No C 53/58 Official Journal of the European Communities 3. 3. 80 
Opinion on the proposal for a Council Directive on the application to collective invest­
ment institutions of the Council Directive concerning the harmonization of systems of 
company taxation and of withholding taxes on dividends 
The text referred to the Committee has been published in Official Journal of the Euro­
pean Communities No C 184 of 2 August 1978 page 8. 
A. LEGAL BASIS FOR THE OPINION 
On 2 August 1978 the Council referred the abovementioned proposal to the Economic 
and Social Committee in accordance with Article 100 of the Treaty establishing the 
European Economic Community. 
B. OPINION OFTHE ECONOMIC AND SOCIAL COMMITTEE 
The Economic and Social Committee prepared its opinion on the above matter at its 
172nd plenary session held in Brussels on 24 and 25 October 1979. 
The full text of the opinion is as follows: 
THE ECONOMIC AND SOCIAL COMMITTEE, 
Having regard to the Treaty establishing the Euro­
pean Economic Community, and in particular 
Article 100 thereof, 
Having regard to the request made by the Council 
of the European Communities on 2 August 1978 for 
an opinion, 
Having regard to the decision taken by the Commit­
tee Bureau on 18 October 1978 instructing the Sec­
tion for Economic and Financial Questions to draw 
up an opinion on the matter, 
Having regard to the Economic and Social Commit­
tee's opinion of 29 September 1976 on the proposal 
for a.Council Directive concerning the harmoniza­
tion of systems of company taxation and of with­
holding taxes on dividends (l), 
Having regard to the opinion of the Section for 
Economic and Financial Questions adopted at its 
53rd meeting on 18 September 1979, 
Having regard to the oral report, submitted by the 
rapporteur, Mr Fredersdorf, 
Having regard to the discussions at its 172nd plen­
ary session held on 24 and 25 October 1979 (meeting 
of 24 October 1979), HAS ADOPTED THE FOLLOWING OPINION 
unanimously: 
1. Preliminary remarks 
1.1. The Committee is pleased to see that the Com­
mission is now proposing to bring collective invest­
ment institutions within the scope of the (still pend­
ing) Directive concerning the harmonization of sys­
tems of company taxation and of withholding taxes 
on dividends (2). The Commission is thus doing what 
the Economic and Social Committee expressly 
asked it to do in its opomopm of 29 September 1976 (3). 
The Committee would reiterate the view voiced in 
that opinion, namely that both Directives should 
enter into force at the same time, because it is im­
possible to accept that collective investment institu­
tions should be excluded from measures to harmon­
ize systems of company taxation. 
1.2. The Committee regrets that the Council has 
still failed to discuss and adopt: 
(a) the proposal of 16 January 1969 for a Directive 
on the common tax arrangements applicable to 
parent and subsidiary companies in different 
Member States (4), and 
(b) the proposal of 16 January 1969 for a Directive 
on the common tax arrangements applicable to 
mergers, scission and contribution of assets in­
volving companies in different Member 
States (5). 
(») OJNoC278,24. 11. 1976. O OJNoC253, 5. 11. 1975, p. 2. 
(3) OJNoC278,24. 11. 1976. 
(4) OJ No C 39, 22. 3. 1969. 
(5) OJ NoC39, 22. 3. 1969 
3. 3. 80 Official Journal of the European Communities No C 53/59 
Both proposals are referred to in the list of defini­
tions given m Article 2 of the proposal for a Direc­
tive concerning the harmonization of systems of 
company taxation, and therefore have to be adopted 
before the latter. The Committee therefore urgently 
requests the Council to discuss and adopt these two 
1969 proposals without delay so that progress to­
wards the harmonization of company taxation is no 
longer impeded on that score at least. 
1.3. The Committee approves the proposal, subject 
to the comments set out below: 
2. General comments 
2.1. Collective investment institutions (CI Is) 
should not be discriminated against but should, on 
the contrary, be encouraged. This is the goal pin­
pointed by the Commission but the proposal falls 
clearly short of it. The permanent or temporary 
financial discrimination and administrative difficul­
ties which the proposal will entail for CI I partici­
pants are considered by the Committee to be unac­
ceptable. It will therefore be necessary not only to 
elimentate this discrimination but also to provide 
for relief to encourage saving through CI Is in keep­
ing with the proposal's object. 
