Proposal for 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)

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. Introduction

Article 12(3) of the Fiscalis Decision obliges the Commission to submit to the European Parliament and the Council a communication on the desirability of continuing the Fiscalis programme, accompanied, if necessary, by a suitable proposal.

The Commission has evaluated [1] the first three years' operation of the Fiscalis programme and considers that the programme activities have proved to be a worthwhile investment, and should therefore be continued. The information exchange systems now administered under the Fiscalis programme are a key factor in the smooth functioning of the internal market, and without such effective and efficient systems as the VAT Information Exchange System (VIES) Member States would not be able to assure the control of exempt intra-Community supplies of goods. While the essential elements of the Fiscalis programme should continue to apply, certain changes are nevertheless necessary. For this reason, the Commission has decided to propose a new programme, the Fiscalis 2007 programme.

[1] SEC(2001) 1328.

The Fiscalis 2007 programme has as its aim the continuous reinforcement of the functioning of the taxation systems of the internal market.

It will provide both the Community infrastructure and the stimulus without which the existing and new Member States acting alone would not be able to assure the proper functioning of the taxation systems of the single market. This infrastructure and stimulus will bring about important improvements to the functioning of the taxation systems (the efficacy with which participating countries cooperate, for example).

A European Union tax policy to serve this goal is being implemented, focusing on the removal of tax obstacles and distortions to the exercise of the four freedoms of the Single market, which includes rendering the tax systems more efficient, simple and transparent. This applies not only as regards the indirect taxes, value added tax and excise duties, covered by the existing Fiscalis programme but is equally valid for the direct tax field, or even more so, since there exists hardly any harmonisation or coordination at Community level.

The extensive use of information technology remains an indispensable element to maintain the achievements of the Fiscalis programme, and to support new developments.

2. How Fiscalis 2007 differs from Fiscalis

The essential differences between this programme and the Fiscalis programme are:

(1) More structured objectives, and

(2) The inclusion of direct taxation in the new programme.

2.1. The reasoning behind these changes

In the context of the evaluation of the Fiscalis programme, the Commission services have established that there is clear agreement that the activities of the programme have helped to achieve the objectives set out. However, a detailed evaluation of the various activities had proved more difficult. Further work will need to be done in this area in the context of the final report on the implementation and impact of the programme as required by Article 12(3)(b) of the Fiscalis decision. The evaluation aspect has been taken into account when formulating the objectives of the Fiscalis 2007 programme.

Furthermore, the sharpening of the objectives in this programme, and the concept of the management committee setting annual objectives for the programme will allow it to have a more precise focus in dealing with changing priorities of both the Commission and the Member States.

As regards the proposal to include direct taxation in the programme, this stems from the understanding that the needs of direct tax administrations are similar to those of indirect tax administrations. The Council Ad Hoc Working Party on Tax Fraud in its report of 22 May 2000 to the Council, inter alia, acknowledged that the mechanisms for administrative co-operation and mutual assistance in the field of direct taxation have not been applied as much as would have been desirable, that there are organisational shortcomings preventing its proper functioning and that there is a lack of transnational administrative culture. The report thus recommended the implementation of systems for effective, and preferably automatic, information exchange as well as the stepping up of information exchange. All of the programme activities, when applied to direct taxation, would reap significant benefits for national tax administrations with respect to the shortcomings highlighted in the report. The extension of the programme activities to direct taxation results in a corresponding increase in the budget allocated.

The benefits to be obtained by both Member States and future Member States from the programme are clear. Participation by the Applicant Countries will allow them to have a better understanding of the Community acquis, and will build up the trust and confidence between the Member States and the applicant countries which is so necessary within the context of Member States working together for the benefit of the single market, while at the same time involving them more directly in the setting of annual, operational objectives. This should contribute to an even closer partnership between the Community and Member States in monitoring and evaluating the activities of the programme.

3. The challenge faced by Fiscalis 2007

Responsibility for the functioning of the internal market, and the taxation systems in particular, falls to the Community, in partnership with the Member States. Whilst the Member States play the major part, at least in terms of resources, the Community also has a significant role in ensuring that the taxation systems function effectively, uniformly and efficiently. To be able to do that, taxation systems have to fulfil three main objectives:

- the protection of national and Community financial interests through the combating of tax avoidance and evasion;

- the avoidance of distortions of competition in the effectiveness of the application of Community law; and

- the continuing reduction of compliance burdens on administrations and taxpayers alike.

The achievement of these objectives will necessarily rest largely in the hands of the Member States. Community action is intended to reinforce the efforts of the Member States, through providing an infrastructure and the necessary stimulus.

4. Programme objectives (Article 3)

As referred to above, the overall objective of the Fiscalis 2007 programme is to improve the functioning of the taxation systems in the internal market by increasing co-operation between participating countries, their administrations and officials, and to identify and remedy areas, such as legislation and administrative practices which make this co-operation more difficult. This overall objective is specified further by the setting of specific objectives for each principle element or activity area of the programme, namely:

* Value Added Tax:

- to simplify and modernise existing VAT rules;

- to ensure uniform application of existing VAT rules;

- to strengthen administrative co-operation between national administrations and the Commission in VAT matters.

