12.9.88 COfficial]ournal of the European Communities ^oC2^7B19 
Opinion on the proposal for a Council Directive completing and amending Directive 
77^88^EEC, removal offiscal frontiers^) 
(88BC2^7^ 
On 11 Septemberl987,the Council decided to consult the Economic and Social Committee, 
under Article 198 of thefreatyestabhshmg the European Economic Commumty,onthe 
ahovementioned proposal 
TheSection for Economic, Financial and Monetary Questions which was responsible for 
preparing the Committee^sworl^ on the subject, adopted its Opinion on 22]une 1988.The 
rapporteur was Mr Broicher. 
At its 257th plenary session(meetmgof7]ulyl988)the Economic and SocialCommittee 
adopted the following Opinion byalarge majority with^votes against and9abstentions. 
1. Ceneral comments 
1.1. Lhe proposal seel^s to amend and clarify the 
wordmgofDirective77^88^EEC^, which willbe 
necessary in the event of the completion of the internal 
mar^et.The removal of internal frontiers will,in par 
ticular,requireanewdefimtionoftheterms^import 
ation^and ^exportation, since import and export pro 
cedures will no longer apply within the Community, 
but only in relation to third countries. Most of the 
amendmentsmthe Commission proposal deal with the 
rewording ofDirective77^88^EEC 
As this is an inevitable consequence of the abolition of 
internal fiscal frontiers, which is not in itself the subject 
of the following Opinion, there is no call here to adopt 
aposition specifically on this issue. 
1,2, Alarge proportion of cross border trade within 
the Community is reportedly being carried out at pre 
sent between companies belonging to the same group. 
Under present rules companies in the same group within 
aMember State may elect to be treated asasmgle entity 
so thatVATdoes not have to be paid on transactions 
between them. It is suggested that an examination 
should be undertaken into the feasibihtyof extending 
the samepnnciple to intraCommunity sales, as this 
would greatly reduce administrative burdensboth for 
companies and national governments. 
2, Specific Comments 
Apart from making purely drafting changes to Directive 
77^88^EEC, the Commission proposal introduces some 
new rulings with certain material consequences. These 
primarily affect provisions which the removal of inter 
nal fiscal frontiers will render obsolete or which, if 
retained, would have undesirable results. 
d)Oie^e^,^^i^^ Thefollowmgare themost important articles in the 
proposal 
Arr^^^^,^^^^o^o^r^^^o^o^rr^^^orr 
Up to now, the basis for charging value added ta^ 
(VAL) has been the distance travelled within each 
Member State, Since the distance travelled during one 
operation may cover several Member States, and hence 
areas under different fiscal jurisdictions, the removal of 
internal frontiers males thee^istingrulng impracti 
cable, Lie new fiscal basis for transport operations 
will be the place of departure,^ewould endorse this 
solution in principle,However,m this caseamandatory 
procedure for deduction of ta^ by the customer should 
be included in Article 21 (l)(b). It is moreover assumed 
that the separate draft Directive which is tobe issued 
onpassenger transport wdldealwithfurther specific 
issues arising as a result of the removal of internal 
frontiers. 
Arr^A^^5^,^^^^o^o^^^o^^o^o^^r^^^ 
Certain services (e,g, consultations, data processing, 
licensing etc) are at present always deemed to be sup 
plied in the country where the customer, if taxable, has 
his business or permanent address. In future the place 
of supply will be the supplePscountry if the latter is 
a taxable person withabusmess or permanent address 
within the EC, Otherwise, the existing provisions will 
still apply, ^o material disadvantages arise in view of 
the general deduction of input ta^, fhus the place 
where suchservicesaresuppliedis always deemedto 
be where the suppler is established as long as the 
customers business is within the EC (regardless of 
whether he isata^ablepersonor not), Lhe resulting 
standardisation and simplification will be suitably prac 
tical 
Arr^^^^,^^^o^o^^o^^rr^^^^ 
Supples of gold to central banls are at present exempt 
from ta^ and also qualify for the right of deduction of 
No C 237/20 Official Journal of the European Communities 12. 9. 88 
input tax. Hitherto, exports within the Community 
have been exempt from tax by virtue of being exports. 
After the transition to the internal market, such trade 
will no longer be treated as exports. Tax exemption 
coupled with the right to deduct input tax must there­
fore be guaranteed by an amendment to Directive 
77/388/EEC. This correction is in line with the consider­
ations underlying the provisions for supplies of gold to 
central banks and should be supported. 
Article 1 (9): Option for financial and banking trans­
actions 
The new proposal would abolish the right of option 
introduced by Article 13 C-b of the sixth Directive 
77/388/EEC, which applies inter alia to banking loan 
transactions. These would in future be exempt from tax 
in all Member States, as is the case for insurance and re­
insurance transactions. This decision is premature. 
The present situation is in any case not satisfactory. It 
runs counter to the idea of a large single market and a 
common financial area, hinders the Community-wide 
provision of services across frontiers and distorts com­
petition in contravention of Article 3 (f) of the Treaty. The Commission is therefore asked to review the issue 
and propose a suitable solution. 
It would seem more appropriate to make optional tax 
exemption mandatory in all Member States with no 
restrictions. Accordingly it is proposed that Article 13 
(C) of Directive 77/388/EEC of 17 May 1977 be amend­
ed as follows: 
'C. Options 
a) Member States may allow taxpayers a right of 
option for taxation in cases of: 
1. letting and leasing of immovable property, 
2. the transactions covered in B (g) and (h) 
above. 
Member States may restrict the scope of this 
right of option and shall fix the details of its 
use. 
b) Member States shall allow taxpayers a right of 
option for taxation in the case of the transactions 
covered in B (d) above.' 
Done at Brussels, 7 July 1988. 
The Chairman 
of the Economic and Social Committee 
Alfons MARGOT