13. 11. 78 Official  Journal  of the European  Communities No C 269/21 
Having  regard  to the oral  report  made  by the rapporteur, 
Mr Marvier, 
Having  regard  to the discussions  at its 159th  plenary 
session,  held  on 31 May  and  1 June  1978  (meeting  of 
31 May  1978), 
HAS  ADOPTED  THE  FOLLOWING  OPINION 
by a unanimous  vote: 
The Committee  approves  the two proposals,  subject  to the 
comments  set out below: 
1. General  comments 
The Committee  approves  in principle  the two  proposals 
which  are designed  to align  the appropriate  national  laws 
and, in particular,  to prevent  the introduction  of new barriers  to trade  affecting  States  which  as yet have  no laws 
in this  field. 
2. Specific  comments 
2.1. Common  Customs  Tariff  subheadings  84.45  B 
and C and  heading  Nos  84.49  and  85.05  are  not 
sufficiently  explicit  to enable  the outline  Directive  to be 
implemented.  The  types  of machines  coming  under  these 
headings  will  have  to be defined  more  accurately. 
2.2. The  French  version  of the  end  of the  first 
paragraph  of Article  26 should  be changed  to read  'si les 
modifications  apportees  aboutissent  a obtenir  une 
securite  au moins  egale'. 
2.3. Point  1 in Annex  II should  be re-worded  to read: 
'The  approved  bodies  responsible  for endorsing  the 
examination  of  machine-tools  and  similar 
machines  . . .' (rest  unchanged). 
Done  at Brussels,  31 May  1978. 
The Chairman 
of the Economic  and  Social  Committee 
Basil  de FERRANTI 
Opinion  on the proposal  for a Seventh  Council  Directive  on the harmonization  of the laws  of 
the Member  States  relating  to turnover  taxes  - common  system  of value  added  tax to be applied 
to works  of art, collectors'  items,  antiques  and  used  goods 
The text  referred  to the Committee  has been  published  in Official  Journal  of the European 
Communities  No  C 26 of 1 February  1978,  page  2. 
A. LEGAL  BASIS  FOR  THE  OPINION 
On 18 January  1978,  the Council  referred  the abovementioned  proposal  to the Economic  and 
Social  Committee  in accordance  with  Articles  99, 100  and  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 159th 
plenary  session,  held  in Brussels  on 31 May  and  1 June  1978. 
The full  text  of the opinion  is as follows: 
No C 269/22 Official  Journal  of the European  Communities 13. 11. 78 
THE  ECONOMIC  AND  SOCIAL  COMMITTEE, 
Having  regard  to the Treaty  establishing  the European 
Economic  Community  and  in particular  Articles  99,100 
and 198  thereof, 
Having  regard  to the request  made  by the Council  of the 
European  Communities  on 20 January  1978  for  an 
opinion, 
Having  regard  to the decision  taken  by the Bureau  of 
the Committee  on 31 January  1978,  entrusting  the 
preparation  of an opinion  on the matter  to the Section  for 
Economic  and  Financial  Questions, 
Having  regard  to the  oral  report  made  by  Mr 
Peyromaure-Debord-Broca,  the  rapporteur,  and  the 
Section's  discussions  at its meeting  on 16 May  1978, 
Having  regard  to the discussion  at the Committee's  159th 
plenary  session,  held  on 31 May  and 1 June  1978  (meeting 
of 1 June  1978), First  of all, the goods  in question  are divided  into  three 
categories: 
(a) Works  of art,  collectors'  items  and  antiques 
(Article  2), These  include  articles  made  of gold  or any 
other  precious  metal  or containing  precious  stones, 
where  the value  of such  precious  materials  does  not 
exceed  50%  of the selling  price; 
(b) Used  goods  in general  (Article  3); 
(c) Certain  used  goods  (Article  4). These  include  private 
cars,  motorcycles,  private  aircraft  and  pleasure 
vessels.  These  items  are characterized  by the fact  that 
they are subject  to rules  that  make  it possible  to 
identify  the successive  owners. 
Secondly,  sales  and  imports  of works  of art by the artist 
himself  are exempt  from  VAT. 