* Excise duties:

- to ensure uniform application of existing rules;

- to strengthen co-operation between the Member States in the matter of excise duties;

- to identify any legal and administrative problems connected with the application of excise rules.

* Direct taxation:

- to raise awareness of the Community dimension of direct taxation and identify any difficulties affecting the application of Community legislation on direct taxation;

- to encourage exchanges of experience and best practice in the matter of administrative procedures;

- to encourage the exchange of information, in particular by:

- the formation of networks of national and Community agencies;

- the exchange of experience and best practice

- where appropriate, the establishment of the Community components of the infrastructure needed to strengthen the exchange of information.

* The countries applying for membership of the European Union:

- to develop applicant country officials' understanding of Community tax legislation;

- to develop applicant country officials' mastery of administrative procedures by the exchange of experience and best administrative practice;

- to encourage the exchange of information between national administrations:

- to ensure that applicant countries are integrated into existing networks;

- to ensure the exchange of best practice;

- to identify any problems affecting the exchange of information.

Finally, at a more operational level, the Committee responsible for the programme will set operational annual objectives, which will also help adapt the programme to any changes in policy objectives, both at Community level and at the level of Member States.

Operational objectives will contribute to the achievement of the specific objectives referred to above. In the areas of action common to both the Fiscalis and Fiscalis 2007 programmes (indirect taxation and excise duties), the future programme's operational objectives will take account of activities in 2001 and 2002 and their results. This will guarantee consistency and continuity between the two programmes.

5. Programme activities

The areas of action to meet these objectives draw heavily on the experience to date in the Fiscalis programme. In addition, a certain amount of flexibility is given to the management committee to decide on other activities which should be undertaken in the context of the programme. These activities could be, for example, the setting up of working groups; planning meetings for multilateral controls and benchmarking.

5.1. Communication and information exchange systems (Article 5)

Communication and information exchange infrastructure has a vital part to play in reinforcing the Community taxation systems, and in particular guaranteeing the effectiveness and efficiency of its administration.

The proposal provides a continuation of the budgetary basis for the existing infrastructure and applications. Wherever possible, existing or new communication and information-exchange systems will take due account of the generic services of the IDA programme in conformity with Decisions 1719/1999/EC and 1720/1999/EC, when available to all participating countries covered by this programme. The proposal provides that the management committee may decide to put new applications in place (for direct tax purposes, for example). The proposal gives a definition of the Commission responsibility for the Community components, and participating country responsibility for the non-Community components. The experience with the Fiscalis programme has demonstrated a need for a parallel commitment of the Commission and participating countries, each in its respective domain, as well as overall coordination, to ensure the functioning of existing systems and development of future applications. Furthermore, in its role as co-ordinator for the establishment and functioning of the communication and information exchange systems, the Commission intends to have a single sub-committee responsible for the activities under this programme, the Customs 2007 programme and the Excise Movement Control System.

5.2. Multilateral controls (Article 6)

Bringing officials from different national administrations together in work activities has proved to be very successful. Multilateral controls under the Fiscalis programme have been conducted primarily for VAT and excise duties, but some controls, (where the participating Member States agreed, and where the same administration was responsible for direct and indirect tax), have also covered direct taxes, notwithstanding that the programme does not include such taxes. Multilateral controls have been successful both in achieving real (financial) results, fostering co-operation between the administrations involved and in identifying the obstacles (practical and legislative) to successful co-operation. The Commission believes that, in the direct tax field, such controls could be especially useful, for instance to satisfy Member States' concerns on transfer pricing issues. Indeed, the report of the Council Ad Hoc Working Party on tax fraud suggested that increased co-operation on under-invoicing and over-invoicing transactions could be developed by way of synchronised inspections.

5.3. Seminars (Article 7)

The use of seminars in the Fiscalis programme has proved to be effective in pursuing all of the objectives of the programme. They provide a forum for the experts in a particular field of administration to meet each other and, together with the Commission, discuss common problems, experiences and possible solutions. This is useful for developing and disseminating best administrative practice but also for stimulating and developing co-operation or simply as pedagogical tools. Bilateral contacts between officials in the context of the Seminars have also proved to be useful to foster co-operation and confidence between national tax administrations. Representatives of business and taxpayers and others with specific expertise have been invited to attend in the past. This will be continued where appropriate.

5.4. Exchanges of officials and training activities (Articles 8 and 9)

The most successful exchanges have proved to be those which enable the exchange official to carry out practical tasks on behalf of the administration visited. Exchanges have also been effective in the dissemination of best administrative practice, particularly in the use of targeted exchanges to study particular administrative practices.

The common training initiative drawn up under Fiscalis to bring together all aspects of training: professional and language programmes and training and linguistic tools is being continued.

6. Financing of the programme (Article 11)

6.1. The Community

The operational costs to be borne by the Community can be broken down into two main categories, Joint Actions and IT Actions. Joint Actions covers seminars, exchanges, multilateral controls, training, and any other activities under Article 1(2)(f). IT actions has two main aspects: the functioning and evolution of existing systems and the development of new systems.

