No C 56/66 Official  Journal  of the  European  Communities 7. 3.77 
Opinion  on the  proposal  for  a Council  Directive  concerning  mutual  assistance  by the 
competent  authorities  of Member  States  in the field  of direct  taxation 
The text  referred  to the  Committee  has  been  published  in Official  journal  of  the 
European  Communities  No  C 94 of 27 April  1976,  page  2. 
A. LEGAL  BASIS  FOR  THE  OPINION 
On 20 April  1976,  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  OF  THE  ECONOMIC  AND  SOCIAL  COMMITTEE 
The Economic  and  Social  Committee  prepared  its opinion  on the  above  matter  at its 
144th  plenary  session,  held  in Brussels  on 15 and  16 December  1976. 
The full  text  of the opinion  is as follows: 
THE  ECONOMIC  AND  SOCIAL  COMMITTEE, 
Having  regard  to  the  Treaty  establishing  the 
European  Economic  Community,  and  in particular 
Article  100  thereof, 
Having  regard  to the  request  for  an opinion  by the 
Council  of  the  European  Communities  on 
20 April  1976, 
Having  regard  to the  decision  taken  by its Bureau 
on 27  April  1976  instructing  the  Section  for 
Economic  and  Financial  Questions  to draw  up an 
opinion  on the matter, 
Having  regard  to the  oral  report  submitted  by the 
rapporteur,  Mr  Miller,  arid  the  opinion  adopted  by 
the Section  at its meeting  on 30 November  1976, 
Having  regard  to  the  proceedings  of its  144th 
plenary  session  held  on 15 and  16 December  1976 
(meeting  of 15 December  1976), 
HAS  ADOPTED  THE  FOLLOWING  OPINION 
by 67 votes  in favour,  22 against  and  17 abstentions: 
1. Introduction 
1.1. The  Committee  is of the opinion  that  since: — all forms  of tax evasion,  and 
— those  forms  of tax  avoidance  which  result  in 
less tax  being  paid  than  could  reasonably  be 
envisaged  according  to the  laws  under  which  a 
taxpayer  is operating, 
are totally  unacceptable  on  social  and  economic 
grounds,  every  step  should  be taken  to outlaw  abuses 
of tax legislation  and  prevent  their  occurrence. 
1.2. Whilst  expressing  certain  reservations  about 
some  otf  the  proposals  contained  in  the  draft 
Directive,  the  Committee  nevertheless  welcomes  the 
initiative  the  Commission  has  taken.  An  agreement 
on a procedure  by which  national  tax  authorities  can 
better  exchange  information  on a legitimate  basis  is 
one of the  prerequisites  of reducing  (ax loss  through 
either  evasion  or avoidance,  of establishing  equitable 
tax treatment  throughout  the  Community,  of 
ensuring  fairer  conditions  oif competition,  and  of 
talking  a step  towards  tax harmonization. 
1.3. In the  opinion  of the  Committee,  however,  it is 
important  to recognize  that  to be  effective  and 
acceptable  any  new  proposals  should  be based  on 
the following  general  principles: 
— allowance  should  be made  for  the  differences  in 
tax legislation  arid  tax  rates  which  exist  in 
Member  States, 
7. 3. 77 Official  Journal  of the European  Communities No C 56/67 
— taxpayers  and  third  parties  should  be given  an 
assurance  that  their  private  afifairs  and  their 
business  and  trade  secrets  will  be  adequately 
protected  by not  being  pried  into  any  more  than 
is necessary  to assess  the tax in question, — 'binding  provisions  which  oblige  all  Member 
States  to  observe  certain  rules  in  supplying 
information  to other  Member  States, 
— optional  provisions  which  leave  much  latitude  to 
Member  States. 
information  passed  from  one  authority  to another 
should  be used  for  no other  purpose  than  that 
for which  it was  disclosed. 2.3. The  draft  Directive  preserves  the  rights  of the 
taxpayer  and  rules  are  laid  down  to ensure  that  the 
confidential  nature  of the information  is respected. 
1.4. Subject  to these  generalizations,  the  Committee 
believes  that  a Directive  governing  exchange  of tax 
information  between  governments  should  be rapidly 
implemented  as this  is a necessary  part  of  tax 
harmonization.  Such  a Directive  is of particular 
importance  at the  present  time  when  the  continual 
increase  in taxation  and  the  constant  growth  of 
cross-frontier  inter-company  relationships  make  the 
possibility  of tax  evasion  and  avoidance  more  and 
more  a matter  of public  interest  and  concern. 2.4. The  Committee  notes  that  the  Commission 
suggests  in  paragraph  10  of  the  explanatory 
memorandum  that  it will  submit  another  draft 
Directive  dealing  with  the  problems  of  double 
taxation  which  will  arise  out  of the  implementation 
of the  present  Directive,  especially  in the  field  of 
transfer  pricing.  The  Committee  is of the  opinion 
that the  two  Directives  should  be introduced  at the 
same  time. 
