m 
COMMISSION OF THE EUROPEAN COMMUNITIES 
COMC90) 200 final 
Brussels, 15 Hay 1990 
REPORT OF THE COMMISSION ON THE IMPACT 
OF COMMUNITY LEGISLATION ON BUSINESS 
WITH SPECIAL REGARD TO SMEs 
SSEPii 
Là** 2o 
/ 
Improvement of the Business Environment, in particular for SMEs, 
in the Community 
Report from the Commission to the Council 
Introduction 
The objective of improving the business environment became part 
of express Community policy through the adoption of the SME 
Action Programme in 198611'. The Council's Resolution on that 
programme contained a specific declaration on this objective. 
The first major actions adopted were the introduction by the 
Commission of the fiche d'impact system for all legislative 
proposals and the launching of a study on the obligations 
imposed by Community legislation on business and on SMEs in 
particular. 
Since then the Community has on several occasions reaffirmed its 
commitment to this policy, notably in the Council Resolution of 
June 30, 1988 *2' and in the formal Council Decision of July 28, 
1989(•*) on the improvement of the business environment and the 
promotion and development of SMEs. This latter decision gave 
formal general recognition to the business environment objective 
and was taken under article 235 of the Treaty which provides for 
the adoption of necessary policies not otherwise covered in the 
Treaty. 
The administrative and legal environment in which business 
operates is not, however, created by Community legislation 
alone. Many of the areas which involve regulation of business 
lie entirely within the Member States competence. The Commission 
has created a Business Environment Committee, in which the 
Member States experts meet to discuss and exchange views and 
experiences with the Commission and each other on this subject. 
The work of this committee led to the preparation of the 
Commission's Report' ' on measures taken by the Member States 
with regard to administrative^simplification and to the proposal 
for a Council Recommendation(5' on policy on this subject in the 
Member States, 
It should also be noted that difficulties for SMEs from 
Community legislation often arise from the details of national 
implementing legislation rather than from directives themselves. 
Efforts to ensure simplification at national level are therefore 
important even where matters regulated at Community level are 
concerned. 
(1) COM(86)445 final 
(2) OJ C 197 of 27.7.1988 
(3) OJ L 239 of 16.8.1989 
(4) SEC (89) 726 final 
(5) COM (90) 58 final 
A 0L< 
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Action in relation to the improvement of the business 
environment can be divided into three broad categories namely, 
examination of legislative proposals, review of existing 
legislation and development of specific measures and actions. 
The current position within the Commission on action in relation 
to each category is reviewed hereunder and the note concludes 
with a review of the present position on the development of some 
specific measures. 
Examination of legislative proposals 
The Commission's examination of legislative proposals is 
particularly important in view of the relatively large programme 
pursued in the context of the internal market. 
The fiche d'impact is the system used within the Commission for 
assessing the likely effects of proposals on business. The 
Commission completed a review of the system at the end of 1989 
and introduced a number of changes. This mainly involves the 
following : 
- All proposals are now covered by the system, even where the 
final legislation is adopted by the Commission rather than 
the Council (previously only legislation adopted by the 
Council was covered); 
An assessment is only made, however, where the proposal is 
likely to have a significant impact on business (previously 
an assessment was made for all proposals); 
Proposals which may have a significant impact on business are 
identified as far as possible in advance by reference to the 
Commission's Work Programme; 
The main advantage arising from these amendments should be the 
targeting of the assessment procedure on the proposals in the 
Commission's Work Programme which have the most significance for 
business. Advance targeting should also stimulate early 
consultation of business by the Commission services so that the 
effects of any proposed legislation can be taken into 
consideration at the earliest possible stage. It is hoped to 
establish arrangements fof advising both the services 
responsible for administrative simplification in the Member 
states and business organisations of the proposals targeted so 
that all concerned should be in a position to make their views 
known at the earliest possible stage. 
The new arrangements should lead to an improvement in the 
quality of the fiche. It is to be hoped that Member States will 
make greater use of the fiche when proposals are discussed in 
Council. It should be remembered that in adopting the fiche 
system one of the principal aims was to ensure that in 
considering legislative proposals the Commission, Council, 
Parliament and Economic and Social Committee should have 
objective information available on the effects of a proposal on 
business. It should also be recalled that in its Resolution of 
3 0th of June 1988 the Council emphasised the need for Member 
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States to take account of assessments in discussions in the 
Council. 
Review of existing legislation 
While examination of legislative proposals is clearly important 
it is existing legislation which establishes the current 
business environment. In addition examination of individual 
proposals is often too specific to allow a more general view of 
policy objectives and associated obligations on firms to be 
formed. 
The above-mentioned study of the obligations imposed on business 
by Community legislation related to five areas : indirect 
taxation, competition, social legislation, environment and 
consumer protection. Based on extensive consultation with 
interested parties it covered national methods of implementing 
the legislation and the costs and benefits for businesses, 
particularly SMEs. A separate report from the Commission on the 
results of the study is annexed to this Communication. 