The expenditure related to Joint Actions will increase slightly over the lifetime of the programme. This is primarily due to the inclusion of direct taxation which will increase the level of activity under all the available tools. The number of officials in Member States dedicated to direct taxation very often out-numbers those working in the field of indirect taxation and this has been taken into account in assessing the cost of Joint Actions. The Joint Actions will therefore start at EUR2.75 million in 2003 and rise to EUR4.5 million in 2007, i.e. EUR17.0 million over the lifetime of the programme.

The programme's IT actions related to the functioning and evolution of existing systems will amount EUR23.9 million over the five-year period.

The IT actions related to development of new systems will amount to EUR11.2 million over the five-year period.

In addition, the activities related to interconnecting the systems of applicant countries with community systems as part of the enlargement will during the programming period cost EUR3.9 million.

6.2. Applicant countries

The participating countries are the Member States of the European Union and, in so far as the necessary arrangements have been agreed, those countries that have applied to be members of the European Union.

The terms and conditions of the participation of the applicant countries in the Fiscalis Programme are governed by Association Council Decisions (or, in the case of Cyprus, by a bilateral agreement). These international legal instruments provide for an automatic extension if the Fiscalis Programme is extended without "any substantial change". If the Fiscalis 2007 Programme is not seen as an extension of the Fiscalis programme, but a successor programme, it would require new Association Council Decisions (for the applicant countries of Central and Eastern Europe) and bilateral agreements (for Cyprus, Malta and Turkey),or other appropriate international instruments. Without these legal instruments being in place and before contributions are received from the applicant countries, no payments will be made from Fiscalis 2007. No provision has been made for applicant countries, since their contributions would be treated as additional funds for the programme to be used for the participation of those countries which have chosen to participate. No provision has been made for budget changes arising as a result of enlargement of the European Union, as such budget changes can only be decided upon at the time of enlargement.

6.3. Conclusions

The total amount to be borne by the Community's budget is therefore EUR56 million.

7. Management of the programme (Article 13)

The Standing Committee on Administrative Co-operation in the field of Indirect Taxation (SCAC) is currently competent to deal with the Fiscalis Programme and administrative co-operation for both VAT and Excise duties. This has worked well, with meeting agendas being designed to maximise participation by Member States, ensuring that the composition of delegations is appropriate for the subject matter being discussed, whether it is administrative co-operation for VAT or Excises, or Fiscalis Programme management issues. Nevertheless, in view of the inclusion of direct taxation in the Fiscalis 2007 programme, the Commission has decided that a new committee, the Fiscalis Committee should be set up as the management committee responsible for running the new programme. The Applicant Countries will be allowed take part in this Committee as observers for the points that concern them.

8. Evaluation (Articles 14 and 15)

The purpose of evaluation is to analyse whether the objectives set for the programme are still relevant and have been met; that the programme represents good value for money and that all expenditure is correctly accounted for. To achieve this, the Commission proposes follow-up actions and two different types of evaluation: interim and final.

The follow-up is a continuous process from which the results have to be synthesised in an annual report which the Commission will submit each year to the management committee. These reports will use financial, output (activities organised) and outcome (immediate impact) indicators. To help the Commission prepare this report, participating countries will be asked to send all relevant data to the Commission.

The interim evaluation report will examine, half-way through the programme, the relevance of the programme objectives, the results of the programme activities, and whether or not these activities have helped in achieving the objectives. The interim report will be based on reports submitted by the participating countries, on annual follow-up reports and on all other available data. It will be prepared by the Commission and submitted to the management committee.

The final evaluation will be based on the interim evaluation, participating country's final reports, follow-up reports and all other available data. It will evaluate the use of resources, the effectiveness and efficiency of the programme and measure its impact.

The interim and final evaluation will mainly use outcome and outreach (medium and long term impact of activities) indicators.

While the two types of evaluations will be carried out by the Commission, in line with standard evaluation practice, the service responsible for the evaluation will be independent from any other policy, management and financial services involved in the programme. The Commission service responsible for evaluation may also decide to involve an evaluator from outside of the Commission services in the evaluation process.

2002/0015 (COD)

Proposal for 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)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 95 thereof,

Having regard to the proposal from the Commission [2],

[2] OJ C , , p. .

Having regard to the opinion of the Economic and Social Committee [3],

[3] OJ C , , p. .

Acting in accordance with the procedure laid down in Article 251 of the Treaty,

Whereas:

(1) In the internal market, the effective, uniform and efficient application of Community law is essential for the functioning of taxation systems, in particular for the protection of national and Community financial interests through combating tax evasion and tax avoidance, avoiding distortions of competition and reducing burdens on administrations and taxpayers. Achieving this effective, uniform and efficient application is a matter for the Community acting in partnership with the Member States.