HAS  ADOPTED  THE  FOLLOWING  OPINION 
by 28 votes  to 16, with  28 abstentions: 
1. Introduction 
1.1. In  submitting  this  proposal  the  Commission  is 
fulfilling  the obligation  imposed  on it by Article  32 of the 
Sixth  VAT  Directive  of 17 May  1977. 
1.2. Article  32 allowed  Member  States  applying  a 
special  system  to the goods  in question  to temporarily 
retain  that  system. Thirdly,  the Directive  allows  a taxable  person  to opt for 
application  of the normal  VAT  scheme  to his transactions 
in the articles  in question.  Where  use is not made  of this 
option  the scheme  laid down  in the Directive  is applicable. 
Fourthly,  the right  to deduct  arises  only  at the time  of 
supply  by a taxable  person  wishing  to resell.  This  right  is 
confined  to imports  and exports  in the case  of works  of art 
and like  articles  and  to exports  in the case  of used  goods 
referred  to in Article  3. 
The schemes  applicable  to these  three  categories  of goods 
can be summarized  as follows: 
1.3. The  following  tables  show  that  the VAT  schemes 
and rates  at present  vary  greatly  from  one  Member  State 
to another. 
1.4. The  object  of the provisions  the Commission  is 
now submitting,  albeit  somewhat  tardily,  is not  only 
harmonization  but  also  neutralization  of the effects  on 
trade  and  marketing  channels. Category  (a) 
The taxable  amount  is 30 % of the selling  price,  but the 
tax paid  at the time  of acquisition  by a taxable  person 
wishing  to resell  is not deductible.  Also  non-deductible  is 
the tax paid  on goods  and services  used  for the purposes  of 
the activity  in question. 
2. Basic  principles  of the Directive 
2.1. For  a proper  understanding  of this  opinion  it is 
necessary  to outline  the basic  principles  of the Directive. Where  an item  is imported  by a taxable  person  wishing  to 
resell,  70%  of the amount  of VAT  paid  at the time  of 
importation  is deductible.  Deduction  may  take  place  only 
on supply  of the item  by the taxable  person  wishing  to 
resell. 
SCHEME  FOR  WORKS  OF ART,  COLLECTOR'S  ITEMS  AND  ANTIQUES 
Proposal United  Kingdom Belgium Luxembourg Germany Netherlands Ireland Italy Denmark 
- Supplies 
effected  by a 
taxable  person 
wishing  to 
resell Taxable  amount: 
30%  of the 
selling  price Taxable  amount: 
30 % of the 
selling  price 
exclusive  of tax 
or the difference 
between  the 
selling  price  and 
the purchase 
price,  at the 
option  of the 
taxable  person 
for each 
transaction Taxation  on the 
difference  between 
the selling  price 
and the purchase 
price,  with  the 
option  of the 
normal  scheme 
for each 
transaction normal  scheme normal  scheme normal  scheme normal  scheme normal 
scheme normal 
scheme normal  scheme 
- Supplies  and 
imports 
effected  by the 
artist  himself exemption exemption taxation taxation taxation taxation taxation taxation taxation exemption 
- Right  to 
deduct  under 
the internal 
scheme none Right  to deduct 
the tax on costs No right  to 
deduct  for the 
taxes  imposed  on 
acquisition  of the 
goods,  except 
where  the normal 
scheme  is opted 
for. But 
deduction  of 
other  inputs 
- Imports Taxation  on the 
value  of the 
goods  and  right 
to deduct  70 % of 
the tax paid Exemption  of 
imports  effected 
by the artist,  a 
private  individual 
or an art gallery 
(when  the goods 
have  been 
acquired  from  the 
artist  by dealers 
with  a view  to 
selling  them); 
taxation  at 30% 
of the>alue  of the 
goods  in other 
cases Exemption  for 
goods  acquired 
from  the artist 
after  1. 4. 1973 
and in certain 
cases  of 
re-importation. 