The Commission will continue its efforts to identify areas where 
existing legislation imposes unnecessary obligations on 
business. 
Development of specific measures 
From time to time it may come to the Commission's notice that a 
particular problem exists for business in general or for SMEs in 
particular which requires specific action. To some extent 
treatment of these individual actions can run contrary to the 
general approach of reviewing broad policy areas as mentioned 
under the previous heading. Nevertheless it is considered that 
where such problems arise a certain flexibility should be 
maintained to allow for their immediate treatment. 
The current position with regard to the development of some 
specific measures is outlined hereunder. 
Present Position on Specific Measures 
1. Company law 
The Council Resolution of June 30, 1988 urged that further 
substantial simplification be made in the 4th Company Law 
Directive concerning annual accounts. The Commission's 
proposal for such simplification is however meeting with 
difficulties in the Council. It is important for the business 
environment that the Member States accept the proposal to 
make the current optional derogations for small companies 
mandatory. 
The proposal also aims at excluding small closed companies 
from the scope of the Directive. Regardless of the Council's 
decision on the previous point, but particularly if the 
Council decides to maintain the optional nature of the 
derogations for small companies, it is important that the 
Member States accept that the obligations imposed by national 
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law on small closed companies do not exceed the minimum 
obligations imposed by the 4th Directive on small companies. 
Thus, small closed companies throughout the Community would 
have the benefit of the options. 
In addition, it is important that the Member States accept a 
substantial increase in the thresholds which define small and 
medium enterprises in the 4th Directive to extend the 
accounting simplifications to a greater number of 
enterprises. 
In considering this matter Member States are asked to balance 
their traditional approach to company accounts against their 
intention of seeking further substantial simplification in 
this field as declared in the Resolution of June 1988. 
Nevertheless, some progress in the field of company law has 
been achieved with the adoption by the Council of the 12th 
Directive on single-member private limited liability 
companies*6' which is of particular interest for smaller 
businesses. 
2. "Economie Sociale" 
As emphasised in the Commission's Communication on 
enterprises in "économie sociale" sector'7' it is important 
to make available to this sector the means available to other 
enterprises to profit from the frontier-free market. 
One of the first problems to be tackled is the question of 
the applicability of the provisions of the Treaty on freedom 
of establishment to enterprises in the "économie sociale" 
sector. The Commission is considering a communication on the 
interpretation of Article 58(2) of the Treaty with the view 
to clarifying its scope. 
Moreover, a certain number of problems arise with regard to 
the development of cooperation between enterprises of this 
sector because of national legislation which is specific to 
them. In this context the Commission asked the Economic and 
Social Committee in January 1990 for its opinion on "the 
feasibility of a European statute capable of regulating 
mergers, holdings or joirit subsidiaries between enterprises 
of the "économie sociale sector". On the basis of that 
opinion the Commission will if appropriate prepare a proposal 
for such a statute. 
3. Improvement of the Fiscal Environment for Enterprises 
The Community Institutions have constantly urged that the 
general fiscal environment for enterprises and SMEs in 
particular be improved. The work carried out by the 
Institutions and other bodies concerned in the context of the 
European Year for Small Business in 1983, the SME Action 
Programme of 1986 and the studies made since then by the 
(6) 89/667/EEC OJ L 395 of 30.12.1989 
(7) SEC (89) 2187 of 18.12.1989 
- 5 -
services of the Commission have enabled those aspects of the 
taxation of enterprises and of SMEs which need particular 
attention to be identified. 
Improvement of these aspects, while a valid objective in its 
own right, also has an important role to play in the 
deepening of the internal market. It is essential that 
enterprises, and SMEs in particular, do not face fiscal 
obstacles to their creation or their development if they are 
to be able to benefit from the large market. 
A. VAT 
Simplified SME systems 
At present in the Member States there is considerable 
diversity in the application of the Community provisions that 
allow small traders to be exempted from VAT. 
The proposal submitted by the Commission in 1986*8' on 
simplified VAT systems for SMEs provided for the introduction 
of a threshold of annual turnover of 10.000 ECU, below which 
firms could opt out of the VAT system. Member States could 
raise that threshold to 35.000 ECU. At the same time 
simplified procedures for the calculation and payment of VAT 
were to be applied to enterprises with a turnover of less 
than 200.000 ECU. As VAT is generally recognised as a major 
source of administrative burdens for enterprises, prompt 
adoption of this proposal is particularly important for 
smaller enterprises. 
VAT System for Intra-Communitv Trade as from 1 January 1993 
The Commission has just adopted new proposals on the issue of 
the VAT system to be applied to trade between Member States 
as from 1993. The new general system proposed would 
significantly reduce existing burdens on enterprises. From 
1993, frontier controls will be suppressed and VAT arising 
from intra-Community trade will be declared and paid through 
the normal VAT returns. While the final objective remains the 
total elimination of differences between procedures for 
national and intra-Community trade, the Commission proposes 
that for a transitional period expiring at the end of 1996 
the principle of taxation at the rate and conditions of the 
country of destination should be maintained. 