(2) Decision No 888/98/EC of the European Parliament and the Council of 30 March 1998 establishing a programme of Community action to ameliorate the indirect taxation systems of the internal market (Fiscalis programme) [4] has significantly contributed to the achievement of those overall objectives for the period 1998 to 2002. It is therefore considered desirable to continue the Fiscalis programme for another five-year period. Decision No 888/98/EC should accordingly be repealed.

[4] OJ L 126, 28.4.1998, p. 1.

(3) Efficient, effective and extensive co-operation among the current and future Member States and between them and the Commission is important for the functioning of the taxation systems of the internal market.

(4) The experience gained by the Community from the Fiscalis programme has shown that exchanges, seminars and multilateral control exercises could achieve the objectives of the programme by bringing officials from different national administrations together in professional activities. Those activities should therefore be continued, but extended to cover taxes on income, on capital and on insurance.

(5) The establishment and functioning of a communication and information exchange infrastructure has a vital part to play in reinforcing the taxation systems within the Community. In particular the VAT Information Exchange System (VIES), referred to in Council Regulation (EEC) No 218/92 of 27 January 1992 on administrative co-operation in the field of indirect taxation (VAT) [5], has shown the value of information technology in protecting revenue whilst minimising administrative burdens.

[5] OJ L 24, 1.2.1992, p. 1.

(6) In order to ensure uniform application of Community law it is essential that officials responsible for taxation have a high common standard of understanding of Community law and its implementation in the current and future Member States. Such a standard can be achieved only through effective initial and continuous training provided by the current and future Member States. Supplementary Community action is useful to co-ordinate and foster such training.

(7) The experience gained from the Fiscalis programme has indicated that the coordinated development and implementation of a common training programme could achieve the objectives of this programme, in particular in achieving a higher common standard of understanding of Community law.

(8) A sufficient standard of linguistic competence on the part of taxation officials has proved to be essential to facilitate co-operation. Participating countries should therefore provide the necessary language training for their officials.

(9) Although the primary responsibility for achieving these objectives rests with the participating countries, supplementary Community action is needed for the coordination of such activities as well as for the provision of an infrastructure and the necessary stimulus. In accordance with the principle of subsidiarity as set out in Article 5 of the Treaty, the objectives of the measures laid down in this Decision cannot all be sufficiently achieved by the participating countries and can therefore, by reason of the scale and the effect of the action, be better achieved at Community level. In accordance with the principle of proportionality as set out in that Article this Decision confines itself to the minimum required in order to achieve those objectives and does not go beyond what is necessary for that purpose.

(10) This Decision lays down, for the entire duration of the programme, a financial framework constituting the principal point of reference, within the meaning of point 33 of the Interinstitutional Agreement of 6 May 1999 between the European Parliament, the Council and the Commission on budgetary discipline and improvement of the budgetary procedure [6].

[6] OJ C 172, 18.6.1999, p. 1.

(11) Since the measures necessary for the implementation of this Decision are management measures within the meaning of Article 2 of Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission [7], they should be adopted by use of the management procedure provided for in Article 4 of that Decision,

[7] OJ L 184, 17.7.1999, p. 23.

HAVE ADOPTED THIS DECISION:

Chapter I

Scope and objectives

Article 1

Fiscalis 2007 programme

1. A multiannual Community action programme (Fiscalis 2007) hereinafter referred to as 'the programme', is hereby established for the period 1 January 2003 to 31 December 2007 to improve the operation of the taxation systems of the internal market

2. The activities of the programme shall consist in:

(a) communication and information-exchange systems;

(b) multilateral controls involving Member States and those applicant countries which have bilateral or multilateral agreements either with one another or with Member States of the European Union permitting such activity;

(c) seminars;

(d) exchanges;

(e) training activities;

(f) any other activities which shall be decided on a case-by-case basis in accordance with the procedure referred to in Article 13(2).

Article 2

Definitions

For the purpose of this Decision:

(a) "taxation" means the following taxes applied in the participating countries:

(i) Value Added Tax;

(ii) Excise duties on alcohol and tobacco products and mineral oils;

(iii) Taxes on income and on capital as defined in Article 1(2) of Council Directive 77/799/EEC [8];

[8] OJ L 336, 27.12.1977.

(iv) Taxes on insurance as defined in Article 3 of Council Directive 76/308/EEC [9].

[9] OJ L 73, 19.3.1976, p. 18.

(b) "administration" means the public authorities in the participating countries responsible for administering taxation;

(c) "participating countries" means the Member States and the countries referred to in Article 4;

(d) "official" means an official of the administration;

(e) "exchange" means a working visit organised under the programme of an official from an administration in another participating country;

(f) "multilateral control" means a co-ordinated control of the tax liability of one or more related taxable persons, which is organised by several participating countries, and having a common or complementary interest.

Article 3

Objectives

1. The overall objective of the programme shall be to improve the proper functioning of the taxation systems in the internal market by increasing co-operation between participating countries, their administrations and officials, and to identify and remedy areas, such as legislation and administrative practices which make this co-operation more difficult.

2. The objectives of the programme shall be:

(a) For value added tax:

to support the European Union VAT strategy as outlined in the Communication from the Commission to the Council and the European Parliament, entitled "A Strategy to improve the operation of the VAT System within the context of the Internal Market [10]", or any future such strategy adopted by the Commission;

[10] (COM(2000) 348 final).

