COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT pursuant to the second subparagraph of Article 251 (2) of the EC Treaty concerning the common position of the Council on the adoption of a Decision of the European Parliament and of the Council adopting a Community programme to improve the operation of taxation systems in the internal market (Fiscalis 2007 programme)

2002/0015 (COD)

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT pursuant to the second subparagraph of Article 251 (2) of the EC Treaty concerning the

common position of the Council on the adoption of a Decision of the European Parliament and of the Council adopting a Community programme to improve the operation of taxation systems in the internal market (Fiscalis 2007 programme)

1- BACKGROUND

Date of transmission of the proposal to the EP and the Council (document COM(2002)10 final - 2002/0015(COD)): // 17 January 2002

Date of the opinion of the Economic and Social Committee: // 17 July 2002

Date of the opinion of the European Parliament, first reading: // 13 June 2002

Date of adoption of the common position: // 26 July 2002

2- OBJECTIVE OF THE COMMISSION PROPOSAL

The objective of the Commission proposal for a Decision of the European Parliament and of the Council is to continue the existing Fiscalis programme [1] and to extend its scope to direct taxation and taxes on insurance premiums.

[1] Decision No 888/98/EC of the European Parliament and of the Council establishing a programme of Community action to ameliorate the indirect taxation systems of the internal market (Fiscalis programme), OJ L 126, 28.4.1998, p.1.

3- COMMENTS ON THE COMMON POSITION

3.1. General remarks

The Commission notes with satisfaction that the Council has endorsed the general approach of the Commission's original proposal. It notes that the Council supports the continuation of the actions currently carried on under the existing Fiscalis programme and particularly welcomes the Council's support to extend these actions to the direct tax area.

The Commission is disappointed, however, that the Council has decided to reduce its proposal for funding of the programme from EUR56 million to EUR44 million. Reducing the budget to this extent may well mean that certain actions foreseen under the programme can not be implemented. Nevertheless, some of the proposed budget related to activities which had not yet been approved by the Council, particularly in the IT field. Should the Council decide to go ahead with the system for the exchange information on cross-border deduction of VAT and the creation of a new system for the control of e-commerce, the Commission will, if there are insufficient funds in the Fiscalis 2007 budget, propose to the European parliament and the Council that the budget be increased. This re-examination of the budget is in line with the desire expressed by Parliament that the Budgetary Authority should be re-consulted on this programme in 2006 (which was the objective of two of the amendments proposed by the Parliament).

3.2. Consideration of the amendments proposed by Parliament at first reading

In its common position, the Council has taken one of the amendments proposed by the Parliament into account. This amendment relates to the submission to the European Parliament of the report which the Commission will establish annually setting out the progress of the programme's activities in terms of implementation and results in relation to the annual action plan. Given that this is the view of the co-legislators, the Commission can now accept this approach.

Two of the amendments proposed by the Parliament amend the programme objectives in relation to value added tax and direct taxation. The Council decided unanimously to amend the Commission proposal in respect of these objectives. The reason that the Council amended these objectives was to underline that Fiscalis 2007 was not a "political" programme, but rather a programme designed to enhance administrative cooperation between Member States' tax officials. The Commission agrees that it is not the purpose of the programme to harmonise tax legislation, and is happy to have a minutes statement inserted to this effect.

Two amendments proposed by the Parliament have not been accepted by the Commission or the Council. These amendments relate to the actions of the programme and the development of synergy with future programmes. The Commission is satisfied that the Council has not taken these amendments on board, as it believes that such Articles in the Decision are unnecessary.

3.3. Amendments proposed by the Council

A number of new elements have been proposed by the Council. With the exception of the change in the financial framework of the programme, all the other new elements are of a drafting nature, which in the view of the Council, clarify the text. The new elements proposed by the Council have been adopted unanimously, and the Commission can accept all the Council's proposals, so that the programme can be adopted before 31 December 2002.

3.4. Points of convergence between the common position and the Commission's proposal

The common position fully supports the thrust of the Commission's proposal, including the extension of the programme activities to direct taxation.

4- CONCLUSION

From the Commission's point of view, the Common position, which the Council has adopted unanimously, represents an adequate compromise. It regrets the reduction in the size of the budget, but accepts that this is in line with the wish expressed by the Parliament to review the budget during the lifetime of the programme.

The Commission is convinced that the gap between the co-legislators is now so small that the Decision can be adopted very quickly, thereby allowing the continuation of the programme activities after 31 December 2002; in particular the IT activities, such as the VAT Information Exchange System (VIES), which is essential for the smooth functioning of the internal market.

5. statement by the Council and the Commission for the minutes

The Commission and the Council made a joint statement for the minutes which is annexed to this Communication.

The purpose of this statement is to confirm that the intention of the programme is not to harmonise the taxation rules. If the proposal concerned the harmonisation of taxation rules, then the Commission would have made the proposal under Article 93 of the Treaty, rather than Article 95. The procedure under Article 93 of the Treaty is unanimity with consultation of the European Parliament.

Declaration to the Minutes

"The Council and the Commission state that the programme shall not entail the harmonisation of tax legislation".