The Commission proposes, however, that from 1993, purchases 
of exempt and non-taxable operators from other Member States 
should not be submitted to VAT of the country of destination 
except when the total annual purchases from other Member 
States exceed 35.000 ECU (70.000 ECU from 1995). The adoption 
by the Council of the proposed 22nd Directive would 
therefore permit small enterprises to benefit not only from a 
VAT exemption for their domestic transactions but also allow 
them to operate outside the general VAT intra-Community 
(8) COM (86) 444 
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system if the amount of their purchases do not exceed the 
above-mentioned thresholds. 
Abolition of fiscal formalities and associated documentation 
at the frontiers has been highlighted by the Institutions and 
Member States as one of the major benefits of the internal 
market. It is important that the Council adopt the 
Commission's proposals and that new administrative burdens 
should not be imposed on enterprises. 
B. Direct Taxation 
The more visible aspect of the Commission's work on direct 
taxation has, in the context of the establishment of the 
internal market by 1992, concerned measures aimed at ensuring 
that fiscal obstacles to cross-border activities are removed. 
The Commission has recently submitted to the Council and 
Parliament a Communication on the guide-lines it will follow 
in the matter of enterprise taxation. This sets out the 
measures which the Commission considers necessary to create a 
fiscal environment for enterprises adapted to the dual 
perspective of the creation of the internal market and its 
deepening. 
The Communication confirms that the Commission will shortly 
make proposals on the inclusion of foreign results in those 
of parent companies and the suppression of withholding taxes 
on royalties and interest within groups of companies. These 
proposals will complement those already made regarding 
mergers, relations between parents and subsidiaries and 
double taxation. 
Elimination of fiscal obstacles to cross-border activities is 
necessary for the benefit of all enterprises, including SMEs. 
A general improvement of the fiscal environment for 
enterprises, however, would justify that attention be given 
to some particular aspects of the tax systems which may 
hinder the creation or development of SMEs. 
In most Member States non-incorporated enterprises are 
subject to personal taxation whereas companies are subject to 
a specific system. Non-incorporated enterprises constitute 
the majority in the Comraurfity and are mostly SMEs which are, 
moreover, the enterprises which depend to a greater extent on 
self-financing for their investments. The Commission has 
already referred to the possibility of allowing non-
incorporated businesses to opt for taxation under the same 
conditions as companies in its Report in 1980( ' on the scope 
for convergence of tax-systems in the Community. This could 
contribute to the reduction of fiscal charges on profits re­
invested in SME and would increase fiscal neutrality with 
regard to capital injections. Moreover, non-incorporated 
enterprises are confronted by fiscal obstacles if they wish 
to change their existing legal status and incorporate. In 
terms of the harmonious development of the market it should 
(9) Supplement 1/80 to the Bulletin EC 
- 7 -
be noted that non-incorporated enterprises play a more 
important role in some Member States than others. 
In the above-mentioned Communication the Commission also 
announced its decision to undertake a study of the necessity 
for other initiative which should take account both of the 
existing situation and the perspective of the integration of 
the Community and of the results of the major fiscal reforms 
of the eighties in the Community and elsewhere. The study 
will include an examination as to whether Community 
initiatives should concern one or more of the elements which 
make-up the taxation of enterprises, including differences in 
fiscal treatment linked to the legal form of an enterprise, 
(the other elements being the system of company taxation, the 
tax-base and tax-rates). 
Finally, attention is drawn in particular to the fiscal 
treatment of the EEIG, an instrument developed to encourage 
cross-border cooperation between enterprises, and of special 
interest to SMEs. The Commission will shortly discuss with 
the EEIG Contact Committee the taxation methods which the 
Member States intend to maintain and will if necessary make 
appropriate proposals, so that this instrument can meet the 
success it deserves. 
4. SMEs and Public Procurement 
The liberalisation of public procurement is one of the 
principal features of the internal market programme. SMEs do 
not, however, participate in this very important sector to an 
extent commensurate with their share in the overall economy. 
Greater possibilities of participation would not only help to 
stimulate enterprise and small business development but would 
bring to public markets a significantly new and competitive 
element. 
The Commission has therefore prepared a Communication on 
promoting SME participation in public procurement in the 
Community. Four categories of measures were examined : 
measures to promote the opportunities for SMEs to compete for 
public contracts, to lower the cost of participation, to 
provide information and training to the participants (SMEs 
and public authorities) and to discriminate in favour of 
SMEs. 
Measures should facilitate and encourage SME participation 
and aim to increase rather than restrict competition. 
Accordingly, discrimination in favour of SMEs and against 
larger enterprises (by means of set-asides or price 
preferences for SMEs) is not recommended. Such systems either 
reduce or distort competition and indeed withdraw the 
incentive for SMEs to seek optimal efficiency. 
The Commission considers that in the other three categories 
public authorities have at their disposal a sufficient set of 
instruments to ensure greater participation of SMEs in public 
procurement. 