(b) For excise duties:

to improve the co-operation between Member States, ensuring a more uniform application of existing rules and developing a common approach on legal and administrative aspects in the field of excise duties;

(c) For direct taxation

to raise awareness of Community policies in the field of direct taxation and providing support for pooling experiences, information exchange and other administrative co-operation;

(d) For the applicant countries:

to meet the special needs of applicant countries taking the necessary measures for the accession in the field of tax legislation and administrative capacity.

3. The operational objectives of the programme shall be set out annually in accordance with the procedure referred to in Article 13(2).

Article 4

Participation of applicant countries

The Programme shall be open to the participation of:

(a) the applicant countries of Central and Eastern Europe, in accordance with the conditions laid down in the Europe Agreements, in the additional protocols thereto and in the decisions of the respective Association Councils;

(b) Cyprus, Malta and Turkey, on the basis of bilateral agreements on this matter concluded with these countries.

Chapter II

Programme activities

Article 5

Communication and information-exchange systems

1. The Commission and the participating countries shall ensure that the following communications and information-exchange systems are operational in so far as their operation is necessary under Community legislation:

(a) the Common Communications Network/Common Systems Interface (CCN/CSI) to the extent necessary to support the functioning of the other systems referred to in this paragraph;

(b) the VAT Information Exchange System (VIES) and its messaging systems;

(c) the excise movement Verification System;

(d) the early warning system for excise;

(e) the excise duty tables system.

2. New communication and information-exchange systems may be established in accordance with the procedure referred to in Article 13(2).

3. The Community components of the communication and information-exchange systems shall be the hardware, software and network connections, which shall be common to all participating countries so as to ensure the inter-connection and interoperability of the systems, whether they be installed at the premises of the Commission (or a designated sub-contractor) or at the premises of participating countries (or a designated sub-contractor). The Commission shall conclude the necessary contracts to assure the operational nature of these components in the name of the Community.

4. The non-Community components of the communication and information-exchange systems shall comprise the national databases forming part of these systems, the network connections between the Community and non-Community components and such software and hardware as each participating country shall deem appropriate for the full operation of those systems throughout its administration. The participating countries shall ensure that the non-Community components are kept operational and shall assure the interoperability of these components with the Community components.

5. The Commission shall co-ordinate, in co-operation with the participating countries, those aspects of the establishment and functioning of the Community and non-Community elements of the systems and infrastructure referred to in paragraph 1.

Article 6

Multilateral controls

Participating countries shall choose, from among the multilateral controls organised by them, those whose costs are to be borne by the Community in accordance with Article 11. The participating countries shall send annual reports and evaluations concerning such controls to the Commission.

Article 7

Seminars

The Commission and the participating countries shall together organise seminars to be attended by officials from the administrations, Commission representatives and, if appropriate, other experts.

Article 8

Exchanges of officials

1. The Commission and participating countries shall organise exchanges of officials. The exchanges may not exceed one month. Each exchange shall be targeted on a particular professional activity and shall be sufficiently prepared and subsequently evaluated by the officials and administrations concerned.

2. The participating countries shall take the necessary steps to enable exchange officials to play an effective part in the host administration's activities. To this end such officials shall be authorised to carry out the tasks relating to the duties entrusted to them by the host administration in accordance with its legal system.

3. During the exchange, the civil liability of the exchange official in the performance of his duties shall be treated in the same way as that of officials of the host administration. Exchange officials shall be bound by the same rules of professional secrecy as national officials.

Article 9

Training activities

1. In order to encourage structured co-operation between national training bodies and officials responsible for training in taxation in administrations, participating countries shall, in co-operation with the Commission:

(a) develop existing training programmes and, where necessary, devise new programmes to provide a common core of training for officials so as to enable them to acquire the necessary common professional skills and knowledge;

(b) where appropriate, open the training courses in taxation provided by each participating country for its own officials to officials from all participating countries;

(c) develop the necessary common tools for taxation training.

2. Participating countries shall also ensure that their officials receive the initial and continuous training necessary to acquire the common professional skills and knowledge in accordance with the common training programmes and the linguistic training necessary for those officials to attain a sufficient standard of linguistic competence.

Chapter III

Financial provisions

Article 10

Financial framework

The financial framework for the implementation of the programme for the period 1 January 2003 to 31 December 2007 is hereby set at EUR56 million. The annual appropriations shall be authorised by the budgetary authority within the limits of the financial perspective.

Article 11

Expenditure

1. The expenditure necessary for the implementation of the programme shall be shared by the Community and the participating countries in accordance with paragraphs 2, 3 and 4:

2. The Community shall bear expenditure as follows:

(a) the cost of the development, purchase, installation, maintenance and the cost of the day-to-day operation of the Community components of the communication and information-exchange systems described in Article 5 unless the Commission, in accordance with the procedure referred to in Article 13(2), decides otherwise;

(b) the cost of the travel and subsistence expenses relating to multilateral controls and exchanges of officials

(c) the cost of the travel and subsistence expenses and other costs relating to seminars and training activities

(d) such proportion of the cost of other activities as shall be decided on a case-by-case basis in accordance with the procedure referred to in Article 13(2).

