1  The Customs 2013 Programme is an EU action programme, which provides funding for customs activities which support the effective functioning of the single market and fall within the exclusive competence of the EU, including:

·  implementation of the Modernised Customs Code;

·  introduction of a pan-EU paperless customs environment; and

·  providing a legal base and EU funding for the maintenance and development of EU communication and information exchange systems such as the New Computerised Transit System and the Common Communications Network (CCN/CSI).

12.2  The Fiscalis 2013 Programme is an EU funded programme which is designed to improve the operation of taxation administration systems in the single market, through strengthened administrative cooperation between Member States and candidate countries, their administrations and officials. Both programmes end on 31 December 2013.

12.3  In November 2011 the Commission proposed creation of a successor to the Customs 2013 and Fiscalis 2013 programmes, by merging both into a single successor programme, 'FISCUS', which would run from 2014 to 2020. FISCUS would be an administrative cooperation programme, which aimed to share best practice and increase cooperation between Member States and candidate countries, their administrations and officials. Following a decision of the Council and the European Parliament that there should be two separate legal instruments, the Commission withdrew its original proposal and replaced it with two amended draft Regulations, documents (a) and (b).

12.4  The draft Regulation, document (a), is to create a Customs 2020 programme, the purpose of which is to contribute to the Europe 2020 Strategy for smart, sustainable and inclusive growth, by strengthening the functioning of the EU's single market and its customs union. The new programme will also contribute to the establishment of a digital single market ('Digital Agenda for Europe'), the overall aim of which is to deliver sustainable economic and socials benefits from a digital single market. The budget proposed for the seven-year period is €548,080,000 (£435,888,000), to be allocated through annual work programmes drawn up by the Commission each year, on the basis of agreed priorities. This represents a 45% increase on the Customs 2013 programme.

12.5  The draft Regulation, document (b), is to create a Fiscalis 2020 programme, the purpose of which is to contribute to the Europe 2020 Strategy for smart, sustainable and inclusive growth, by strengthening the functioning of the tax systems within the Member States and the EU's single market. It will also have the objective of driving technical progress and innovation in national tax administrations with the aim of developing e-tax administrations. The new programme will also contribute to the establishment of a digital single market. The budget proposed for the seven year period is €234,370,000 (£186,394,000), to be allocated through annual work programmes, drawn up by the Commission each year, on the basis of agreed priorities. This represents an increase of 28% on the Fiscalis 2013 programme.

12.6  When we considered these revised proposals last month we heard, in relation to document (a), that:

·  the Government supports the ongoing work and outputs of the present Customs 2013 programme;

·  the UK has benefited from participation and funding for a range of cooperation activities and the maintenance and development of EU communication and information exchange systems;

·  the Government welcomes the specific orientation of the measures to improve the functioning of the customs union — this supports the important work on the successor to the Modernised Customs Code (the Union Customs Code) and facilitating legitimate trade, which must be the first priority;

·  the Customs 2020 proposal contains a number of new activities, including funding for EU expert teams and new models of IT procurement and management of services at EU level;

·  the Government would be querying the purpose of these provisions and would seek to ensure that participation in programme activities remains voluntary, so that Member States retain flexibility to engage in EU-level activities which meet their needs; and

·  the Government does not support the proposed 45% increase in the programme budget at a time of public spending restraint and will argue for a freeze in the budget, along with a re-prioritisation of activities to focus on those of greatest benefit to Member States.

12.7  On JHA implications of the Customs 2020 proposal we heard that:

·  the proposal includes a specific priority 'to fight fraud';

·  the nature of the 'fraud' in question is not specified and, while it is possible the term is intended to refer, in the main, to civil customs infringements, it is capable of describing criminal activities;

·  the Government takes the view that measures establishing cooperation between competent authorities for the purpose of the prevention, detection and investigation of criminal offences should be adopted under Article 87 TFEU and consequently that the UK JHA opt-in is engaged;

·  the Government would seek to clarify the Commission's position during negotiations, with a view to securing amendments to the text; but

·  it is proceeding on the basis that the opt-in Protocol will apply.

We were reminded that the Government had notified the Council that it wished to opt in to the original FISCUS proposal, which this measure seeks to partly replace.

12.8  In relation to document (b), we heard that:

·  the Government takes the view that tax matters remain primarily for Member States; and

·  as the Fiscalis programme is, however, focused on improving administrative co-operation and sharing best practice between Member States, some EU-level action to strengthen administrative practices in the single market is appropriate and justified.

12.9  On the policy implications of the proposal we were told that the Government supports the ongoing work and outputs of the present Fiscalis programme, saying that the UK has benefited from participation and funding for a range of cooperation activities and the maintenance and development of EU communication and information exchange systems. In more detailed comments we heard that:

Legal base

·  the amended proposal cites three articles, Articles 114, 197 and 212 TFEU, as the legal bases to support activities under the Fiscalis programme;

·  in its explanatory memorandum the Commission says that the use of the legal bases will allow for the development, operation and maintenance of information exchange systems within the framework of administrative cooperation and facilitate cooperation with third countries, whilst ensuring the voluntary nature of the programme;

·  the Government has concerns about the appropriateness of the legal bases, especially Article 212 which could extend the remit of the programme into new areas, such as concluding agreements on technical cooperation with third countries;

Scope

·  the proposed Fiscalis 2020 programme is broader in scope than the Fiscalis 2013 programme;

·  in addition to VAT, excise duties on alcohol and tobacco and taxes on energy products, it would also cover administrative cooperation and best practice sharing on all taxes falling within the scope of Article 2(1)(a) of the Mutual Assistance for Recovery of Claims Directive;[61]

·  the Government does not think the programme should be extended further into direct tax matters;

·  it will be seeking programme resources to be prioritised towards administrative cooperation and best practice sharing on cross-border VAT and excise matters; and

Budget

·  the Government does not support the proposed 28% increase in the programme budget at a time of public spending restraint and will argue for a freeze in the budget, along with a re-prioritisation of activities to focus on those of greatest benefit to Member States.