- 8 -
5. Competition Rules 
There are two developments under this heading, both aimed at 
increasing the transparency of policy for SMEs 
State Aids (Articles 92-94) 
The Commission has always considered that promotion of SMEs 
is a valid objective of economic policy and has taken this 
into account in examining Member States proposals for aid 
systems. Member States proposals on aids to SMEs are however 
somewhat diverse and this has not helped the Commission in 
its task. 
The Commission will therefore shortly prepare and issue a 
Communication on the guide-lines which will apply in 
assessing the compatibility with the common market of aids to 
SMEs. 
Rules applying to Undertakings (Articles 85 and 86) 
It is generally recognised that there is a need for improved 
information and advice to SMEs on these rules. 
A guide is now being prepared and should be available 
shortly. This will be in an easily readable and practical 
format. It will highlight the protection afforded to SMEs 
against practices contrary to the competition rules and the 
many block exemption regulations, notices and communications 
issued by the Commission which allow for an application of 
the rules in a manner adapted to the characteristics of SMEs. 
6. SMEs and Technical Standardisation, Testing and Certification 
This is another area which becomes of increasing importance 
for SMEs with the creation of the internal market. SMEs often 
complain that they are not sufficiently informed on 
developments in this field. Some consider that they should be 
more involved in the actual development of policy including 
the elaboration of individual standards. 
As regards information, the problem for many SMEs is probably 
that their needs are ver/* specific and sporadic. They will 
not have the resources to sift through the vast amount of 
information to identify the items of particular interest to 
them. However it does seem that a general information 
campaign on the importance of this matter would be of 
assistance. The Commission services are examining the 
possibilities for such a campaign in consultation with the 
Community standard organisations. A study is also being 
commissioned to try to identify SMEs more precise needs. 
Consideration is being given to the possibility of making 
better arrangements for targeting information to specific 
users. Existing organisations or net-works, such "as the 
employer organisations or Euro Info Centres can play a 
valuable role in filtering information in this area through 
to specific members and clients. 
REPORT OF THE COMMISSION ON THE IMPACT 
OF COMMUNITY LEGISLATION ON BUSINESS 
WITH SPECIAL REGARD TO 8MBS 
Contents 
Introduction 
I. General considerations and measures 
II. Specific measures - tax legislation 
- competition legislation 
- social legislation 
- environmental legislation 
- consumer protection legislation 
<? 
2 -
INTRODUCTION 
1. Following a Council Request, the Commission undertook a study, 
with the help of outside consultants, and on the basis of their 
research extensive consultation with European business 
organisations, trade unions and consumer organisations. The 
study covered existing Community legislation in five fields: 
tax, competition, social legislation, environment and consumer 
protection. On the whole, some 100 Directives and 15 
Regulations were examined. For each measure, the state of 
implementation at national level was reviewed, and the costs 
and benefits for business were analysed, with special but not 
exclusive regard for SMEs. The aim of this exercise was to 
identify the main obligations deriving from Community 
legislation, and to isolate these from obligations resulting 
from national implementing legislation. 
2. The conclusions of this study have been widely publicised. The 
present report is intended to summarise the issues raised by 
the study, and more generally to present the measures which 
have been taken by the Commission to optimise the impact of 
Community legislation on business. 
I. GENERAL CONSIDERATIONS AND MEASURES 
Nature of Community legislation 
3. Current developments in Community legislation must be seen in 
the context of the programme to complete the internal market. 
One of the fundamental objectives of this programme is to 
create a favourable environment for Community businesses by 
abolishing various costly obstacles to their development. SMEs 
bear a proportionately higher share of these costs than large 
firms and should therefore benefit greatly from the programme. 
Simplifications will take place in particular with regard to 
technical standards, with" the general principle of mutual 
recognition, and to trade formalities, with the abolition of 
frontiers. 
The Preamble to the Single European Act states the 
determination of Member States, not only to strengthen existing 
common policies, but also to pursue new objectives. 
Priorities for Community legislation set out in the Single 
European Act include the "social dimension" of the internal 
market, cooperation in economic and monetary policy, research 
and development, and environmental protection. 
4. While priorities for Community legislation are clearly 
established, it remains true that the Community legislative 
process and instruments can sometimes result in complexity. 
S)0 
Community Directives result from political compromises between 
Member States and this often leads to the use of imprecise 
concepts which are interpreted differently at national level. 
Moreover, Directives often allow several options regarding 
national implementation, which also results in differences 
between Member States. These - as well as amendments to the 
Directives - are factors of legal uncertainty for enterprises. 
In addition, whereas business favours in principle 
harmonisation of national legislation, in order to eliminate 
competition distortions, it considers that a "false" 
harmonisation, allowing for still important differences between 
Member States, leads to the opposite effect. 
