A4-0228/98

Resolution on the Commission communication 'A package to tackle harmful tax competition in the European Union¨ (COM(97)0564 - C4-0333/98)

The European Parliament,

- having regard to a the Commission communication (COM(97)0564 - C4-0333/98),

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy (A4-0228/98),

A. whereas a broad issue to tackle is the evolution of the European structure of economic governance as far as non-monetary matters are concerned, with a particular focus on taxation,

B. whereas the drive towards enhanced policy coordination, as recalled in the Council¨s conclusions under the Luxembourg presidency, is a crucial tool for avoiding any further obstacles in the completion and the correct functioning of the single market, especially in the field of taxation; whereas the coordination of taxation will also represent a vital instrument in fulfilling employment policy guidelines by relieving the burden of taxation on labour,

C. whereas a certain degree of competition among national systems will be engendered as a result of the greater transparency achieved by the introduction of the single currency, which will, in turn, stimulate efficiency and increase consumer welfare,

D. whereas it is clear that this competition must not go beyond a beneficial level and be excessive, in the sense that it should not be harmful, i.e. cause more costs than benefits,

E. whereas the lack of coordination among national tax systems and the consequent high degree of tax competition among Member States has reached a level which is proving to be harmful, resulting in a potential failure to harvest the full benefits which the single market can provide in terms of growth and employment, given the increased tax burden put on labour compared with the more mobile capital,

F. whereas the lack of fiscal harmonisation and the excessive levels of competition have caused a progressive loss of sovereignty by Member States over taxation policy and hence over their fiscal instrument, as a consequence of potential tax erosion and loss of fiscal revenues produced by unchecked tax competition,

G. whereas there is a clear need of coordination of the evolution of national tax systems and a certain degree of fiscal harmonisation, particularly in those areas where harmful tax competition could produce adverse effects (indirect taxes, business taxation, taxation of mobile factors such as capital, tax treatment of non-resident citizens and companies, energy and environmental taxes, tax treatment of cross-border labour),

H. whereas this need is particularly strong given the distorting effects of widely differing rates of excise duties,

I.

whereas differences in taxation systems and levels which are based on social motives or criteria concerning the environment, public health and protection of consumers are not to be seen as harmful tax competition,

J. whereas decisions on minimum levels of taxation and common economic means of control to protect the environment and public health can be made at EU level,

K. whereas it is necessary to accept a "beneficial¨ level of tax competition in order to foster an improvement in the level of competitiveness,

L. whereas it is clear that the problem of tax havens within the territory of Member States of the EU is a question which must be given primary importance in any attempt to fight harmful tax competition,

M. whereas other areas of intervention requiring a degree of coordination and harmonisation, such as State aids, should be identified,

General remarks

1. Welcomes the speeding up of the process aimed at tackling the issue of tax coordination in the European Union and the commitment of the Council in this respect, being fully convinced of the fact that the current distortions in taxation systems might increasingly result in a failure to harvest the full benefits which the single market can provide in terms of growth and employment, as well as in a progressive loss of sovereignty by Member States over taxation policy and hence over their fiscal instrument, as a consequence of the tax erosion which has resulted from harmful tax competition;

2. Given the complexity of the task, and the numerous inter-linked interests of EU companies and citizens, endorses the Commission¨s approach aimed at the constitution of a "package¨ of proposals, in the shared belief that a better prospect of agreement and a more pervasive defence of the various interests at stake will more easily be achieved than if each policy issue is tackled separately;

3. Agrees with the idea that such a package should be composed of (a) a Code of Conduct for business taxation, (b) a European solution in the area of taxation of income from savings and (c) measures to eliminate withholding taxes on cross-border interest and royalty payments between companies;

4. Considers, however, that the synchronism in the legislative progress of the various elements of the package should be taken as a broad target to be achieved in the medium term, and not be used, on the contrary, as a tool by Member States to delay approval of the various elements of the package;

5. Regarding European Parliament and Council Decision 888/98/EC of 30 March 1998 establishing an action programme to improve indirect taxation systems in the single market (FISCALIS programme) ((OJ L 126, 28.4.1998, p. 1. )) regrets to note that this programme has been unbundled by the original Commission¨s proposal; welcomes however the agreement reached with the Council which is allowing the programme to be fully implemented already for 1998;