2. The  main  provisions  of the  draft  Directive 2.5. The  Committee  also  notes  with  satisfaction  that 
the Commission  has  begun  to consider  how  the  area 
of exchange  of tax  information  can  be extended  to 
include  third  countries.  It hopes  that  these  exchanges 
will lead  to a better  knowledge  of taxes  paid  by 
transnational  companies. 
2.1. Several  provisions  of the  draft  Directive  allow 
for such  considerable  (flexibility  in their  implemen-
tation,  that  many  say  by  giving  precedence  to 
permissive  action,  consultations  and  bilateral 
arrangements,  and  by not  providing  for participation 
by the  Commission  itself,  the  Directive  loses  an 
essential  part  of  its  Community  character  and 
effectiveness.  Be this  as it may,  the  Committee  is of 
the opinion  that  the  different  tax  systems  existing 
in Member  States  are,  to a great  extent,  the cause  of 
much  international  tax  evasion  and  avoidance,  and 
that only  after  further  harmonization  has  been  made, 
will it be possible  to introduce  more  efficacious  rules 
to combat  tax  abuses.  As it is not  the  task  of the 
present  draft  Directive  to diminish  those  differences 
in national  legislation  and  rates  which  often  lead 
to loss  of tax,  the  pragmatic  approach  adopted  by 
the Commission  probably  represents  (albeit 
regrettably)  the least  that  must  ibe expected  in present 
circumstances.  However,  it will  be necessary  to build 
on these  minimum  provisions. 
2.2. The  draft  Directive  is more  of a framework  for 
collaboration  than  a tightly  defined  system.  Its main 
guidelines  fall  into  two  categories: 2.6. Whilst  realizing  that  this  Directive  applies  only 
to direct  taxes,  the  Committee  believes  there  is also 
evasion  of indirect  taxes,  and  therefore  urges  the 
Commission  to give  its attention  to this  matter  as 
soon  as possible. 
3. Specific  comments 
3.1. Article  1 
3.1.1.  The  Committee  notes  that  the  taxes 
mentioned,  namely  income  and  capital,  when  referred 
to specifically  on a country  basis  in Article  1.3, 
follow  no logical  pattern.  It cannot  understand  why, 
for example,  in neighbouring  countries,  land  tax  is 
mentioned  in one,  and  not  in another,  even  though 
they exist  in both.  The  Committee  is not  impressed 
by the  Commission's  statement  that  the  'list  of taxes 
to be covered  in each  country,  and  listed  in Article 
1.3 correspond  to  those  which  the  competent 
authorities  in each  Member  State  stated  they  wished 
to have  covered.  The  Committee  believes  either  that 
No C 56/68 Official  Journal  of the European  Communities 7. 3. 77 
there  should  be no list  (leaving  the  type  of tax  to 
be covered  to be decided  under  Article  4) or that 
the list  should  be more  uniform  and  systematic. 
Moreover,  it is strongly  of  the  opinion  that 
whichever  alternative  is adapted,  the taxes  which  the 
Directive  applies  should  include  estate  duty  and  gift 
taxes. 
3.2. Article  2 
3.2.1.  As it is reasonable  to suppose  that  a State 
asking  another  for information  will  do so only  after 
exhaustive  use of its own  resources,  the Committee  is 
of the opinion  that  the second  sentence  of Article  2.1 
might  well  be deleted.  It suggests,  however,  that  the 
first sentence  could  be reinforced  by adding  at the 
end 'but  only  after  it has  fully  exhausted  its own 
sources  of information'.  Indeed,  it is essential  for the 
effective  operation  of the Directive  and  for all-round 
cooperation,  that  States  requesting  information 
should  have  already  made  exhaustive  inquiries  and 
are using  the procedure  as a last  resort.  If this  were 
not to be the  case,  the  retention  of the  second 
sentence  of Article  2.1  would  give  the  requested 
State  an easy  excuse  for not attempting  to supply  the 
information  required. 
3.2.2.  In Article  2.2,  the  words  'so far as may  be 
required',  should  be deleted  as they  offer  nothing  to 
the text. 
3.3. Article  3 
3.3.1.  This  paragraph  would  be more  meaningful  if 
the 'particular  categories  of cases'  were  at least  to 
be specified  as those  referred  to in the  explanatory 
memorandum. 