3. Specif ic comments 
3.1. Article 2 
3.1.1. The definition of 'collective investment in­
stitutions' does not offer adequate legal certainty at 
the Community level in the Committee's view. The 
conditions which CIIs must fulfil, namely that they 
must make 'offers to the public' and must observe 
'the principle of spreading the investment risk', are 
vague from the legal point of view and the Commit­
tee considers that they are not necessary. The tax 
claim should be adequately secured for example by 
Article 2 (2), which stipulates that dividends re­
ceived by a CI I must be attributed for tax purposes 
to the participants in the same or the following year 
if they are to count as redistributed dividends. The 
Committee therefore thinks that additional criteria 
of the kind mentioned above should be dispensed 
with and that a suitable Annex would suffice. 
Moreover, this would avoid the unnecessary perfec­
tionism, which is also reflected in the derogation in 
Article 3. 3.1.2. The proposal states that dividends may not 
be placed to reserve for a period of more than five 
years. A time limit was approved in principle in the 
Committee's opinion of 29 September 1976 on the 
harmonization of systems of company taxation, 
though the Committee did request that the time 
limit should, if possible, be longer than five years. 
Otherwise, there is a risk that CII participants will 
forfeit their tax credit. 
3.2. Article 3 
3.2.1. So that citizens in all Member States will 
know where they stand legally, the Committee 
thinks that the system of bilateral and multilateral 
agreements should be abandoned. It would then be 
possible, in conjunction with Article 2 (see last sen­
tence of 3.1.1.), to dispense with the perfectionist 
provision for an agreement in the case of CIIs 
whose capital is not raised by means of difficult-to-
define 'offers to the public'. 
3.2.2. The Committee therefore thinks that uni­
form derogations applicable to the whole of the 
Community should be laid down in the Annex re­
ferred to in Article 2, which might have to be 
amended and expanded accordingly. 
3.3. Article 4 
3.3.1. Three procedures exist side-by-side, viz.: 
(a) tax credit for CII participants (paragraph 1); 
(b) set-off for CIIs (paragraph 2); 
(c) repayment to CIIs (Article 10). 
This makes matters neither clear nor simple. These 
various procedures might inevitably lead to different 
dividend distribution practices, which would rule 
out the comparability necessary for an evaluation of 
CIIs. 
The Committee therefore considers that a simple, 
uniform and practical procedure is called for. 
No C 53/60 Official Journal of the European Communities 3. 3. 80 
3.3.2. Viewed in conjunction with Article 12 (un­
der which the basis of assessment is to be the divi­
dends minus the costs incurred by the CI I), the 
provisions of paragraph 3 place CII participants at a 
clear disadvantage compared with shareholders. In 
the case of shares, no costs, such as custody or other 
bank charges, are deducted from the dividends in 
calculating the basis of assessment. The Committee 
therefore thinks that the tax credit must be based in 
the gross dividend without deduction of 'propor­
tionate costs'. Furthermore, the CII participant 
should be able to set off the administrative costs as 
expenses in his income tax return. 
3.3.3. The Committee considers that discrimina­
tion against CII participants from the liquidity 
angle can only be precluded if the participant's tax 
credit is reflected in the unit price the minute the 
dividends are received by the CII. This is most read­
ily ensured if the tax credit is repaid to the CII im­
mediately. Otherwise, the CII participant will be 
penalized and will not enjoy the promised relief or 
concession. The perfectionistic safeguarding of the 
tax claim must take second place here. 
3.3.4. The words 'other than a CII' in Article 4.1., 
should not imply that where income is passed from 
one CII to a second the tax credit is denied to the 
participants of the second CII. 
3.4. Articles 5 to 9 
3.4.1. In the Committee's view the use of tax credit 
in connection with the withholding tax is extremely 
irksome especially as Article 8 in conjunction with 
Article 7 will practically force the Member States to 
levy such a tax in all cases. This gross discrimina­
tion vis-d-vis fixed-interest investments, which are 
not subject to withholding tax in several Member 
States and will not be in the future either, is dia­
metrically opposed to the proposal's object. 
