Brussels, 23/05/2001 (Agence Europe) - On Wednesday, the European Commission adopted its communication on the European Union's future strategy regarding tax policy. The adoption was preceded by a lengthy debate within the College of Commissioners that led to certain changes to the initial draft, without affecting its substance. The paper, proposed by Commissioner Frits Bolkestein, responsible for taxation, recommends greater tax coordination between Member States, together with maintaining "a reasonable degree of tax competition" within the EU. It proposes greater harmonisation of indirect taxation, notably VAT, but clearly opposes harmonisation of direct tax (income for legal and natural persons). Invoking the conclusions of the European Summit of Lisbon, which is to catch-up the American economy and make of the EU the most competitive economy in the world by 2010, the Commission wants to focus the Union's tax strategy on problems facing companies operating in the Internal Market. Mr. Bolkestein recommends bringing fair competition between Member States into play, in a way that reminds us, for example, of that that exists between American States. This competition remains, to his eyes, within the scope of measures that the Primarolo Group recommended to combat unfair competition. These measures are, moreover, taken into account by the services of Commissioner for competition Mario Monti.
Nevertheless, Bolkestein's proposal, the general spirit of which was the subject of a debate in February (see EUROPE of 8 February, p.8), was altered following an internal debate. This cleavage, that preempts the difficulties the proposal could run up against both in Council and in Parliament, separates, on the one hand, those in favour of tax competition, among whom Mr. Bolkestein himself, and, on the other, those in favour of a more sustained harmonisation of taxation, defended by France's Prime Minister. The former want to correct the imperfections of company taxation that harms competition (dual taxation, excessive costs), whereas the latter would like to reduce the differences in the level of taxation between Member States. Commissioner Pascal Lamy, responsible for external trade, defended himself for wanting full and complete harmonisation, but he spoke of his serious doubts over the concept of tax competition, which he considers hardly compatible with the spirit of Community integration and the European social model. According to a source close to Mr Lamy, other Commissioners have intervened for sections of the text referring to tax competition to be withdrawn. Among them are Pedro Solbes, Gunter Verheugen, Michael Schreyer and Poul Nielson, while David Byrne and Margot Wallström have supported the original document. Furthermore, Mr Bolkestein defended himself over practising a policy of complacency against the United Kingdom, which it in an election period. In the rush, he announced that the Commission would present coordinated actions to fight against tax barriers and failings in the field of company taxation and the taxation of tobacco, alcohol and vehicles. Moreover, he warned the Member States that the European executive intends to initiate, more promptly, legal actions when their practices or taxation regulations are contrary to the Treaty. Deploring the unanimity rule which could block his strategy, he raised the possibility of resorting to "enhanced cooperation" and non-binding approaches such as the formulation of recommendations, rather that legislative proposals.
The new Commission tax strategy follows several objectives:
Carry out a study into the difference in company taxation and tax barriers within the EU (double taxation, excessive administrative costs);
Fight against tax barriers to provision of cross-border pensions;
Prepare a Communication on the taxation of vehicles transferred from one Member State to another;
Imminently present, in addition to the Directive already proposed on tobacco taxation, a report on alcohol taxation;
Computerise excise system to avoid fraud and simplify formalities;
Implement its strategy in terms of VAT presented in June 2000 (see EUROPE of 15 June, p.7). Mr Bolkestein stated on Wednesday that "any possibility for alignment between the rates is positive in the field of VAT".