5. The Commission and the Council should be aware of this 
fundamental weakness. They should endeavour wherever 
appropriate and possible to reduce the number of options left 
open to Member States in EC legislation and limit the 
possibility of divergent interpretations of certain concepts at 
national level. The fact remains, however, that in some fields 
such as workers health and safety (Article 118A of the EEC 
Treaty) or environmental protection (Article 13OT of the EEC 
Treaty), Member States are free under certain conditions to lay 
down more stringent requirements than those fixed by Community 
legislation. 
6. The Commission obviously agrees that Community legislation 
should only be prepared to meet a particular need within the 
Community and, to that extent, that a "necessity test should be 
applied to each legislative proposal. This test should notably 
take account of the principle of the "subsidiarity" of 
Community measures to national measures. However thé "need" for 
Community legislation should not be interpreted in a narrow 
sense and should encompass all the objectives laid down in the 
EEC Treaty, as amended by the Single Act (see 3 above) . In 
particular, the Commission retains its commitment to the 
harmonisation of existing legislation in Member States to 
improve the competitive environment and simplify procedures for 
business. 
While harmonisation itself can lead to a simplification of the 
legal and administrative environment for Community enterprises, 
the need to avoid over-regtllation should be borne in mind. 
Consultation 
7. The Commission also acknowledges that its legislative proposals 
should, as far as possible, be likely to enjoy the support of 
Member States, business, workers and consumers. This can best 
be achieved by early and extensive consultation and assessment 
of impact, so as to ease any difficulties within the proposal. 
The European Parliament and the Economic and Social Committee 
also play an extremely valuable role in the refining of 
proposals by bringing to bear their experience in the business 
and consumer world. By effective consultation, the resulting 
proposal will be more likely to be accepted and therefore 
complied with. This is clearly in the interest of all. 
11 
The Commission recognises the value of the Green Paper system 
as a means of consultation and debate, and often uses this 
procedure, as it has done recently for example with regard to 
copyright (1988) and telecommunications (1987). 
The memorandum on the Statute for European companies, issued by 
the Commission in July 1988 (COM (88) 320), was used as a means 
to consult Member States, the European Parliament, the Economic 
and Social Committee, as well as all interested parties, about 
the major orientations to be followed on this project. 
SME compliance 
9. The Commission is of the view that SMEs should, in the interest 
of the public, comply with all general requirements like the 
protection of health and safety, consumers and the environment. 
This is in line in particular with the declaration annexed to 
the Single Act in relation with Article 118A, whereby it was 
agreed that SME workers should not be penalised vis-à-vis other 
workers with respect to health and safety. 
However, the particular difficulties faced by SMEs may be eased 
by, for example: the reduction of administrative requirements; 
providing a longer implementation period etc. As far as 
possible, the Commission includes such measures designed to 
ease compliance for SMEs in its legislative proposals. 
Information 
10. Improved availability and diffusion of information should help 
to ease the apparent confusion of SMEs in some areas of 
Community legislation. 
One method by which this is being achieved is through the Euro-
Info Centre network. As decided in May 1989, the Commission is 
currently extending the network to improve communication with 
the Community's small and medium-sized businesses. 
A number of publications are issued by the Commission to 
describe the state of Community legislation in various fields. 
A particular effort has been made to explain the legislation 
proposed or adopted as part of the internal market programme 
and a Commission data base^on this subject is now accessible to 
the public (INFO 92) . The publications can also be consulted 
via the SCAD data base, which is accessible to the public at 
large. 
In order to reduce problems of interpretation of Community 
legislation, and thereby increase legal certainty for 
businesses, the Commission also issued guidelines on the 
interpretation to be given to certain articles of the EEC 
Treaty. Interpretative communications have thus been issued on 
the application of Article 30 in the sectors of pharmaceutical 
products, second-hand cars, and, more recently, food products. 
A communication on Article 58 is at present being considered 
with the view to clarifying the scope of the EEC Treaty's 
provisions on freedom of establishment. Communications on the 
interpretation given by the Commission to major European Court 
11 
cases are also issued, such as the Communication on the Cassis 
de Dijon case (free circulation of goods, 1980) or on the 
Gaston Schul case (double taxation of imported goods, 1986). 
Existing legislation 
11. The Commission has noted the comments and suggestions made in 
the consultants' report on the five specific areas of existing 
Community legislation and possible simplifications. It 
considers that, as far as simplification is concerned, existing 
legislation should be changed where the "benefits" from change 
outweigh any "costs" caused by that change. 
While too frequent amendments of EC legislation should be 
avoided to limit the cost of adjustment for enterprises, it 
remains sometimes necessary to revise existing legislation for 
purposes other than simplification (eg. adaptation to technical 
or economic changes). 
In any event, the Commission will continue its efforts to 
identify areas where existing legislation imposes unnecessary 
obligations on business. 
12. The Commission retains its strong commitment to codify and 
thereby simplify and make more transparent existing 
legislation. Since 1987, all legislation with ten amendments 
should be codified and the Commission continues to encourage 
earlier codification where possible. Indeed the European 
Parliament, in its Resolution of March 1989 on the 1989 
Commission Programme, calls on the Commission to submit a new 
proposal for a regulation which will allow for the codification 
of all legislative acts, given the multiplicity of Community 
legal acts and the need to make Community legislation more 
accessible to citizens, more transparent and understandable. 