3.4. Article  4 
3.4.1.  Bearing  in mind  again  that  the object  of this 
draft  Directive  is not to change  existing  tax structures, 
nor to align  rates,  it will  still  be advantageous  after 
it is approved,  for some  individuals  and  enterprises 
to operate  their  business  in Community  States  which 
they consider  offer  the best  tax  treatment.  In these 
cases  avoidance  of tax and  claiming  appropriate  tax 
relief,  if legal,  is not  reprehensible.  It is not  in 
principle,  the  intention  of the  draft  Directive  that 
information  should  be exchanged  on matters  which are legal  and  above  board.  It is rather  to ensure  that 
there  is no less  tax being  paid  than  could  be envisaged 
according  to the  laws  under  which  the  taxpayer  is 
operating.  This  is a cask  which  seems  well  within 
the competence  of the  State  in which  the enterprise 
is a taxable  entity.  It seems  misleading,  therefore,  to 
talk in Article  4.1 (a) and  Articles  4.1 (c) and  (d) of 
'tax loss'  in the first  instance,  and  'tax  saving'  in the 
second  and  third  without  there  being,  in the  draft 
Directive,  a clear  definition  of their  meaning. 
3.4.2.  In Article  4.1 (d) mention  is made  of 'artificial 
transfers  of profits  within  groups  of enterprises'.  The 
Committee  recommends  that  to avoid  confusion 
more  recognizable  legal  language  should  be used. 
For instance,  the  term  'group  of companies'  is not 
usually  found  in international  tax  law,  while  it 
would  be better  to refer  to profits  that  arise  from 
arrangements  that  differ  from  those  that  normally 
obtain  in dealings  between  independent  enterprises 
(see Article  9 of the  OECD  Agreement  on double 
taxation). 
3.5. Article  5 
3.5.1.  The  question  this  Article  raises  is whether  a 
time limit  should  be imposed.  In principle,  the Com-
mittee  believes  it should,  even  though  the variety  of 
cases  on which  information  will  be sought  might 
result  in any  rule  on time  limits  being  interpreted 
liberally.  The  Committee  therefore  proposes  that 
Article  5 should  be amended  as Follows: 
'The  competent  authority  of the  State  which,  by 
virtue  of the preceding  paragraphs,  is called  upon 
to furnish  information,  shall  act on the  request  as 
quickly  as possible,  and  in any  case  within  three 
months.  If it decides  that  it will  refuse  to provide 
the information  asked  for,  it will  inform  the State 
concerned  within  this  time  limit,  giving  the grounds 
for its refusal.  If it encounters  obstacles  which  will 
prevent  it from  giving  the  required  information 
within  the  time  limit,  it will  inform  the  State 
requesting  information  of the  nature  of the  ob-
stacles  encountered  and  the  probable  duration  of 
delay.  In these  cases,  the  State  asking  for  infor-
mation  will  also  give  the State  requiring  it periodic 
reports  on  progress  made  in assembling  the 
required  data.' 
7. 3.77 Official  Journal  of the European  Communities No C 56/69 
3.6. Article  6 
3.6.1.  While  realizing  that  the  language  used  in 
Article  6 is an attempt  to gloss  over  the complicated 
legal,  political  and  psychological  considerations 
arising  from  allowing  a tax  authority  from  one 
country  to 'operate'  in another,  the Committee  is of 
the opinion  that  the  Article  in its present  form  will 
not do because  the words  'to authorize  the presence' 
creates  confusion  and  argument  when  an attempt  is 
made  to give  meaning  to them.  The  Committee 
acknowledges,  on the  one  hand,  that  it is necessary 
for officials  to be able  to investigate  across  borders 
(by the Treaties  of Rome  being  amended,  if need  be), 
but, on the other,  having  regard  to the ordinary  rights 
of individuals  and  companies  being  investigated,  how 
important  it is to define  the powers  of the  investi-
gator.  Therefore,  the  Committee  is of the  opinion 
that either  Article  6 should  be deleted,  leaving  the 
matter  under  consideration  .to be dealt  with  bilaterally 
under  the terms  of Article  9, or, and  preferaibly,  the 
following  should  be  substituted  for  the  present 
Article  6: 
'For the  application  of the  preceding  provisions, 
the competent  authority  of the informing  Member 
State,  and  the competent  authority  of the Member 
State  for which  the information  is intended  shall, 
under  the  terms  of Article  9, determine  the 
conditions  under  which  the  tax  officials  of one 
Member  State  can follow  up the investigations  and 
participate  in the  enquiries  they  have  initiated  in 
the second  State.' 
3.7. Article  7 
3.7.1.  The  Committee  is of the  opinion  that  the 
first paragraph  of this  Article  provides  sufficient 
guarantee  that  Member  States  will  respect  the element 
of secrecy  implicit  in the  information  being  ex-
changed.  Paragraph  3 of this  Article,  however,  allows 
too-easy  a let-out  for a Member  State  not to provide 
needed  information.  It will  diminish  the  degree  of 
harmonization  which  the  rest  of the  Directive  is 
trying  to achieve,  and  reduce  the effectiveness  of tax 
law enforcement  to the level  of that  Member  State 
with the least  stringent  fiscal  laws.  The  Committee, 
therefore,  proposes  that  paragraph  3 be deleted. 
