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DOCUMENTS "COM"
COM (77)338
Vol.1977/0113

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(77)338 final .
\ Brussels,27July 1977
PROBLEMSPOSEDBYEXCISEHARMONISATION -
(Communication fromtheCommissiontotheCouncil)
COM(77)338final.

PROBLEIISPOSEDBYEXCISEHAHiONISATION
Communication fromtheCommissiontotheCouncil
i
i

PROBLEMS POSEDBYEXCISEHAFETONISATIOU
Communication fromtheCommission +otheCouncil
1.On7Harch,1972,theCommissionsubmitted ,totheCounciladraft
directive(the"Framework"directive)togoverntheharmonisatioh of
consumertaxesotherthanVAT^"*"^.Theproposalprovidedthatbythetime
oftheabolitionoffiscalfrontiers,IlemberStateswouldapplyfive,and
onlyfive,excises-onmineraloils,manufactured tobacco,alcohol,beer,
andwine.Onthesamedate,theCommissionalsosubmittedproposalsfor
harmonisingtheexcisesonalcohol,beerandwine,togetherwithadraft
directivelayingdownrulesfortheapplication ofexcisesonmixturesof
beer,wineoralcohol,andadraftCouncildecisionforthesettingupof
aregulatorycommitteeonexciseduties,todealwithmeasuresfor
implementing theexciseharmonisation directives.
2.On9August1973.theCommissionsubmittedadraftdirectivefor
(2)harmonisingexcisesonmineraloilsv'.
3.Asregardsharmonisation ofexcisesonmanufactured tobacco,thefirst
directiveestablishing theprinciplesonwhichtheharmonisedexciseshould
belevied,togetherwithafirststageintheharmonisation process,was
adoptedbytheCouncilon19December1972^\aspartofaseriesof
Communitymeasuresontobacco.TheCouncilisatpresentexaminingtwo
furtherproposalsontobaccoexcises,oneforthedefinitionoftobacco
(A)\tJ a rtilproducts ',andoneforthecriteriatoapplyinasecondstageof
(5)harmonisation •Thiscommunication isnotthereforeconcernedwiththe
questionofharmonisation ofexcisesontobacco,
4.ThevariousexciseproposalsstemmedfromtheCouncilresolutionof
-'(6) 1
ir\h1V/-r> 11__ «i•«22Ilarch19(1forthegradualachievementofeconomicandmonetaryunion.
^OJC.43-29.4.1972 ..^ojc.92-31.10.1973
(l)wy0JL.303-31.12.1972^ojc..72-27.6.1974 _ .v
(5joJC.45-27.2.1976^OJC.28-27.3.1971 •/•

Theproposals were designed ,toachieve aharmonised system ofexcise
taxation throughout theCommunity ,both astotheexcises tobelevied and
astotheir structures .-"'Wiey*r:on5ti'tut'etl"-a~ first -sterr-towards the
ultimate aim of .the .abolition of ,fiscal frontiers and.free movement of
goods andpersons throughout theCommunity .However ,asthese initial
proposals related only tothestructures oftheexcises ,theliberty of
Member States tofixthe levels ofexcise rates wasunaffected .Avariety
•oftransitional provisions wore included intheproposals ,tofacilitate
\
theadaptation oftheexcises inindividual Member States totheproposed
harmonised systems .
5.With theexception ofthedraft wine directive andthedraft directive
onmixed beverages ,alltheexcise proposals received favourable opinions
fromtheEconomic andSocial Committee andtheEuropean Parliament ^^.
TheParliament regarded themixed beverages proposal aspremature .As
regards thedraft wine directive ,theEconomic andSocial Committee
expressed doubts astoitsutility inadvance oftheabolition offiscal
frontiers ,andtheEuropean Parliament ,proposed that harmonisation of
excises onwine should beachieved bytheir abolition rather than (as
proposed bytheCommission )bytheir extension tothose Member States
which didnot apply this excise .
6.Inresponse totheopinions ,theCommission withdrew theproposal on
mixed beverages andmade some small amendments totheproposals onalcohol
andonmineral oils .However ,theCommission maintained unchanged the
proposal forthe introduction inallMember States ofanexcise onwine ,
for reasons ofcompetition . .
7.Todate ,little progress hasbeen made with these proposals atCouncil
level .This hasinpart been dxietotheneed recently togive priority to
discussions ontheSixth VATDirective ,inorder tomeet the1January 1978
deadline forlinking part oftheCommunity 'sownresources toVAT .However
'l" '
^'OJC.36-1.6.1973 andOJC.109-19.9.1974
(2)oJC.40-25.4.1974 andOJC.32-11.2.1975 .

