6.8.84 Official Journal of the European Communities No C 206/21 
4. Annexes 4.3.2. B2 
4.1. Annex I B 
The Committee suggests that 'brown' sugar' (par­
tially refined sugar) be included in Annex I B as a 
raw material. Polyglycerol polyricinoleate should be permitted in 
quantities of up to 0,3 % for all products, and of up 
to 0,5 % for thin films. 
4.3.3. B3 
4.2. Annex III A, 1.1.3 (i) 
In the Committee's view the text after 'points' 
should read '(i) to (iii)'. 
4.3. Annex III B — Additives 
4.3.1. Bl 
Both lecithin and ammonium phosphatides should 
also be permitted in quantities of up to 1 % for the 
products listed in Annex I A, 18 and 23. Use of sorbitan tristearate should be permitted to 
prevent whitening of the couverture, in quantities of 
up to 0,5 %. 
4.3.4. B4andB5 
Magnesium silicate and shellac should also be per­
mitted for articles listed in Annex I A, 28. 
In addition, the use of the following substances 
should be permitted for coating of products listed in 
Annex I A, 18, 23 and 28: carnauba wax, beeswax, 
gum arabic and pectin. 
Done at Brussels, 23 May 1984. 
The Chairman 
of the Economic and Social Committee 
Francis CEYRAC 
Opinion on the proposal for a Council Directive on the harmonization of the laws of the 
Member States relating to turnover taxes — common system of value added tax: 
expenditure not eligible for deduction of value added tax 
(84/C 206/08) 
The text referred to the Committee has been published in Official Journal of the Euro­
pean Communities No C 37 of 10 February 1984, page 8. 
A. LEGAL BASIS FOR THE OPINION 
On 7 February 1983 the Council of the European Communities decided, under Arti­
cles 99 and 100 of the Treaty establishing the European Economic Community, to 
consult the Economic and Social Committee on the abovementioned proposal. 
Procedure: 
On 16 February 1984 the Commission tabled a number of amendments to the original 
proposal. The amendments were contained in a document entitled 'Amendments of 
the proposal for a 12th Directive relating to the common system of value added tax: 
expenditure not eligible for deduction of value added tax'. 
No C 206/22 Official Journal of the European Communities 6. 8. 84 
The Section for Economic and Financial Questions, which was responsible for prepar­
ing the Committee's work on the matter, adopted its opinion on 15 May 1984 in the 
light of the report by Mr Broicher. 
B. OPINION OF THE ECONOMIC AND SOCIAL COMMITTEE 
The Economic and Social Committee adopted the following opinion at its 217th plen­
ary session, meeting of 23 May 1984, with no dissenting votes and 2 abstentions. 
1. General comments 
The Committee welcomes the Commission's efforts 
to further harmonize national legislation on turn­
over taxes. The Commission, acting under Article 17 
(6) of the sixth VAT Directive ('), has tabled a draft 
Directive partially or fully excluding from VAT 
deductibility, expenditure which is not strictly busi­
ness-related. 
In examining the Commission proposal, the Com­
mittee took the view that input tax deductibility 
must be contingent on the expenditure being busi­
ness-related. The Committee concedes that it is no 
easy task to distinguish between business and non­
business components of the type of expenditure in 
question. This also explains the difference in 
national arrangements on deductibility. Some Mem­
ber States have a blanket ban on deductibility in re­
spect of the expenditure in question. Other Member 
States operate flat-rate deductibility arrangements. 
The Committee agrees with the Commission that the 
different arrangements create distortions of compe­
tition. There is therefore a need for harmonization. 
The Committee fundamentally endorses the new 
Commission proposal to grant flat-rate deductibility 
in respect of certain business-related expenditure. 
The Committee is not however in favour of a uni­
form rate for all sectors and professional groups. 
This would overlook the fact that some types of 
undertakings, particularly in the small business sec­
tor (tradesmen, commercial travellers, etc.) incur 
higher levels of business-related expenditure of the 
type covered by the Commission proposal. This 
applies in particular to the use of vehicles for busi­
ness purposes. With uniform flat-rate deductibility 
arrangements, many firms would have to apply for 
special authorization for higher concessions. This 
would place an unnecessary burden both on the 
(') OJ No L 145, 13.6. 1977. firms concerned and on the tax authorities. In addi­
tion, a flat-rate deductibility allowance could consti­
tute an unwarranted tax benefit for firms with lower 
expenditure in this area. In the interests of both jus­
tice and simplicity, the Committee therefore advo­
cates the introduction of sliding-scale deductibility 
arrangements for certain types of expenditure. 
Deductibility rates for the vatious sectors and pro­
fessional groups would be determined by the Com­
mission on the basis of established patters, subject 
to strict criteria. 
The Committee is well aware that the draft Directive 
will have severe budgetary repercussions on the var­
ious Member States and also on the European Com­
munity. In order to minimize difficulties in intro­
ducing the new arrangements, the Committee there­
fore supports the Commission proposal for a four-
year transitional period designed to facilitate the 
gradual adjustment of national legislation. 
2. Specific comments 
Article I 
The Committee proposes that Article 1 be amended 
in line with the following comments: 
The various language versions of 'private aircraft' 
and 'pleasure boats' (English rendering in COM 
Doc.) do not always reflect what the Commission 
clearly had in mind, i.e. aircraft and boats owned by 
companies. In the interests of clarity, these terms 
should therefore be replaced by 'company aircraft' 
and 'company boats' respectively. 
Input VAT is to be deductible in respect of expendi­
ture on the purchase, manufacture, importation, 
leasing or hire, and modification of passenger cars, 
motor cycles, company vessels, company aircraft, 
etc., in so far as the tax authorities accept the need 
for purchase and suitability for business use. 