Otherwise 
taxation  on the 
normal  value -
- Exports Right  to deduct 
the tax due  or 
paid on 
acquisition exemption 
(zero  rate) exemption 
(zero  rate) 
SCHEME  FOR  USED  GOODS 
Proposal France United  Kingdom Belgium Luxembourg Germany Netherlands Ireland Italy Denmark ? O 
N> OS 
s Supplies  by a 
taxable  person 
wishing  to 
resell  goods 
acquired  from 
a non-taxable 
person  who 
has not been 
entitled  to 
deduct 
Right  to 
deduct  under 
internal 
scheme 
- Imports 
- Exports Taxable  amount: 
30%  of the 
selling  price.  This 
scheme  may  at 
the option  of the 
reseller  apply  to 
supplies  of used 
goods  acquired 
from  other 
taxable  persons 
Taxation  on the 
normal  value 
without 
deduction 
Deduction  of the 
tax due  or paid  at 
the time  of 
acquisition Principle:  taxable 
amount  is the 
difference 
between  the 
selling  price  and 
the purchase 
price.  But this 
difference  may  be 
calculated 
globally  for each 
tax period. 
Furthermore 
dealers  may  have 
each transaction 
taxed  on the total 
selling  price 
In the case  of 
taxation  on the 
difference  between 
the selling  price 
and the purchase 
price:  right  to 
deduct  the tax 
imposed  on the 
cost of the 
dealer's  services. 
In the case  of 
taxation  on the 
total  selling  price: 
full deduction 
entitlement 
Taxation  on the 
normal  value 
exemption 
(zero  rate) Normal  scheme, 
except  for the 
goods  referred  to 
in paragraph  5 Taxation  on the 
difference 
between  the 
purchase  price 
and the selling 
price,  subject  to 
authorization. 
Otherwise 
normal  scheme normal  scheme normal  scheme normal 
scheme normal 
scheme normal 
scheme normal  scheme 
o 
l 
n 
I § 
SCHEME  FOR  CERTAIN  USED  GOODS 
P 
Proposal France United  Kingdom Belgium Luxembourg Germany Netherlands Ireland Italy Denmark 
Used  goods 
— Goods  covered Private  cars, 
trailers,  motor 
cycles,  private 
aircraft  and 
pleasure  vessels Private  cars, 
caravans  and 
motor  cycles Same  goods  as 
referred  to in 
the proposal Private  cars  with 
less than  10 seats Cars,  vans  and 
lorries  weighing 
less than  four 
tonnes 00 
- Supplies  by a 
taxable  person 
wishing  to 
resell,  of goods 
acquired  from 
a non-taxable 
person  or a 
taxable  person 
who has not 
benefited  from 
the right  to 
deduct Taxation  on the 
selling  price  of the 
goods,  with  the 
right  to deduct  an 
amount  of VAT 
calculated  on 
the basis  of the 
acquisition  price 
(but not more 
than four-fifths 
of the sum  due 
on the resale) Same  scheme  as 
in paragraph  4 
for private  cars, 
cycles  and  motor 
cycles  (but 
different  rates 
depending  on the 
taxable  amount 
chosen) Taxation  of the 
difference 
between  the 
selling  price  and 
the purchase 
price.  No right 
to deduct.  Option 
of the normal 
scheme Normal  scheme, 
subject  to 
certain  minimum 
levels  of tax 
on vehicles 
supplied  within 
the country 
or imported. 
(25 % duty  on 
sales  by private 
individuals) Taxation  of 
supplies  effected 
on an occasional 
basis  by a private 
individual  or a 
taxable  person 
who has not been 
entitled  to deduct. 
The assignor 
issues  an invoice 
specifying  the price 
exclusive  of tax 
and the amount 
of the tax. 
This  tax is higher 
than the residual 
tax borne  by the 
assignor,  who  does 
not pay  anything 
to the Exchequer. 
This  tax is 
deducted  by the 
taxable  person 
who resells  the 
goods  (up to the 
amount  of the tax 
invoiced  at the 
time  of this resale) normal  scheme 
-normal 
scheme Where  the goods 
sold by a taxable 
person  have  not 
been  taxed  when 
he acquired  them 
(purchased  from 
a private  individual) 
taxation  is based 
on 84-75%  of 
the difference 
between  the selling 
price  and  the 
purchase  price. 