In addition, since 1989 the list of codified legislation is 
published in the Official Journal of the European Communities, 
C Series, every six months. It should be noted that in 1989 
more than thirty legislative areas have been codified as 
against twelve in 1986. To a large extent this concerned 
agricultural legislation; the wine producing sector in 
particular has been codified in a more systematic manner during 
the last three years. The ^codification of the basic regulation 
on sheep and goat meats has just been published. In 1990 it is 
planned to codify the fish and beef and veal meats sector as 
well as milk and dairy products. 
Other sectors included amongst the priorities for which draft 
codification is already well advanced include public 
procurement, access to the road transport profession, 
cosmetics, travellers' allowances as well as the consolidation 
of the twenty four directives on agricultural tractors or 
forestry vehicles into a unique codified text. A proposal 
concerning labelling and presentation of foodstuffs to the 
final consumer is already with the Council. Finally, a major 
effort is being undertaken to consolidate customs legislation 
in the Customs Code. 
- 6 
Impact Assessment 
13. The Commission has been committed since 1986 to the assessment 
of the impact of proposals on business through the impact 
assessment system. In November 1989 the Commission decided to 
reinforce this procedure by concentrating it on proposals 
having a significant impact on businesses and by bringing 
within its scope measures within the Commission's own powers. 
The procedure encourages the Commissions services to take 
account of the concrete effects on enterprises of legislative 
measures from their very conception and allows the Community 
Institutions to take their decisions with full knowledge of the 
facts. 
It is also important that Member States, business 
organisations, trade unions and other representative 
organisations, examine carefully draft proposals from the 
Commission and alert the services to any which, in their 
experienced view, are likely to have a detrimental effect on 
some aspect of business, employment and competitivity. The 
difficulties may then be overcome, or at least recorded in the 
fiche d'impact to allow the Commission and Council to take them 
into consideration when making a final decision on the 
proposal. 
National Implementing Legislation 
14. The objectives of Community legislation will obviously not be 
reached if certain Member States do not implement it or 
implement it only partially at national level. This leads in 
particular to distortions of competition between enterprises 
established in different Member States. The number of 
complaints received by the Commission from individuals or 
enterprises has more than doubled in the past five years. The 
Commission is striving to speed up its decisions on these 
complaints. The Commission will continue to monitor closely the 
implementation of Community legislation at national level and 
use the legal means provided under the Treaty to ensure its 
observance by Member States. It has decided to give wider 
publicity to infringement proceedings started against Member 
States and it informs enterprises of the results of these 
actions. ** 
15. Many of the difficulties encountered by business are the result 
of Member States'implementing legislation. The Commission will 
seek to ensure an increasingly uniform implementation of 
legislation within the Community. Member States will be 
encouraged further to enact implementing legislation which is 
unlikely to additionally burden business. This will improve the 
competitive environment and also ensure that SMEs throughout 
the Community will benefit from any special measures designed 
to assist them. The 1988 proposed amendment to the 4th 
Directive on annual accounts (COM(88)292 et COM(89)561), which 
would make simplification compulsory in all Member States, is a 
recent illustration. 
W 
National Administrative Simplification Units 
16. Some Member States have initiated special units to try to 
encourage transparency in and simplification of national and 
Community implementing legislation. The Commission has been 
able to promote exchanges of views and experience between 
Member States and this is one way of identifying areas of 
difficulty and improvements which might be made. Member States 
without units like this are encouraged to set them up with the 
aim of working with the Commission to try to keep the burdens 
on all the Community's business to a minimum. 
In 1989, the Commission submitted a draft Resolution to the 
Council which goes in this direction. 
II. SPECIFIC MEASURES 
17. Under this section, the Report deals with five areas of 
Community legislation which are particularly important and 
which correspond to the areas covered by the above-mentioned 
consultants' study. 
Clearly, a number of measures taken in other fields of 
Community legislation have an impact on enterprises and have 
received the same attention from the Commission, such as the 
area of company law, mentioned under paragraph 15 above. 
Tax legislation 
18. Variations in practice between Member States are greater in the 
area of taxation than in any other area covered by the report. 
The Commission shares the view that greater harmonisation, in 
particular of VAT legislation, is a key instrument for the 
completion of the Internal Market. 
Moreover, the Commission emphasises that the creation of the 
internal market should not lead to the introduction of 
additional formalities for enterprises engaged in intra-
Community trade, whether with regard to VAT or excise. On the 
contrary, it should lead to a reduction in procedures and the 
Commission will submit revised proposals which go in this 
direction. 
19. It should be noted that, although VAT is sometimes perceived by 
business as difficult to implement, it has, in many Member 
States replaced even more complex systems of indirect taxation 
applicable to enterprises. 