3. The Commission shall, in accordance with the Financial Regulation applicable to the general budget of the European Communities, determine the rules relating to the payment of expenses and shall communicate them to the participating countries.

4. The participating countries shall bear expenditure as follows:

(a) 100% of the development, purchase, installation, maintenance and the cost of the day-to-day operation of the non-Community components of the communication and information-exchange systems described in Article 5 unless the Commission, in accordance with the procedure referred to in Article 13(2), decides otherwise;

(b) the difference, if any, between the expenditure paid by the Community in accordance with paragraph 1, and the actual cost of the activity;

(c) the costs relating to the initial and continuing training, including linguistic training, of their officials.

Article 12

Financial Control

Financing decisions and any agreements or contracts resulting from this Decision shall be subject to financial control, and if necessary, on the spot audits by the Commission, including the European Anti-fraud Office (OLAF), and by the European Court of Auditors. Any grants made pursuant to this Decision shall be subject to agreement in writing, in advance, by the beneficiaries. This agreement shall contain the acceptance of the beneficiaries to an audit by the European Court of Auditors into the use made of the financing granted.

Chapter IV

Other provisions

Article 13

Committee

1. The Commission shall be assisted by a committee, called the "Fiscalis Committee", composed of representatives of the Member States and chaired by a representative of the Commission.

2. Where reference is made to this paragraph, the management procedure laid down in Article 4 of Decision 1999/468/EC shall apply, in compliance with Articles 7 and 8 thereof.

3. The period provided for in Article 4(3) of Decision 1999/468/EC shall be three months.

Article 14

Follow-up

1. The programme shall be subject to continuous joint monitoring by the participating countries and the Commission.

2. Each year the Commission shall submit to the Committee referred to in Article 13(1) a follow-up report setting out the progress of all the programme's activities in terms of implementation and results.

3. The administrations of the participating countries shall send the Commission all the information necessary for follow-up reports to be drawn up as efficiently as possible.

Article 15

Interim and final evaluation

1. Mid-term and final evaluations of the programme shall be carried out under the Commission's responsibility using the reports drawn up by the participating countries. The programme's effectiveness and efficiency shall be evaluated in terms of the objectives set out in Article 3. Evaluations shall be conducted using the reports referred to in paragraph 2.

- The mid-term evaluation shall review the initial results and impact of the programme's activities. It shall also assess the use of funding and the progress of follow-up and implementation.

- The final evaluation shall assess the effectiveness and efficiency of the programme's activities.

2. The participating countries shall send the Commission:

(a) by 31 December 2004 at the latest a mid-term evaluation report on the programme's effectiveness and efficiency;

(b) by 31 December 2007 at the latest a final evaluation report on the programme's effectiveness and efficiency.

3. The Commission shall present to the European Parliament and the Council:

(a) by 30 June 2005 at the latest a mid-term evaluation report on the programme's effectiveness and efficiency and a communication on the desirability of continuing the programme, accompanied, where relevant, by a suitable proposal;

(b) by 30 June 2008 at the latest an evaluation report on the programme's effectiveness and efficiency.

These reports shall also be sent to the Economic and Social Committee and the Committee of the Regions for their information.

4. The evaluation reports referred to in paragraph 3 shall be based on the reports referred to in paragraph 2, the follow-up reports referred to in Article 14(2) and any other relevant information.

Article 16

Repeal

Decision No 888/98/EC is hereby repealed.

Article 17

Entry into force

This Decision shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Communities.

The Decision shall apply from 1 January 2003.

Article 18

Addressees

This Decision is addressed to the Member States.

Done at Brussels,

For the European Parliament For the Council

The President The President

LEGISLATIVE FINANCIAL STATEMENT

Policy area(s): Chapter 04: Taxation policy

Activity(ies): Article 01: Fiscalis 2007 Programme (ex Fiscalis)

Title of action: Adopting a Community programme to improve the operation of taxation systems in the internal market (Fiscalis 2007 programme)

1. BUDGET LINE(S) + HEADING(S)

B5-3050

2. OVERALL FIGURES

2.1. Total allocation for action (Part B): EUR56 million for commitment

2.2. Period of application: 2003 - 2007

2.3. Overall multiannual estimate on expenditure:

a) Schedule of commitment appropriations/payment appropriations (financial intervention) (see point 6.1.1)

EUR Million (to 3rd decimal place)

>TABLE POSITION>

b) Technical and administrative assistance and support expenditure (see point 6.1.2)

>TABLE POSITION>

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c) Overall financial impact of human resources and other administrative expenditure (see points 7.2 and 7.3)

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2.4. Compatibility with the financial programming and the financial perspective

|x| Proposal compatible with the existing financial programming

| | This proposal will entail reprogramming of the relevant heading in the financial perspective

| | This may entail application of the provisions of the Interinstitutional Agreement.