3.8. Article  8 (3) 
3.8.1.  The  Committee  is of the  opinion  that  the 
French  term  'ordre  public'  should  be kept  in all 
other  texts  as, we are told,  the phrase  in French  has 
a unique  legal  meaning,  recognized  internationally, 
which  could  well  be lost  when  translated  into  some 
other  languages. 3.8.2.  If Article  8 (3) is left  as it is, the Committee 
is of the  opinion  that  harmonization  would  be 
achieved  only  at the lowest  possible  level.  It may  well 
be that  in the present  state  of development  in Mem-
ber States,  it is just  not  possible  to achieve  a great 
measure  of harmonization  in official  tax  conduct 
throughout  the  Community.  Nevertheless,  the Com-
mittee  is of the  opinion  that  paragraph  3 of this 
Article  is too  negative,  allowing  tax  authorities  to 
use existing  national  prohibitions  as an excuse  for 
not being  able  to collaborate  in the  spirit  of the 
Directive.  As a small  sitep  towards  overcoming  this 
tendency,  the Committee  suggests  that  the following 
words  be added  to the end  of Article  8 (3): 
'. . . but only  after  exhausting  all possibilities  of 
the consultative  procedure  set up under  Article  9.' 
3.9. Article  9 
3.9.1.  The  Committee  notes  that  the implementation 
of many  of the provisions  of the Directive  in general 
and of Article  9 in particular  depends  in some  cases 
on the good  will  of member  governments,  or on bila-
teral  agreements.  It suggests  that  in an attempt  to 
bring  about  greater  harmonization,  and  more  com-
mon treatment  of cases  of tax evasion  and  avoidance, 
the Directive  should  make  provisions  for  the  Com-
mission  to play  a part  in drawing  up the  bilateral 
agreements.  It, accordingly,  recommends  that  Article 
9.3 should  be amended  to read: 
'Where  the  competent  authorities  make  arrange-
ments  . . . they  shall  notify  them  to the  Com-
mission  for examination  and  comment  before  they 
become  effective.' 
3.10.  Article  10 
3.10.1.  The  Committee  is of the opinion  that  Article 
10 should  be made  more  specific  by insisting  that 
each  Member  State  should  send  an annual  report  to 
the Commission  indicating  the  volume  and  kind  of 
information  it has  received  and  given  during  the last 
12 months.  States  receiving  information  should  also 
report  on whether  they  had  been  able  to make  effec-
tive use of the information  received.  On the basis  of 
these  reports  the  Commission  should  then  publish 
a consolidated  report  so that  members  of the  Com-
No C 56/70 Official  Journal  of the European  Communities 7.3. 77 
munity  might  evaluate  the effectiveness  of this  Direc-
tive and  subsequently  decide  whether  any  further 
measures  could  be usefully  taken. theless  appears  to go as far as is possible  at this  stage 
of the Community's  economic,  financial  and  adminis-
trative  development. 
4. General  conclusions Done  at Brussels,  15 December  1976. 
4.1. The  Committee,  subject  to the  general  and 
specific  comments  set out  above,  approves  this  pro-
posal  for a Directive.  Although,  in certain  instances, 
it is too dependent  on bilateral  agreements,  it never-The Chairman 
of the Economic  and  Social  Committee 
Basil  de FERRANTI 
ANNEX 
to the opinion  of the Economic  and  Social  Committee 
The following  amendment  was  rejected  during  the discussion: 
Delete  paragraph  3.7.1. 
Voting 
For : 37, against:  50, abstentions  : 10. 
Opinion  on the proposal  for a Council  Regulation  on the procedure  for applying  the 
European  unit  of account  (EUA)  to the legal  acts  adopted  by the institutions  of the 
European  Communities 
The text  referred  to the  Committee  has  been  pulblished  in Official  Journal  of the 
European  Communities  No  C 271  of 17 November  1976,  page  5. 
On 15 October  1976,  the  Council  referred  the  abovementioned  proposal  to the 
Economic  and  Social  Committee  in accordance  with  Article  198  of the  Treaty 
establishing  the European  Economic  Community. 
B. OPINION  OF THE  ECONOMIC  AND  SOCIAL  COMMITTEE 
The Economic  and  Social  Committee  prepared  its opinion  on the  above  matter  at its 
144th  plenary  session,  held  in Brussels  on 15 and  16 December  1976. 
The full  text  of the opinion  is as follows: A. LEGAL  BASIS  FOR  THE  OPINION