Besides, account has been taken of the increased VAT compliance 
difficulties for SMEs in comparison to large business. To that 
end, the Commission has presented a proposition (COM (86) 444 
final of 30 September 1986, amended OJ C 310 of 20.11.87) on 
VAT which includes the following obligatory measures : 
IS 
a VAT exemption for firms with an annual turnover below 
10.000 ECU, and the possibility for Member States to raise 
this minimum level up to 35.000 ECU (unless the present 
system is more favourable) 
an option for SMEs below the above mentioned exemption 
level to fall under the normal VAT system 
the ability for businesses with an annual turnover of less 
than 200.000 ECU to opt for a simplified VAT system along 
the lines described in the proposal or under national 
schemes, if these are at least as favourable. 
The Council has not been able so far to reach an agreement on 
this proposal. 
20. There are still a number of differences in the implementation 
of the 6th VAT directive at national level. These are due on 
the one hand to certain imperfections of this Directive and to 
the fact that it leaves a number of options open to Member 
States, and on the other hand to problems of interpretation of 
certain provisions of the Directive. The consultants' report 
tends to demonstrate that the burdens of compliance with the 
6th Directive for business depend largely on national 
implementing measures. The Commission thus continues its 
efforts to achieve a more uniform VAT system. 
21. As regards existing VAT legislation, the regular meetings of 
the VAT Committee, made up of national and Commission 
officials, allow some harmonisation of national points of view, 
in particular on the interpretation of the 6th directive. It 
also enables Member States to agree on guidelines for the 
implementation of important provisions determining for example 
whether certain services are taxable, the place where the 
provision of services is taxable, exemptions, the basis of 
assessment, etc. 
Reports on the work of this Committee are regularly 
communicated to the Council. 
22. While certain divergences can be eliminated through dialogue 
between the Member States and the Commission, the latter is 
convinced of the need to abolish certain derogations allowed by 
the 6th Directive in order to achieve better harmonisation. 
This was the aim in particular of the proposal for an 18th VAT 
Directive, that has been partially adopted by the Council1. 
It still leaves derogations which will be the subject of a 
report from the Commission, to be examined by the Council 
before 1 January 1991, with the view to their abolition. 
23. The proposed 19th VAT Directive2 aims at interpreting certain 
concepts in the 6th directive such as permanent establishment 
or means of transport, and at specifying the extent of certain 
provisions. 
JOCE L 226 of 3.8.1989 
JOCE C 347 of 29.12.1984 amended COM(87) 315 
M 
- 9 -
24. Concerning the specific problems encountered by firms with the 
implementation of the 8th VAT Directive, (reimbursement of VAT 
charged in another Member State) the Commission has entered 
into discussions with certain Member States against which 
complaints were particularly serious and has obtained their 
commitment to amend current implementing practices. 
25. As regards the tax free allowance for fuel, an agreement has 
already been reached for coaches and a proposal to raise the 
allowance for lorries is pending before the Council. 
Competition legislation 
26. In implementing its competition policy the Commission takes 
into account the size of the businesses concerned. Thus a 
"Notice concerning agreements, decisions of associations of 
undertakings and concerted practices of minor importance" was 
issued in 1977 and updated in 1986. Accordingly, agreements 
between SMEs operating mainly in local markets (defined by 
criteria related to market share and turnover) are excluded in 
principle from the application of Article 85 of the Treaty and 
do not need to be notified to the Commission. Besides, 
thresholds related to market share and turnover are also used 
to exclude specific types of agreements between SMEs from EC 
rules, such as specialisation agreements, R & D or exclusive 
distribution agreements. 
27. Considerable efforts have also been made by the Commission in 
recent years to increase the transparency for businesses of EC 
competition rules. A number of block exemption regulations have 
been adopted, eg on patent licensing, R&D agreements, motor 
vehicle distribution and servicing, know-how licensing and 
franchising agreements. The Regulations on exclusive 
distribution (1983/83) and exclusive purchasing (1984/83) also 
contribute to clarify EC competition rules to the benefit of 
many large and small businesses. 
28. The Commission believes that the drawing up of standard 
agreements to be used by SMEs in the most commonly met 
contractual situations, is not necessarily a good solution for 
SMEs. Whether an agreement is restrictive or not cannot be 
assessed out of context but must be examined in the light of 
all circumstances (e.g. existence of similar agreements, market 
share, potential competition, etc.). In particular 
circumstances, certain restrictions can be permitted which 
could not be included in a standard agreement for general use. 
Conversely, clauses which are generally unobjectionable can 
occasionally be quite restrictive. However, the existing block 
exemption regulations may serve as useful references for the 
drawing-up of agreements. 
29. EC competition rules can offer an appreciable protection to 
SMEs, for example when they are involved in restrictive 
agreements or practices, or when they suffer from abuses of 
dominant positions. 
A\ 
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The Commission agrees that action is required to improve the 
advice and information available to SMEs both on the protection 
afforded by the law and the applicability of the law to their 
agreements. An update of the 1983 brochure on EC competition 
law has just been published and is available in the Euro Info 
Centres. 