even when allowance hasbeen made fortheVATwork load ,Council
discussions ontheexcises have been limited ,andtheresults ,meagre#
8.The draft framework directive and those forharmonising the excises on
beer ,wine ,andalcohol ,together with theExcise Committee decision ,were
discussed inthe Council ona-number ofoccasions atthe level ofexperts
andofpermanent representatives .However ,noagreement could bereached
amongst thedelegations .Late in1974 »areport onthis group ofproposals
was submitted bythePermanent Representatives Committee fordiscussion at
Ministerial level ,buttheproposals have notasyetbeen examined bythe
Council .Inaddition todifferences ontechnical points ,afundamental
cause ofdisagreement lay inthe refusal ofcertain delegations todiscuss
the structures ,ofexcise rates .
9.Asregards thedraft directive onexcises onmineral oils ,theCouncil
hasheld only onemeeting (attheexpert level )onthis proposal .
10.IntheCommission view ,harmonisation intheexcise field islong
overdue .First there istheneed forharmonisation ofindirect taxes
within theCommunity toproceed in*abalanced fashion .TheCouncil hasnow
adopted theSixth Directive onVAT ,which provides foraharmonised basis
ofassessment .Inaddition ,on1July ofthis year ,theenlarged Community
completed theprocess ofdismantling customs duties between Ilember
4
States andofestablishing acommon external tariff .Bycontrast ,
harmonisation intheexcise field hastodate been limited toinitial steps
related totheexcises levied oncigarettes .There isthus thedanger of
marked disparities intherate atwhich harmonisation evolves indifferent
sectors ofindirect taxation .Consequently ,delay inadopting theexcise
proposals tosome extent frustrates thefrontier simplifications andthe
increased neutrality ofcompetition which could beexpected toflow from
progress inother sectors .This effect must tend toslow ddwn harmonisation
r
overall .
11.Secondly ,major differences still exist between theMember States -in
thecoverage andthemethods ofassessment oftheexcises .Asafew .
examples :different Member States Classify similar orsubstitutable

productsindifferentexcisecategories ,sothattheyincurvorydifferent
taxburdens;producersofthesanegoodsoperatingindifferontMember
Statesbenefitfromwidelydivergentperiodsof.taxdeferment,ason/
occasiondodomestically producedandimportedproductsinthesameMember
State;-permittedlossesinthemanufacturing processorinwarehouse
differbetweenMemberStates;someMemberStatespermittax-freoware­
housingfacilitiesnotpermittedbyothers.Suchdifferencesintheexcise
structuresdistortcompetition andhinderthefreecirculation ofgoods.
Andastheexcisesareingeneralleviedathighrates,theresulting
competitivedistortionsarefrequently ^severe.
12.Thirdly,thecontinueddelayinharmonisingtheexcisesmeansthatthe,
distortions and.discriminations towhichtheirdifferentstructuresgive
rise,haveofnecessitytobedealtwithbyothermeans.TheCommission
hasbeendbligedtoopenproceedings underArticle169oftheTreatyina
numberofcaseswheretheexcisesleviedbyMemberStatesdonotappearto
conformwiththeprovisionsofArticle95»Inthemajorityofthesecases,
discrimination arisesbecausesimilardomesticandimportedproductsare
soclassifiedfortaxpurposesthattheirfiscaltreatmentdiffers.The
Commissionisofcourseawarethatdiscrimination alsoarisesfromdifferences
intaxrates,ratherthaninclassification .TheCommissionis,however,
oftheviewthatmostinfringements couldbeeliminatedbytheadoptionof
thedraftdirectivesforharmonisation ofexcisestructures whichhave
alreadybeeniproposed.
13.Notwithstanding thisprolongedinactivityintheexcisefield,the
Council,inrepliestoquestionsintheEuropeanParliament^\has
rooognisedonseveraloccasionstheutilityoftheexciseproposalsand
inparticularthoseforharmonisingtaxesonalcoholicdrinks.Moreover,
theCommissionhasnotedwithsatisfaction theCouncil'sstatedintention.
initswrittenreplytoparliamentary questionNo.709/76»torecommence
workontheCommission'sexciseharmoninationproposals,nowthattheSixth
VATDirectivehasbeenadopted.Giventhiswillingnesstore-commencework
N'ojc.209-11.9.1975
(2)v'OJC.127-31.5.1977

