30. 3. 87 Official Journal of the European Communities No C 83/9 
Opinion on the Proposal for a Council Directive amending Directive 77/388/EEC on the 
Harmonization of the Laws of the Member States relating to Turnover Taxes in Respect of 
the Common Value Added Tax Scheme applicable to Small and Medium-Sized Businesses. 
(87/C 83/07) 
On 20 October 1986 the Council decided to consult the Economic and Social Committee, under 
Article 198 of the Treaty establishing the European Economic Community, on the abovemention-
ned proposal. 
The Section for Economic, Financial and Monetary Questions, which was responsible for 
preparing the Committee's work on the subject, adopted its Opinion on 13 January 1987, in the 
light of the Report by Mr Broicher. 
At its 243rd Plenary Session (meeting of 28 January 1987) the Committee adopted the following 
Opinion by a very large majority, with one abstention: 
1. General comments 
1.1. The Commission's efforts to secure further harmo­
nization of Member State legislation on turnover taxes are 
welcomed in principle by the Committee. However, the 
proposal as it stands at present is not considered to be a 
suitable instrument for attaining this goal. 
1.2. The Committee thinks that Member States ought to 
be granted a freer hand in taxing small and medium-sized 
businesses. This would enable each Member State to take 
account of these businesses specific and — possibly — 
varying situations. Greater simplicity can be achieved only 
in part by limited tax exemptions. Although the tax 
treatment of taxable persons will be simplified, this will 
mostly be counterbalanced by serious problems of 
definition. 
1.3. In addition, the distortion of competition between 
Member States is not a reason for standardizing the rules 
applicable to businesses with a turnover of 35 000 ECU or 
less, because businesses of this size play an insignificant 
part in cross-frontier trade in goods and services. Free 
competition is hindered in individual cases, but these are 
much less serious than those cases where exempted and 
non-exempted enterprises with only slightly different 
turnovers compete with each other. 
2. Specific comments 
In keeping with the basic ideas set out above, the 
Committee has the following comments to make on the 
individual articles: 
2.1. Article 1, paragraph 1 
There should be only an upper limit on the turnover on 
which Member States may grant a tax exemption. There 
are no objections to the proposed 35 000 ECU limit. Within 
this limit Member States should be left to decide for themselves whether they wish to grant an exemption and, if 
so, how high the turnover is to be on which this exemption 
is to be granted. The key factor here, apart from the 
economic situation in the individual Member State, will 
possibly be an appropriate balance between the cost of 
collecting the tax and the revenue accruing therefrom. 
If a tax exemption limit is introduced — no matter how 
high it may be — the Member States should make provision 
for a graduated scheme which avoids sudden changes 
between being exempted and not being exempted when 
there is only a slight variation in turnover. 
2.2. Article 1, paragraph 1 
There is no uniform definition of 'small and medium-sized 
undertakings' in the Community. Even in those Member 
States where a definition exists, it is frequently applied to 
only certain areas of economic activity. For the sake of 
clarity, the two terms should therefore not be used. 
Furthermore, Article 1, paragraph 2 is superfluous and 
should be deleted, because Article 1, paragraph 3 gives an 
adequate definition of where the exemptions and the 
simplified scheme are to apply. 
2.3. Article 1, paragraphs 3 to 5 
Article 1, paragraph 3 gives a suitable definition of turnover 
for the purposes of determining the exemption limit. 
Article 1, paragraph 4 stipulates that the entrepreneur 
exempt from tax shall not be entitled to deduct tax or to 
show it in invoices. 
Article 1, paragraph 5 provides taxable persons with a 
choice, thereby making allowance for the fact that a tax 
exemption is not always to their advantage. Eligible 
persons can decide for themselves whether to opt for the tax 
exemption. 
No C 83/10 Official Journal of the European Communities 30. 3. 87 
There are no objections to Article 1, paragraphs 3 to 5. 
2.4. Article 1, paragraph 6 
The simplified tax scheme should be confined to the 
possibility of introducing flat-rate percentages for calculat­
ing deductible VAT. Uniform procedures with regard to 
tax declarations and payments may cause the taxable 
persons to be worse rather than better off, because uniform 
Community-wide rules do not accommodate individual 
requirements in each Member State. The measures 
specified in Article 1, paragraph 6 (e) and (f) should 
therefore be dropped. The Committee thinks that 'in the 
business and services sectors' ought to be added after 
'taxable persons' in Article 1, paragraph 6 (g). 
An upper limit on turnover is necessary for the flat-rate 
percentages — just at it is for the tax exemptions — so that 
competition between the Member States is not distorted. 
There are no objections to the proposed 150 000 ECU limit. 
Article 1, paragraph 6 (g) allows the Member States to 
introduce flat-rate percentages when a business's turnover 
does not exceed this limit. As in the case of the tax 
exemptions, the taxable persons should also have the 
choice here between the simplified and the normal scheme. 
If they opt for the simplified scheme, the taxable event does 
not necessarily have to be the receipt of payment in 
accordance with paragraphs (b) to (d). Here, too, the 
taxable person must be entitled to choose. 
2.5. Article 1, paragraph 7 
If the Committee's proposals are accepted, the provisions 
laid down in Article 1, paragraphs 7 to 9 with regard to the 
Commission's supervisory powers must be adapted 
accordingly. The freer hand granted to the Member States 
will make these provisons superfluous to a large extent. If 
Article 1, paragraph 9 is retained, the Economic and Social 
Done at Brussels, 28 January 1987. Committee — as the body representing socio-economic 
organizations at Community level — should be consulted 
at the same time as the European Parliament. 
2.6. Article 1, paragraphs 10 and 11 
The annual revision of (a) the limits on turnover and (b) the 
equivalents in national currencies of the ECU is considered 
by the Committee to be neither necessary nor practicable. 
These figures should be reviewed and, if necessary, 
adjusted only once every few years even if this means 
putting up with certain inaccuracies. The taxable persons 
must be notified of any changes in good time and thus given 
the chance to plan accordingly. Furthermore, a change in 
the limits will require the Member States to enact 
legislation, which will take at least one year. The changes 
should come into effect at the start of a tax period, 
otherwise there will be problems with definitions and tax 
collection. 
2.7. Article 2, paragraph 2 
The aim here is to determine the basis of assessment for the 
Community's own resources. Regardless of the tax 
exemption rules, 10 000 ECU is to remain the limit above 
which the total turnover of a taxable person is to be taken 
into account for determining the basis of assessment. 
2.8. Article 2, paragraph 3 
It is unrealistic and ill-advised to state that the Directive 
must be applied in the Member States by 1 April 1987 at the 
latest. The necessary changes in Member States VAT 
legislation require more time and the deadline should be at 
least one year later. Moreover, the new provisions should 
come into force at the start of a new tax period in the 
individual Member States. 
The Chairman 
of the Economic and Social Committee 
Alfons MARGOT