3.4.2. The Committee would therefore reiterate the 
proposal made by the Committee in its opinion of 
29 September 1976 under point 2.12.1., viz. 
'The Member States should find ways of mitigat­
ing the hardship that a withholding tax of 25 % 
might have on shareholders with small incomes.' 
What holds good for shareholders must apply all the 
more to CII participants who, by the very nature of things, are mostly people with small incomes. Be­
cause of the special features of saving through CIIs, 
it is not enough, however, to provide for exemption 
of CII participants on the basis of a certificate or the 
like, as in the case of shareholders. This red tape by 
itself would be bound to make saving through CIIs 
less attractive than saving through fixed-interest or 
other investments where no withholding tax is lev­
ied. Therefore withholding tax should be dropped 
completely in the case of CIIs. 
3.4.3. Reference should be made to 3.3.2. and 
3.3.3. in connection with the question of net divi­
dends which arises again in Article 9. 
3.5. Article 10 
3.5.1. This matter has already been dealt with in 
essence in 3.3. 
3.5.2. The procedure set out in this Article is to be 
recommended in general since the concession al­
ways comes into operation prior to the redistribu­
tion of the dividends to the participants, and the 
basic object of promoting rather than penalizing in­
vestment in CIIs can be achieved most readily in 
this way. 
3.5.3. The 'proportionate costs' provisions hamper 
this procedure and should be rejected. These costs 
cannot be calculated before the end of the year. 
3.6. Article 12 
3.6.1. These provisions, taken together with those 
laid down in Articles 4 and 10, are emphatically re­
jected by the Committee because they penalize sav­
ing through CIIs (cf. 3.3. and 3.5.3.). The Committee 
therefore feels that Article 12 should be deleted there­
by making it possible to write off the costs to the 
fund's capital. 
3.6.2. The taking into account of the 'proportion­
ate costs' will also have unacceptable repercussions. 
3. 3. 80 Official Journal of the European Communities No C 53/61 
On account of the time-lag the proportion of costs 
and thus the cost allocation to participants will de­
pend on the numbers of participants on the relevant 
The full text of the opinion is as follows: 
THE ECONOMIC AND SOCIAL COMMITTEE, 
Having regard to the decision taken by its Bureau 
on 1 December 1977 instructing the Section for 
Regional Development to prepare a study on the 
role and influence of local and regional authorities 
and socio-economic organizations in the field of the 
common regional policy, 
Having regard to its decision of 5 April 1979 to 
transform this study into an opinion pursuant to the 
fourth paragraph of Article 20 of the Rules of Proce­
dure, 
Having regard to the opinion issued by the Section 
for Regional Development on 14 September 1979, 
Having regard to the report submitted by the rappor­
teur, Mr Ventejol, date. A change in participants will have an intolera­
ble arbitrary effect. 
Having regard to the discussions at its 172nd plen­
ary session held on 24 and 25 October 1979 (meeting 
of 25 October 1979), 
Whereas the election of a Parliament by universal 
suffrage shows the Community's determination to 
continue working towards European union; whereas 
this goal will not be attained in full without the in­
volvement of an ESC representing all socio-econ­
omic interest groups in the Community, 
Whereas enlargement is going to confront the Com­
munity with new problems stemming inter alia from 
greater regional imbalance; whereas it is therefore 
vital for enlargement to be accompanied by a 
strengthening of Community ties, 
Whereas the common regional policy, because it in­
volves concrete projects in a precise location, is well 
suited to generating public awareness of Commun­
ity solidarity, Done at Brussels, 24 October 1979. The Chairman 
of the Economic and Social Committee 
R. VANNI 
Opinion on the role and influence of local and regional authorities and socio-economic 
organizations in the field of the common regional policy 
A. LEGAL BASIS FOR THE OPINION 
At its 167th plenary session held on 4 and 5 April 1979 the Committee, acting on a 
proposal from the Bureau, decided to deliver an opinion on the abovementioned sub­
ject on its own initiative. 
B. OPINION OF THE ECONOMIC AND SOCIAL COMMITTEE 
The Economic and Social Committee prepared its opinion on the above matter at its 
172nd plenary session held in Brussels on 24 and 25 October 1979.