30. Moreover, in December 1989, the Commission modified the "de 
minimis" rule on State aids. In raising the threshold of number 
of employees (150) and of turnover (15 million ECU) the 
Commission increased the number of aids which can benefit from 
the simplified and accelerated procedure for obtaining the 
Commission's agreement. 
Social legislation 
31. Under Article 118A of the EC Treaty, Directives on the health 
and safety of workers "shall avoid imposing administrative, 
financial and legal constraints in a way which would hold back 
the creation and development of small and medium-sized 
undertakings". 
The Commission is of the view that the same degree of 
protection should be offered to workers regardless of the size 
of the enterprise. However, workers' protection should not 
unnecessarily restrict management flexibility. The Commissior 
will take particular account of that requirement in applying 
its Action Programme for the implementation of the Community 
Charter for the basic social rights of workers3. 
32. As regards social legislation in the road transport sector, 
improvements have been made through harmonisation of control 
methods (Directive adopted by the Council in 1989) and 
clarification of the 1985 regulations (proposal to amend). 
33. Regarding other aspects of existing social legislation, the 
area for action would seem to be the provision of information 
and the clarification of terms and legislative concepts. 
Environmental legislation 
34. The objectives of action by the Community relating to the 
environment are set out in the Treaty (Art. 130R) and the 
Commission believes that there can be no question of 
compromising these general objectives. It does, of course, have 
a responsibility to keep Community legislation and its 
implementation under review. 
It should, however, be noted that the Treaty (Art. 13 OR) 
requires that "environmental protection requirements shall be a 
component of the Community's other policies". The Commission 
therefore recognises that measures to relieve administrative 
and other burdens on small and medium enterprises must not 
involve a lowering of environmental standards. 
COM(89)568 
^ 
- 11 
35. Directive 85/337 introduces a procedure for studies of the 
impact on the environment of certain projects of a significant 
size. The Member States can extend that requirement to less 
important projects. (As to the enterprises concerned, the 
Commission estimates the study costs at 1 or 2% of overall 
investment costs - costs which are normally compensated by 
economic or other factors). 
36. Legislation on the handling or destruction of waste can affect 
enterprises of all sizes. In the context of the Community 
Strategy for the management of waste (SEC(89)934) the 
Commission is conscious of the need to reduce the charges on 
enterprise within limits compatible with an efficient 
protection of environment. 
37. On major accident hazards (82/501), two revisions of the annex 
defining the substances and the application thresholds have 
been adopted by the Council (87/216/EEC of 19.3.87 and 
88/610/EEC of 24.11.88) and the Commission is giving a high 
priority to a fundamental review of the annexes based on 
systematic criteria. 
38. With regard to water legislation, the Commission is aware of 
the necessity to establish a more efficient mechanism to 
examine the problems of practical implementation of water 
directives. In this respect, it has introduced a proposal to 
the Council (COM(88) 752 final) aiming at establishing a 
regulatory Committee whose major functions will be to adapt to 
scientific and technical progress the requirements of certain 
water directives including Directives 80/778 on drinking water 
and 75/440 on surface water. This Committee would also assist 
the Commission, in an advisory capacity, on any question 
related to the implementation of those directives. 
Consumer protection, legislation 
39. The Commission notes the recommendation made in the 
consultants' report for action to try to reduce the variation 
in implementation measures and encourage harmonisation and 
simplification in the following areas : Product Liability 
(85/374) ; Labelling (79/112); Quantities and capacities of pre­
packaged products (80/232); Unit pricing of foodstuffs 
(79/581); Cosmetics (76/768); Food additives; Chocolate 
products. 
40. The Directive on product liability provides that the Commission 
will submit a report to the Council every five years on its 
implementation, accompanied if necessary by appropriate 
proposals. In the framework of the first report, due in 1993, 
and in the light of experience, it will consider whether it is 
desirable and possible to amend some of its provisions to 
reduce its impact on business, especially SMEs, without 
challenging consumer protection. 
4r 
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41. As regards food legislation, legislation has been improved on 
several aspects during the past years. An essential 
modification of the Directive on labelling has been approved by 
the Council. It aims at eliminating existing derogations within 
two years of its adoption and also takes into account the 
products in store. 
42. The Directive on additives has also been modified to allow for 
the adoption of a list of additives authorised at Community 
level and the definition of conditions of use. The EEC coding 
system will be extended worldwide as it has been adopted in the 
Codex Alimentarius (FAO, WHO); this is certainly an advantage 
for Community enterprises which are already used to it. 
43. The recent Communication on the conditions of use of Article 30 
to the food sector (JOCE C 271 from 24.10.89) should give 
producers and distributors of food products a better 
understanding of conditions which they must fulfil to benefit 
from free circulation of their products in the Community. 
Zo 

ISSN 0254-1475 
COM(90) 200 final 
DOCUMENTS 
EN 13 
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ISBN 92-77-60016-0 
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