2.5. Financial impact on revenue:

|x| No financial implications (involves technical aspects regarding implementation of a measure)

OR

| | Financial impact - the effect on revenue is as follows:

None

3. BUDGET CHARACTERISTICS

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4. LEGAL BASIS

Article 95 of the Treaty establishing the European Community

5. DESCRIPTION AND GROUNDS

5.1. Need for Community intervention

5.1.1. Objectives pursued

The overall objective of the programme shall be to improve the proper functioning of the taxation systems in the internal market by increasing co-operation between Member States, their administrations and officials, and to identify and remedy areas, such as legislation and administrative practices which make this co-operation more difficult. The programme is also open to the participation of the applicant countries.

The general objectives of the programme are:

Value added Tax: To support the European Union VAT strategy as outlined in the Communication from the Commission to the Council and the European Parliament, entitled "A Strategy to improve the operation of the VAT System within the context of the Internal Market", or any future such strategy adopted by the Commission. The four main objectives in this field are simplification and modernisation of rules, together with a more uniform application of rules and a new approach to administrative co-operation.

Excise duties: To improve the co-operation between Member States, ensuring a more uniform application of existing rules and developing a common approach on legal and administrative aspects in the excise field.

Direct taxation: To raise awareness of Community policies in the field of direct taxation and providing support for pooling experiences, information exchange and other administrative co-operation.

Applicant countries: In order to ensure the effective application of the tax acquis by the applicant countries, to meet the specific needs of the applicant countries, to reinforce their administrative capacity and to help them implement the necessary legislative, administrative, organisational and technical measures.

The specific objectives of the programme will be set and reviewed annually by the programme's management committee established by the decision.

5.1.2. Measures taken in connection with ex ante evaluation

The Fiscalis programme [11] was adopted by the European Parliament and the Council in 1998 as a five-year programme of Community action to ameliorate the indirect taxation systems of the internal market. It has been subject to a mid-term evaluation, based on interim reports from Member States covering the first three years, which has concluded that the short-term impact of the programme is encouraging and it is seen as a valuable tool in support of EU fiscal policy. It was noted, however, that it was difficult to measure the extent to which the objectives had been realised. Further work will need to be done in this area in the context of the final report on the implementation and impact of the programme as required by Article 12(3)(b) of the Fiscalis decision.

[11] 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.

Through its activities, Fiscalis has disseminated significant knowledge and added experience to the participants on specific subjects, has made it possible to improve control and the fight against fraud of the indirect taxation systems and allowed officials to adopt new administrative practices in co-operating with other tax administrations. The report showed that the programme, which also provided the legal basis for funding much of the Community computer support operations, made it possible to encourage better use and distribution of the existing tax control systems. These are key control instruments for intra-community VAT and Excise. The programme also contributed to new computerisation projects within the excise field. By opening it to the applicant countries, it has also been possible for them to already benefit from participation in seminars and exchanges.

Taking account of the evaluation and the contribution it has made towards the achievement of Community objectives in the field of indirect taxation, the new programme, Fiscalis 2007, builds on the experience but also takes account of new developments in the area of tax policy as well as general developments in Europe. For example, new technology plays a significant role in the modernisation of both tax systems and tax administrations and opens possibilities for improved efficiency and creates an environment for better co-operation between Member States. A new programme should benefit from this evolution. Therefore, the proposal contains a significantly reformed and modernised programme the aim of which is to continue to provide the best support for Community tax work.

In this respect, the proposal contains the following improvements compared to the Fiscalis Decision:

- the objectives of the programme will be directly linked to tax policy objectives;

- it will be extended to cover direct taxation;

- a specific objective has been inserted to better meet the special needs of applicant countries. It will be possible to include new activities to meet these needs.

- a concerted approach is taken to fiscal communication and information exchange systems as all will be assembled in the programme.

- provision is made for a more structured approach on evaluation.

5.1.3. Measures taken following ex post evaluation

Not applicable.

5.2. Actions envisaged and arrangements for budget intervention

The activities are as follows:

- Communication and information exchange systems:

The Community is responsible for keeping existing systems, and in particular VIES (VAT Information Exchange System), CCN/CSI (Common Communications Network/Common Systems Interface), EWSE (the early-warning system for excise) and Excise Duty Table, operational: this mainly involves covering the costs of maintaining, upgrading and running systems and network operating costs.

For the new systems planned, including the excise movement verification, e-commerce and 8th Directive systems, the Community has to cover the costs of developing, purchasing, installing, running and upgrading the systems: this mainly concerns the common hardware, software and networks to be used by all participating countries to ensure the interconnection and interoperability of systems.

For the new systems planned for direct taxation, the Community has to cover the cost of feasibility studies.

For the applicant countries, within the framework of the enlargement process, the Community has to cover the costs of assistance, conformity testing and interconnection of national systems with Community systems.

The participating countries have to cover the costs of running the national databases making up these systems, network connections between the Community and non-Community components of the systems and any software and hardware that a participating country might think necessary to enable its administration to make the most of the systems.