6. 8. 84 Official Journal of the European Communities No C 206/23 
For simplicity, deductibility may be granted on a 
percentage basis without production of evidence as 
to business-related use. The Committee proposes 
three different rates: e.g. 25, 50 and 75%. In con­
junction with the tax authorities of the Member 
States, the Commission would then be responsible 
for determining the appropriate percentage rate for 
specific sectors and professional groups, on the 
basis of objective criteria, in particular the present 
ratio between expenditure for business and private 
use. 
Entrepreneurs who submit individual evidence of 
the scale of business-related use would be entitled 
to deduct input VAT in excess of the flat-rates. 
Evidence of business-related running costs must be 
strictly checked. A flat-rate mileage allowance for 
the various types of vehicle could be considered, for 
example. This would be easy to monitor (checks on 
the vehicle's identity) and would clamp down on tax 
evasion. Alternatively deductibility could be made 
contingent on the keeping of a vehicle log-book. 
The same deductibility arrangements would apply 
in respect of expenditure on the repair,'maintenance 
or running of the abovementioned modes of trans­
port, in particular to expenditure on fuel, lubricants, 
spare parts and services. 
The rules on percentage deductibility and the pro­
posed provisions for submitting evidence of 100% 
business-related use would render Article 1 (2) 
superfluous. It could therefore be deleted. 
Article 2 (1) 
In line with the above general comments, the Com­
mittee feels that there is a case for granting full 
deductibility in respect of VAT on transport expen­
ses incurred on business travel by a taxable person 
or his staff (in so far as such expenses are not cov­
ered by Article 1), where the journey is clearly neces­
sary in connection with business activity. 
Nevertheless, extremely strict criteria should be used 
for vetting evidence that the journey is business-
related : (a) business travel in connection with the sale of 
goods and services, installation work, etc. is a 
straightforward matter; 
(b) travel to conferences, congresses, etc. should, 
however, be thoroughly checked by the tax 
authorities and deductibility should only be 
granted on production of cast-iron evidence that 
such travel is for staff training purposes. 
Article 2 (2) 
Specific reference should be made here to travel 
from home to work-place, since the current Com­
mission wording is somewhat ambiguous on this 
point. 
Article 3 
In line with Article 3 (a) of the Commission propo­
sal, the Committee also takes the view that expendi­
ture listed in Article 3 should qualify for full deduc­
tibility on production of evidence that it is busi­
ness-related. There may, however, be a case for 
fixing a (daily) ceiling in respect of expenditure on 
accommodation, food and drink. This ceiling could 
average 60 ECU per day on a sliding scale in line 
with the cost of living in the individual countries of 
destination. 
Article 3 (a) 
Article 3 (a) provides for full input VAT deductibil­
ity, subject to scheduled conditions. In line with the 
above comments, the relevant wording should be 
appropriately amended to indicate that the level of 
deductibility will be geared to the scale of the evi­
dence of business-related use. It should therefore be 
made clear that 100% deductibility will be contin­
gent on production of cast-iron evidence of business 
use. In this connection, consideration should be 
given to certain restrictions in line with the com­
ments on Articles 3 and 4. 
Article 4 
The Committee proposes deletion of the second part 
of Article 4 'including expenditure on hospitality ... 
intended primarily for such entertainment'. More­
over the Committee believes that expenditure on 
entertainment should be VAT deductible provided: 
No C 206/24 Official Journal of the European Communities 6. 8. 84 
(a) evidence is produced that it is business-related 
and (b) expenditure in individual cases is within 
generally accepted norms. 
For simplicity, guide values or ceilings could be set 
in line with the scale and importance of the under-
Done at Brussels, 23 May 1984. 
1. General comments 
1.1. At present nearly 13 million persons through­
out the European Community, that is 11,5 % of the 
working population, are unemployed. The young, 
the elderly and women are particularly affected and 
on an increasingly long-term basis with little imme­
diate hope of re-entering the labour market. The 
Commission consultations have indicated a new taking. In addition eligibility should be vetted 
according to strict criteria. 
Deductibility in respect of gifts made in connection 
with business activity should be limited to articles 
costing 20 ECU or less. 
The Chairman 
of the Economic and Social Committee 
Francois CEYRAC 
spontaneous local growth of employment initiatives 
including many by unemployed persons themselves 
which require tangible support. The Committee 
therefore welcomes the communication and agrees 
that employment creation policies ought to take 
more account of the potential of local employment 
initiatives (LEIs). It also recognizes that, whereas 
some LEIs resemble or may eventually mature into 
normal small and medium-sized enterprises, the vast Opinion on the Commission's communication to the Council 'Community action to 
combat unemployment — the contribution of local employment initiatives' 
- (84/C 206/09) 
The text referred to the Committee has been published in Official Journal of the Euro­
pean Communities No C 70 of 12 March 1984, page 1. 
A. LEGAL BASIS FOR THE OPINION 
On 1 December 1983 the Council, acting in accordance with Article 198 of the Treaty 
setting up the European Economic Community, asked the Economic and Social Com­
mittee for an opinion on the abovementioned communication. 
Procedure: 
The Section for Social Questions was instructed to prepare the Committee's work on 
the matter. The Section adopted its opinion on 10 May 1984 after hearing a report by 
Mr Brian E. Roycroft. 
B. OPINION OF THE ECONOMIC AND SOCIAL COMMITTEE 
At its 217th plenary session, meeting of 23 May 1984, the Economic and Social Com­
mittee adopted the following opinion unanimously.