12.10  On JHA implications we were told that:

·  the Fiscalis proposal contains a specific priority 'to fight against tax fraud, tax evasion and tax avoidance';

·  the Government takes the view that measures establishing cooperation between competent authorities for the purpose of the prevention, detection and investigation of criminal offences should be adopted under Article 87 TFEU, and consequently that the UK JHA opt-in is engaged;

·  the Government would seek to clarify the Commission's position during negotiations, with a view to securing amendments to the text; but

·  it is proceeding on the basis that the opt-in Protocol will apply.

We were reminded again that the Government had notified the Council that it wished to opt-in to the original FISCUS proposal, which this measure seeks to partly replace.

12.11  We said that:

·  we had been told, in relation to JHA matters in the FISCUS proposal, that the Government was hopeful of textual changes that would obviate the need for an Article 87 TFEU legal base and a JHA opt-in decision;

·  the implication of the Government's comments on JHA aspects of the new proposals seemed to be that this hope had been extinguished;

·  we wished to know, in the light its previous intention to notify the Council that it wished to opt in to the FISCUS proposal, whether the Government had the same intention for the new proposals;

·  if so, had Parliament been, or would it be, informed of the decision, with a written statement, as undertaken by the Minister for Europe (Mr David Lidington);[62]

·  although we had been told that the Government thought that an Article 114 TFEU legal base for the FISCUS proposal was inappropriate and that an Article 113 or Article 115 TFEU legal base would be more appropriate, the Government appeared to be content with an Article 114 TFEU legal base for the Fiscalis 2020 proposal, document (b).

We concluded that, before considering the new documents again, we wanted to have, in addition to the Government's comments on our observations above, information about progress in the negotiations in addressing the budgetary and widened scope points drawn to our attention. Meanwhile the documents remained under scrutiny.[63]

The Minister's letter

12.12  The Economic Secretary to Treasury (Sajid Javid) now tells us, in relation to the Customs 2020 draft Regulation, document (a), that:

·  in general terms, Council working group negotiations on the proposal are progressing steadily;

·  the Government has been successful in adding text to the proposal which highlights the voluntary nature of the programme;

·  the budget negotiations for the programme will take place in parallel as part of the Multiannual Financial Framework discussions and the Government will continue to argue for a freeze to the programme budget and a re-prioritisation of existing work;

·  it has received broad support for an explanatory text which clarifies the remit of the programme and would remove the JHA obligations — however, it is possible that the Government will not gain enough support to bring about these changes; and

·  it is especially unlikely that this will be achievable before the opt-in deadline of 30 November ¯ therefore, as a contingency, the Government will be deciding whether to opt-in to this proposal should the JHA obligations remain in the text at 30 November.

12.13  In relation to the Fiscalis 2020 draft Regulation, document (b), the Minister says that:

·  negotiations on the proposal have progressed favourably;

·  the Government has secured a clear reference to the voluntary nature of the programme and also additional text which clarifies the remit of the programme;

·  with some further minor amendments, which it is optimistic about achieving, the Government considers that this would guard against the possibility of the programme extending further into the area of direct tax;

·  the Government proposal to remove the text which gives rise to JHA obligations has been accepted and included in a revised text ¯ however, the proposal remains under negotiation and the Government will need to continue with the opt-in process as it is unlikely the final text will be agreed before the opt-in deadline of 4 December; and

·  as with the Customs 2020 proposal, as a contingency, the Government will decide whether to opt-in should the JHA aspects remain in the text at 4 December.

The Minister continues that:

·  legal bases for the Fiscalis 2020 proposal have not yet been discussed;

·  the Government remains concerned, however, about the legal bases cited for the programme ¯ it is concerned with the appropriateness of all legal bases cited for this proposal, including Article 114 TFEU; and

·  it awaits further information from the Commission on the rationale behind these legal bases.

Conclusion

12.14  We are grateful to the Minister for this response to our last Report on these proposals, which shows some progress, and look forward to hearing in due course about more certain favourable developments. However we note that the Minister has not addressed our question as to whether Parliament has been, or will be, informed of possible JHA opt-in decisions, with a written statement, as undertaken by the Minister for Europe (Mr David Lidington).[64] So, before considering the documents again, we should like to have, in addition to the Government's further progress reports, a speedy answer to that specific question. Meanwhile the documents remain under scrutiny.


61   Council Directive 2010/24 EU: see http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:084:0001:0012:EN:PDF. Back

62   See HC Deb, 20 January 2011, col. 51WS. Back

63   See headnote. Back

64   See HC Deb, 20 January 2011, col. 51WS. Back


 
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Prepared 5 December 2012