- Exchanges, working parties, seminars and multilateral controls: The travel and subsistence costs of participating countries' tax officials taking part in exchanges, seminars or multilateral controls abroad will need to be covered. All travel and subsistence costs (for exchanges, seminars or multilateral controls) will be calculated on the basis of the travel costs and daily allowances currently applicable to officials of the Commission.

- Common training initiatives: The purpose of these is to establish project groups to develop common training for Member States, in particular in the areas of Audit techniques and Computer Audit techniques; to develop the use of the internet in training; to provide managed training information, develop technical language tools and to promote co-operation between the training organisations in Member States. These activities will require funding for travel and subsistence and eventually for the purchase of the appropriate materials. All travel and subsistence costs (for exchanges, seminars or multilateral controls) will be calculated on the basis of the travel costs and daily allowances currently applicable to officials of the Commission.

5.3. Methods of implementation

The aim is to bring a co-ordinated approach to the programme, sharing experiences and applying best practice. In order to ensure that activities are targeted on priority policy areas, there is provision for an annual review of the specific objectives by the Fiscalis 2007 Committee. On the basis of this annual review, a rolling action plan will be developed, prioritising objectives and identifying the appropriate action(s) to be undertaken to achieve the objectives. The results of these actions will be monitored and reviewed by the management committee and new actions, if appropriate, will be identified and added to the rolling action plan.

In order to ensure that the programme is developed so that it achieves the agreed specific objectives, all requests for actions will be required to follow procedures which are aimed at ensuring that actions are prioritised, clear objectives are set, those proposing actions take account of the resources required to achieve them, proper approval is given for the action by all those implicated in it and that follow-up and evaluation are seen as an integral part of the proposal.

This method of working ensures that actions are targeted on the policy priorities, are undertaken in partnership with Member States and that the results and experience of activities are fed back into other work, whether within or outside the scope of the programme.

6. FINANCIAL IMPACT

6.1. Total financial impact on Part B - (over the entire programming period)

6.1.1. Financial intervention

Commitments in EUR million (to the 3rd decimal place)

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6.2. Calculation of costs by measure envisaged in Part B (over the entire programming period)

Commitments in EUR million (to the 3rd decimal place)

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7. IMPACT ON STAFF AND ADMINISTRATIVE EXPENDITURE

7.1. Impact on human resources

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7.2. Overall financial impact of human resources

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7.3. Other administrative expenditure deriving from the action

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I. Annual total (7.2 + 7.3)

II. Duration of action

III. Total cost of action (I x II) // EUR2.636.774

5 Years

EUR13.183.870

The needs of administrative and human resources shall be covered within the allocation granted to managing the Directorate General in the framework of the annual allocation procedure.

8. FOLLOW-UP AND EVALUATION

8.1. Follow-up arrangements

This is covered by Article 14 of the proposal, which stipulates that the programme will be subject to continuous monitoring managed jointly by the participating countries and the Commission. This is assured by the use of financial, outcome and output indicators. The Commission services will present to the Committee on an annual basis a follow-up report covering the activities of the programme and their results in the year described. Participating countries shall provide the Commission with all necessary information needed to produce the follow-up reports.

8.2. Arrangements and schedule for the planned evaluation

Article 15 of the Decision provides for evaluation of the programme. The programme will be subject to mid-term and final evaluations carried out jointly by the participating countries and the Commission with a view to assessing the impact of the programme's activities on the specific and general objectives set out in Article 3.

The mid-term evaluation will review the relevance and initial results and impacts of the programme's activities. It will also cover the use of funding, follow-up and implementation.

The final evaluation is intended - taking account of the findings of the mid-term evaluation report - to account for the use of resources and the effectiveness and efficiency of the programme's activities.

The programme's effectiveness and relevance will be evaluated in terms of its specific and general objectives.

The final and mid-term evaluation reports will be based on reports submitted by the participating countries, annual follow-up reports and any other relevant information. Topical studies may be considered by the Commission with a view to supplementing the information available on the programme's impact.

The Commission will see that the evaluation matrix for the future programme is available from the very outset. It will comprise:

- the programme's intervention logic (the hierarchy of objectives, results and expected impact)

- indicators for the results and impact enabling the achievement of objectives to be measured,

- data-gathering instruments tailored to the results and impact identified (targeted questionnaire, statistical and other data).

9. ANTI-FRAUD MEASURES

The participating countries will pay their own officials' travel and subsistence costs, in accordance with the rules agreed. The requisite sums will be advanced to the participating countries in the course of the financial year, taking account of implementation. The participating countries will provide detailed statements of their spending and keep all documents for the purposes of controls. The travel costs of officials of other countries or representatives of outside bodies and costs related to the organisation of seminars will be paid either directly by the Commission or, subject to authorisation, by the participating countries. All such contracts will include fraud-prevention measures (audits, etc.).

Sums relating to other programme activities will be subject to the usual procedure of verification by the Commission before payment, taking account of contractual obligations and the principles of sound financial and general management. All contracts between the Commission and the beneficiaries will include fraud-prevention measures (audits and reports, etc.).