Select Committee on European Communities Fifteenth Report



CBIConfederation of British Industry
CFCControlled Foreign Corporation
ECEuropean Community
ECBEuropean Central Bank
ECOFINEconomic and Finance Council of Ministers
EMUEconomic and Monetary Union
ERMExchange Rate Mechanism
EUEuropean Union
GDPGross Domestic Product
IGCInter-Governmental Conference
OECDOrganisation for Economic Co-operation and Development
MEPMember of the European Parliament
QMVQualified majority voting
SLIMSimpler Legislation for the Internal Market
SMEsSmall and medium-sized enterprises
UNICEUnion of Industrial and Employers' Confederations of Europe
VATValue added tax
WTOWorld Trade Organisation

Technical terms

Note: Terms defined elsewhere in the glossary are shown in italics

Arms length pricingSee transfer prices
Beneficial owner Individual ultimately entitled to interest or dividends paid on a security
BondFixed-interest security issued by financial institutions, companies, or governments
Call optionContractual provision permitting the issuer of a bond, under certain circumstances, to repay the bond at par value
Captive insurance companyInsurance company acting only on behalf on the company which owns it


Co-existence model (In the context of draft Directive 8781/98) Scheme by which Member States would be able to choose either to introduce a withholding tax or to implement the reporting option
Competition(As defined in Ruding report) "Process where, in contrast to tax co-ordination, the interplay of market forces might achieve similar goals (generally that of convergence)"
Convergence(As defined in Ruding report) "Process or series of developments where Member States' tax bases, rates, systems, revenue yields etc become closer together, irrespective of whether this happens as a result of EC co-ordination or the interplay of market forces"
Co-ordination (As defined in Ruding report) "Any action or measures taken by the Commission or some or all [Member States] to influence the tax practices of [Member States] (such action might take the form of Directives, conventions, recommendations, guidelines, etc)"
CustodianEconomic operator who collects interest on behalf of investors
Destination basis(As applied to VAT) Arrangement whereby internationally-traded goods are taxed in the country to which they are imported
Effective incidence of taxWhere the ultimate burden of taxation is borne, as distinct from where the formal tax liability lies: thus, for example, the effective incidence of a business tax which is passed forward in higher product prices may be on consumers
Effective tax rateConcept used to make a better comparison of the overall tax burden over time or between countries, whereby the tax rate at each point in time or in each country is adjusted to reflect differences in the tax base
EurobondBond denominated in a currency other than that of the country in which it is issued, usually underwritten by an international syndicate
Grandfathering (In the context of the proposed withholding tax) Provision that the new withholding tax would apply only to bonds issued after a certain date, leaving existing bonds outside its scope
Grossing up paymentAdditional payment made by an issuer of bonds to compensate an investor for a withholding tax levied on the interest flows paid to the investor
Harmonisation(As defined in Ruding report) "The occurrence of greater convergence as a result of action at the Community level by the Commission or other agencies of the Community such as the European Court of Justice. 'Full harmonisation' describes the situation where identical tax bases, rates, systems etc are proposed or achieved among Member States. By contrast, 'partial harmonisation' involves something less than identical bases, rates, systems, etc (such as approximation of the base, minimum or maximum statutory tax rates)"
Headline rateUnadjusted or published rate of taxation (as opposed to the effective tax rate)
IssuerCompany or syndicate that organises the raising of capital by issuing bonds or other securities
Information system(In the context of draft Directive 8781/98) See reporting option
Origin basis(As applied to VAT) Arrangement whereby internationally-traded goods are taxed in the country from which they are exported
Paying agent Economic operator who is responsible for the payment of interest for the immediate benefit of the beneficial owner of a security
ProportionalityThe principle that the legislative means should be no more than the strict minimum required to achieve a particular end
Reporting option(In the context of draft Directive 8781/98) Proposed arrangement whereby a Member State where interest was earned would report payments of interest to the tax authorities of the recipient's Member State of residence, so that the latter could levy appropriate taxes
Tax baseAmount (of income, sales etc) on which tax is levied
Tax ratePercentage rate, or other tariff, applied to the tax base to determine the amount of tax due
Transfer pricesHypothetical prices assigned to value notional transactions between the parts of a single company which are based in different countries so as to calculate the amount of profit earned in each country. In arms length transfer pricing procedures, transactions are valued at the price which would have been charged if transaction had been between unrelated companies
Transitional régime(In the context of EC VAT policy) The arrangements for the taxation of goods in trade between Member States which were introduced as a consequence of the abolition of fiscal controls at intra-EU frontiers
Withholding tax(In the context of draft Directive 8781/98) Tax deduction made at source from payments of interest

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