This  tax should  not 
appear  on the 
invoice.  If the 
selling  price  is less 
than the purchase 
price  no tax is 
levied. Official  Journal  of the European  Communities  No  C 269/25 
Proposal France United  Kingdom Belgium Luxembourg Germany Netherlands Ireland Italy Denmark ? n K> OS 
\o 
K> ON - Exports 
- Imports 
Exchanges  of 
goods  of the 
same  nature 
between  a 
taxable  person 
and a non-
taxable  person Deduction  of the 
tax subject  to the 
four-fifths  limit 
normal  scheme exemption 
(zero  rate) 
Taxation  on 
the basis  of the 
normal  value, 
without  any  right 
to deduct 
The 'normal  value 
of a used  car 
should  be taken 
into account 
in the taxable 
amount  for a 
new car assigned 
by a trader The value  of 
the used  item 
exchanged  is 
not included  in 
the taxable 
amount  for the 
new item  of 
the same  kind Taxation  is 
based  on the 
difference 
between  the 
price  of the 
item assigned 
and the value 
of the item 
received.  The 
latter  is taxed 
under  the 
normal  scheme 
when  it is 
resold  by the 
trader 
I r § 
3 
13. 11. 78 Official  Journal  of the European  Communities No C 269/27 
A taxable  person  wishing  to resell  may  deduct  all of the 
VAT  on the purchase  of the item  if this is exported. unrealistic  in view  of the special  features  of the 
goods  in question,  the diversity  of the situations 
and the  number  of stages  or intermediate 
transactions  (e.g.  used  vehicles). 
Category  (b) 
The principles  are the same  as for Category  (a). 
But, in keeping  with  basic  VAT  principles,  this  scheme 
does  not apply  in the case  of purchases  made  by a taxable 
person  wishing  to resell  from  a person  who  is subject  to 
the normal  tax scheme. 
At the option  of a taxable  person  wishing  to resell,  this 
scheme  may,  however,  be applied  at the time  of reselling 
to used  goods  acquired  from  other  taxable  persons.  The 
procedures  for this are to be laid  down  by each  Member 
State. 
Category  (c) 
A taxable  person  wishing  to resell  is entitled  to deduct  the 
VAT  sum  resulting  from  application  of the VAT  rate  to 
the value  of the item  on acquisition,  which  he will have  to 
prove,  even  if it was  not paid. 
If an item  is exported,  the amount  of tax deductible  may 
not exceed  four-fifths  of the amount  of tax calculated  on 
the basis  of the  value  declared  for  the  purpose  of 
exportation. 
The basic  rules  are  in line  with  those  applicable  to 
Categories  (a) and  (b). 
In conclusion,  it can be said  that  the Directive  lays  down 
the principles  of a VAT  with  flat-rate  structure  that allows 
the goods  in question  to be introduced  or reintroduced 
into the normal  scheme. 
3. General  discussion 
3.1. A  number  of points  were  considered: 
3.1.1.  Why  have  solutions  involving  flat-rate  structures 
been  sought?  Flat  rates  are to be regarded  as The fact  that provision  has had to be made  within 
a common  framework  for three  categories  of 
relatively  heterogeneous  articles  and  special 
measures  for certain  situations  would  seem  to 
indicate  that  the efforts  to simplify  matters  are 
probably  going  to give  rise to other  complications, 
namely  in interpretation  of applicability  and  the 
carrying  out of checks. 
3.1.3.  Why  are artists  to be exempt?  Is this not leaving 
too large  an opening  for distortions? 
3.1.4.  Is this real  harmonization? 
3.1.5.  Why  was  the normal  VAT  regime  not adopted? 
3.1.6.  Why  was  this  system  not  completed  with  a 
harmonized  VAT  rate  in one form  or another? 
3.2. As regards  point  1: 
3.2.1.  The  difficult  problem  to be solved  was  how  to 
reintroduce  into  the VAT  cycle  products  that  have  been 
outside  it for a very  long  time  and how  to introduce  into 
this cycle  products  coming  under  VAT  for the first  time.  It 
was necessary  in particular  to find  ways  of providing 
certain  entitlement  to deduct  input  tax.  The  interested 
parties  also  wanted  to avoid  having  to show  their  margins. 
The only  possible  basis  therefore,  save  in exceptional 
cases,  was  the selling  price  paid  by the taxable  person 
wishing  to resell.  With  this basis,  the only  possible  system 
was a flat-rate  one adapted  to each  category  of articles. 