-5-
in-thisfield.,theCommissionhasconsidered ,howbesttheworkmaybe
carriedforward,takingintoaccountthechangedcircumstances sincethe
exciseproposalswereputforward.
14.A3statedearlier.,theextiscproposalsweredrawnupaspartofthe
planforeconomicandmonetaryunion,asafirststoptowardstheabolition
offiscalfrontiers.TheCommissionacceptsthattheobstaclespresented
bycurrenteconomicdifficulties aresuchthattheapproximation oftax
levels(andconsequently ,theabolitionoffiscal ^frontiers)canbe
achievedonlyinthelongterm.TheCommissionhasalsorecognised ,in
paragraph3ofitsActionProgrammeforTaxation^\that"taxharmonisation
mustsupportworkontheconvergence ofeconomicpolicies,withoutimposing
restrictions ontheIlenberStatesearlierthanisnecessaiy,especiallyas
regardstheratesofthemaintaxesandcharges".Accordingly ,the
Commissionhasalreadyproposedinthetaxfield"toconcentrate on•
essentialsandtorestrictCommunitymeasurestothosewhichare
absolutelyindispensable ".
15.Judgedagainstthesecriteria,theCommissionacceptsthatthedraft
frameworkdirectiveisnotimmediatelyrelevanttotheday-to-day
functioning oftheCommunity.Itisthereforeneithernecessaiynor'useful
topursueCouncildiscussions oftheframeworkproposalatthepresenttime.
However,theCommissioncontinuestoattachgreatimportancetothis
proposal,whichisstillofvalueinindicatingthedirectioninwhich
theharmonisation oftheexcisesshoulddevelop.Itishopedthat
discussions canbere-commenced whenthefutureevolutionofeconomicaua
monetaryunionismoreclearthanatpresent.
16.Turningtotheremainingproposals-thoseforharmonisingthe
structureoftheexcisesonalcohol,beer,wineandmineraloils-the
Commissionwouldnotgivethenallthesamepriority.Inthelongterm,.'-
incommonwiththedraftframeworkdirective,alltheseproposalshavean
essentialparttoplayintheabolitionoffiscalfrontiers.However,
giventhatthisisnolongeranimmediateobjective,thereis.muchtobe
saidforaselectiveapproach, .• /
EECBulletinHo.CE9/1975.

~6 -
17.Asafirst priority ,thetime now seems ripe fortheCouncil to
resume work ontheproposals forharmonised ,excises onalcohol and on
beer .AlltheMember States already levy excises onthese products ,and
"itiswidely recognised that divergencies inthestructures ofthese excises
,inparticular are the cause ofconsiderable competitive distortions .Both
excises arefrequent sources ofbreaches oftheTreaty obligations ofthe
Member States ,which have toberesolved byonemeans oranother .Itis
evident that the re--commencement ofwork onthese proposals would necessi­
tate anopen-minded approach ,thediscussions covering theproposals in
their entirety ,including those provisions ontherates structures ,
18.TheCommission remains committed totheproposed framework directive
andtotheproposal foraharmonised excise onwine .However ,the
framework directive must await further progress towards economic and
monetary union .Asregards thewine excise ,thewidely divergent views
onthis question within theCouncil ,anditspolitical delicacy ,aresuch
that itisnot realistic toanticipate agreement onthis proposal for
some time tocome .
19.Asregards themineral oils directive ,theCommission recognises
that progress with this proposal istosome extent linked todiscussions
onthecommon energy andtransport policies .Nevertheless ,adoption of
theproposal without prejudice tofuture developments inthese common
1.
policies would ofitself achieve useful results .
> 1
' /
20, 'Inconclusion ,theCommission propones totheCouncils .
' 1
(a)immediately tore-commence discussions .ontheproposals to
harmonise theexcises onalcohol andbeer ,with aview totheir
adoption byl.IIay 197";
■> • « •
(b)subsequently ,tore~cornmence .discussion ,ontheproposal to
J vharmonise theexcises onmineral oil3 ,with aview toits
adoption bytheend of1970 . '