A Code of Conduct for business taxation and related issues

6. Welcomes the adoption by the Council of a Resolution of the Council and the representatives of the Governments of the Member States meeting within the Council of 1 December 1997 on a code of conduct for business taxation ((OJ C 2, 6.1.1998, p. 2.)) and the establishment of a Code of Conduct Group, in order to assess the tax measures that may fall within the scope of the code and to oversee the provision of information on those measures; welcomes also the important role of the Commission in supporting the work of the Group and expects to be kept well informed on the progress made;

7. Acknowledges the fact that, although no specific mention of its role has been expressly made in the Commission¨s communication, some of the specific measures suggested in its resolution of 29 May 1997 on the Commission report on taxation in the European Union: report on the development of tax systems ((OJ C 182, 16.6.1997, p. 59.)) have been taken on board by the Commission and the Council;

8. Recognizes in particular that its request for a precise definition of the spheres of taxation to which the code of conduct applies, the stand-still and roll-back clauses, the commitment of Member States to inform each other of existing and proposed tax measures which fall within the scope of the Code, in accordance to the general principles of transparency and openness, have all been included in the Commission¨s document approved by the ECOFIN Council;

9. Stresses the need for the Code of Conduct to be faithfully respected;

10. Regrets to note, however, that some other proposals of similar importance contained in its resolution, namely the general issue of the measures designed to eliminate significant distortions in the area of indirect taxation while creating at the same time alternative sources of revenue, such as environmental and energy taxes, although originally included in the Commission communication of 1 October 1997 'Towards coordination of taxation in the European Union' (COM(97)0495), have not subsequently been put forward;

11. While recognising that the adopted Code of Conduct relates only to direct business taxation, regrets that its proposals on the elimination of all forms of double taxation on income from labour and of other obstacles resulting from taxation or social charges which restrict mobility within the Union have not so far been taken into account by the Commission and the Council;

12. Also considers that there should finally be uniform definitions of such tax concepts as basis of assessment, earnings and the rules on writing-off;

13. Calls for the speeding up of the elimination of tax havens in the EU internal market in order to put an end to the ruinous tax competition between the Member States which is not consistent with the single market or with the spirit of the Community;

A European solution in the area of taxation of income from savings

14. Supports the Commission proposal and the agreement reached in the ECOFIN Council for a minimum Community solution in the area of the taxation of income from savings paid in one Member State to individuals who are not resident for tax purposes in that State, in order to counter current and potential distortions of the single market and to prevent significant losses of tax revenues as a result of the non-taxation of non-residents;

15. Looks forward to a commonly agreed solution in the area of the taxation of savings and welcomes the Commission's undertaking to come up shortly with a proposal in this field; points out in this context that the competitiveness of the European financial markets must be maintained at international level;

Measures to eliminate withholding taxes on cross-border interest and royalty payments between companies

16. Welcomes the Commission's proposal for a Council Directive on a Community system of taxation applicable to interest and royalty payments made between associated companies of different Member States (COM(98)0067) ((OJ C 123, 22.4.1998, p. 9.)) as being in line with its requests for measures which might offset the double taxation of certain cross-border activities;

17. Looks forward to expressing its comments on the document in line with the provisions of the legal basis of the proposal;

Conclusions

18. Considers the package of measures presented by the Commission as the minimum set of rules it is necessary to adopt in order to counter the previously analysed consequences of harmful tax competition and in order to fight unemployment successfully;

19. Welcomes beneficial tax competition among Member States as a tool to increase the competitiveness of the European economy confronted with the challenges of globalization;

20. Considers it necessary to reach a common minimal basis in all fields where tax competition degenerates into harmful behaviour by reaching an equitable compromise between subsidiarity and enhanced economic policy coordination;

21. Calls upon the Commission to put forward proposals which could strengthen and complete the existing package, including in the field of indirect taxation, to monitor more closely the issue of fiscal state aids in the Member States and to involve Parliament formally and more closely in the appropriate fora of discussion for the implementation of its strategy on taxation policy;

22. Instructs its President to forward this resolution to the Commission, the Council and the governments and parliaments of the Member States.