3.2.2.  As  far as the choice  of flat-rate  is concerned,  this 
cannot  be anything  but an average,  in view  of the customs 
of the trade.  It cannot  be compared  to the VAT  applied 
rigorously  throughout  an economic  chain  up to the final 
consumer.  The  difficulty  arises  when  a consumer  resells 
used durable  goods  and these  re-enter  normal  economic 
channels. 
3.2.3.  These  used  goods  transactions  cannot  be 
exempted  without  the risk  of large-scale  budget  losses. 
No C 269/28 Official  Journal  of the European  Communities 13. 11. 78 
3.3. As regards  point  2: 
3.3.1.  The  desire  to tax as accurately  as possible  has led 
to classification  of the articles  in question  into  three 
categories.  This  was a necessary  choice,  but the precision 
cannot  of course  be absolute. 
3.3.2.  A  number  of common  rules  will,  however,  allow 
both  participation  in a Community  market  and  simple, 
effective  checks  by virtue  of the obligation  to comply 
with these  rules.  All this cannot  but be conducive  to the 
tax harmonization  necessary  for the maintenance  of a 
market  without  any significant  economic  distortions  due 
to taxation. 
3.4. As  regards  point  3: 
3.4.1.  It  has  been  found  difficult  to make  artists 
taxable  persons  for  VAT  purposes.  This  is because 
making  tax checks  on all the aspects  of artists'  work 
involves  greater  difficulties  than  a system  that  operates 
'downstream'  of the artist,  even  though  this  may  lead  to 
certain  (probably  limited)  distortions. 
3.4.2.  The  evidence  suggests  that  there  are liable  to be 
such distortions  in the case  of small  objects  of great  value, 
whatever  the tax situation. 
It is, in fact,  not absolutely  clear  from  Article  2 (2) that the 
exemption  only  applies  to the supply  and  importing  of 
works  of art created  by the artist  himself. 
3.5. As regards  point  4: 
3.5.1.  It  is clear  that  the harmonization  is only  partial. 
It covers  only  the VAT  structures  in keeping  with  the 
objectives  of the Sixth  Directive. 
3.5.2.  On  the other  hand,  it cannot  be said  that  there  is 
any harmonization  at all in this area  at the present  time. 
The systems  within  the Community  differ,  as do those 
outside  it. 
3.5.3.  This  gives  rise to market  disruption  and affects 
commercial  channels. 
3.5.4.  A  common  basis  of assessment  for VAT  was 
considered  a good  thing,  so what  had to be done  was  to find a way  of creating  such  a common  basis,  however 
imperfect  it might  be, for the articles  in question. 
3.5.5.  At  any  rate,  that  was  the task  assigned  to the 
Commission  in the Sixth  Directive. 
3.5.6.  In  the absence  of any alternative,  all that one can 
do is consider  the level  of what  will  at all events  be a 
flat-rate  solution. 
3.6. As regards  point  5: 
3.6.1.  There  could  be no question  of making  the Sixth 
Directive  applicable  to the articles  in question.  This  would 
have  been  done  when  the Sixth  Directive  was being  drawn 
up, if one  had  wished  to adopt  this  course. 
3.6.2.  The  specific  features  of these  transactions  in 
used goods,  with  breaks  in the continuous  economic  chain 
between  taxable  persons,  cannot  but lead  to special  rules 
on reintroduction  into  the economic  chain. 
3.7. As regards  point  6: 
3.7.1.  It  was  asked  why  the  harmonized  flat-rate 
structures  had  not been  completed  with  a harmonized 
single  rate.  This  would  make  for greater  balance  in the 
system  and thus  prevent  any distortion  of competition  due 
to the rates. 
3.7.2.  The  existing  rates,  however,  vary  greatly 
depending  on whether  the  Member  States  put  the 
emphasis  on the used  goods  aspect  (and  hence  opt for a 
low rate)  or on the value  as an antique  or a collector's  item 
or on the quality  of the metal  used  (and  hence  opt for a 
high rate). 
3.7.3.  It  might  be possible  to arrive  at a consensus 
setting  out from  (a) the views  as to the marginal  nature  of 
these  activities  and (b) the desire  to be a prime  centre  for 
such activities  in the Community. 
3.7.4.  Perhaps,  without  harmonizing  the rates,  the 
Directive  could  lay dpwn  criteria  for the choice  of the rate 
applicable  in each  Member  State,  so that the rates  adopted 
would  be within  a limited  bracket,  which  would  already 
be a step  towards  harmonization. 
3.7.5.  This  aspect  of the problem,  however,  is at all 
events  outside  the present  scope  of the draft  Directive 
under  discussion. 
13. 11. 78 Official  Journal  of the European  Communities No C 269/29 
4. Specific  comments 
Article  1 
Paragraph  1 
This paragraph  defines  the transactions  on which  VAT  is 
to be levied,  namely: 
(a) supplies  effected  by taxable  persons  who  acquire  the 
articles  in question  with  a view  to their  resale; 
(b) transfers  of the  articles  in question  by persons 
exercising  an intermediate  function  of whatever  kind. 
These  principles  do not call for any comment,  since  they 
are in keeping  with  the concept  of supply,  which  is the 
taxable  event  for VAT  purposes. 
However,  a particular  question  raised  here  was  the tax 
situation  regarding  auctioneers  and the transactions  they 
are instrumental  in bringing  about  on the auction  market. 
It was  feared  in some  quarters  that  the Directive  affected 
the tax arrangements  applicable  to auctioneers  in their 
function  as intermediaries.  (Their  commission  only  is 
subject  to VAT  under  the Sixth  Directive.) 
After  a .thorough  examination  of the  matter  the 
Committee  came  to the  conclusion  that  these  tax 
arrangements  are not affected,  for the following  reasons. 
The Seventh  Directive  does  not tax professions  but goods 
on supply.  Supplies  between  private  individuals  are not 
therefore  taxable  because  private  individuals  are not 
taxable  persons.  This  also  applies  if an auctioneer  brings 
the private  individuals  into  contact  with  each  other  and 
the supply  is effected  directly  between  them.  Only  if the 
article  to be sold  were  transferred  to the auctioneer  and if 
he then  effected  the supply  direct  would  VAT  be due. 
If a firm  of auctioneers  is involved  in the transaction,  it 
takes  charge  of the article  to be sold  and supplies  it to the 
buyer.  Regardless  of whether  the  latter  is a private 
individual  or a taxable  person,  the firm  of auctioneers 
makes  out an invoice  for the selling  price  plus  VAT  in 
accordance  with  the provisions  of Article  3 (2) and pays 
the VAT  to the tax authorities. 
Auctioneers  will  therefore  be liable  to VAT  on their 
commission  only,  provided  they  act simply  as agent  or 
intermediary  and  do not engage  in any  act of supply. This interpretation  is the only  one that  accords  with  the 
basic  distinction  between  the profession  and the article. 
Paragraph  2 
No comment. 
Paragraph  3 
This paragraph  lays  down  the right  to opt for the normal 
scheme  under  the Sixth  Directive. 
Paragraph  4 
No comment.  Article  15 of the Sixth  Directive  lays  down 
exemptions  that  are to be applicable  under  the Seventh 
Directive.  Article  24 provides  for a special  scheme  for 
small  undertakings  that  is also  to be applicable  under  the 
Seventh  Directive. 
Article  2 
Paragraph  2 
In keeping  with  the general  remarks,  it is not absolutely 
clear  from  the proposed  text  that  the exemption  applies 
only to the supply  and importing  of works  of art created 
by the artist  himself. 
Paragraph  3 
This paragraph  has come  in for criticism  on account  of the 
fact that the basis  of assessment  is to be 30 % of the selling 
price.  It was pointed  out that  a percentage,  even  if it is an 
average,  does  not cover  all the economic  realities.  It was 
proposed  that  for each  sale  there  should  be a right  of 
option  between  the system  proposed  by the Commission 
and a system  based  on taxation  of the actual  margin, 
which  would  of course  have  to be proved.  It was  also 
suggested  that  it be left to the Member  States  to deal  with 
this aspect  of the problem. 
The Committee  concluded,  however,  that  taxation  of the 
actual  margin  at each  stage  would  take  the goods  out of 
the continuous  VAT  cycle  and that  one would  end up with 
a system  of non-deductibility;  furthermore  the keeping  of 
strict  records  for proof  of the profit  margin  would  seem 
problematic  on a Community  scale. 
No C 269/30 Official  Journal  of the European  Communities 13. 11. 78 
The exercise  of a right  of option  for each  sale would  make 
the task  of supervision  very  difficult. 
Where  an option  is to be possible  at Community  level  it 
can only  be exercised  (a) for  the entire  transaction 
concerned  and (b) between  the normal  VAT  scheme  and 
a sufficiently  rigorous  flat-rate  system  as provided  for in 
Article  1 (3). 
The Committee  rejected  the idea  of leaving  it to the 
Member  States  to determine  the scope  of this option,  for 
that would  mean  too great  a breach  of the principle  of 
aiming  for the necessary  minimum  of harmonization,  and 
the consequences  would  be unforeseeable. 
Paragraph  4 
This paragraph  lays  down  that,  for the scheme  to be 
applicable,  the  value  of  the  precious  materials 
incorporated  must  not exceed  50 % of the selling  price  of 
the objects  in question.  It was  criticized  because  each 
buyer  will assess  the objects  in question  differently  on the 
basis  of their  age or their  artistic  qualities,  so that the value 
represented  by this  percentage  can  also  vary  greatly. 
Furthermore,  estimates  of this  50%  will  at all events  be 
very relative.  The Committee  thinks  that,  although  such  a 
criterion  seems  necessary,  its consequences  will clearly  be 
unforeseeable. 
Paragraph  6 
This paragraph  covers  the VAT  situation  of the objects  in 
question  when  they  are  imported.  The  deduction 
entitlement  is limited  to 70 % of the amount  of VAT  paid 
at the time  of importation  and may  be exercised  only  on 
supply  (resale). 
Criticism  centred  on the  limitation  of the  deduction 
entitlement  and  on the  impossibility  of making  this 
limited  deduction  immediately  - a state  of affairs  that will 
place  a particularly  heavy  burden  on this  sector. 
Some  circles  have  pointed  to the need  to have  in the 
Community  an active  market  in antiques  and used  goods. 
While  endorsing  this aim,  the Committee  fails  to see why business  would  be diverted  to outside  the Community  if 
imports  of the articles  in question  were  taxed  in the same 
way as other  goods.  Setting  aside  the flat-rate  element  in 
this special  scheme,  the principle  of taxation  at the time  of 
importation  by a taxable  person  wishing  to resell  has to be 
respected.  The  Committee  recognizes,  however,  that 
deferment  of the deduction  represents  a financial  burden. 
The Committee  questions  the  justification  for  the 
Commission's  position,  since  it will be a question  here  of 
VAT  paid  and  not  an estimated  flat-rate  deduction 
entitlement  that  arises  only  on resale. 
Article  4 
Paragraph  3 
This paragraph  limits  the  deduction  entitlement  to 
four-fifths  of the amount  of tax due  on resale,  which  is 
tantamount  to putting  the average  margin  at 20%. 
It has been  asked  in some  quarters  whether  this limitation 
of the  margin  allows  correct  taxation  of all the 
transactions  involved  in the sale  of a new  car with  the 
trade-in  of a used  car. 
The Committee  takes  note  of the justification  given  by the 
Commission,  which  thinks  that where  a private  individual 
not liable  to tax is involved,  fhe taxable  person  might  be 
able to overstate  his purchase  price  or understate  his 
selling  price.  The  fact  remains,  however,  that  this  is an 
exceptional  measure. 
5. Conclusions 
After  thorough  consideration,  the Committee  rejects  the 
draft  Directive. 
The Committee  recommends  the Commission  and  the 
Council  to stick  to the general  VAT  rules  and  to desist 
from  complicated  and impractical  special  provisions,  for 
which  there  is no practical  need.  The taxpayer  expects  tax 
harmonization  in the Community  to make  his life easier, 
rather  than  to impose  intolerable  new  burdens. 
Done  at Brussels,  1 June  1978. 
The Chairman 
of the Economic  and  Social  Committee 
Basil  de FERRANTI