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DOCUMENTS "COM"
COM (79)190
Vol.1979/0081

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(79)190final.
Brussels,28august1979
EMPLOYEE PARTICIPATION
IVASSETFORMATION
MEMORANDUM
/Tl\£ :%\
– • .>»\gV-.10
V ■'''\y
COM(79)190final.

EMPLOYEE PARTICIPATION INASSET FORMATION
SUMMARY
This memorandum istheresult ofwork undertaken inthepast few
years ,inclose collaboration with experts from Governments andsocial partners
onthebasis ofaCouncil (Social Affairs )mandate .
The24June 1976Tripartite Conference has ,onitsside ,asked Govern­
ments andsocial partners totake appropriate measures toencourage asset
formation byworkers andthe4thmedium-term economic policy programme has
expressed thewish that discussions onthis theme take place in1977 sothat
concrete reforms maybeimplemented inMember States byI98O .
Situation anddevelopments inMember States (l)
Anumber ofmeasures regarding asset formation arealready inforce
inallMember States –insome cases foralong time -particularly inthe
field ofincentives toindividual savings and access tohome ownership :
fiscal benefits ,savings increments ,loans forhome building ,rebate on
interest ,and soon.Efforts toexpand andcomplete these measures have been
progressively made inalmost allthemember countries under various forms
adapted tonational structures ,particular conditions andresources :youth
savings ,home building saving schemes ,indexed saving schemes ,andsoon.
Furthermore ,incertain member countries ,newforms have appeared which
are specific towage-earners but conceived inaccordance with different basic
principles .Themost important ofthese chose either theformula ,negotiated
jointly ,ofanasset benefit granted atastandard rate inabsolute value by
theemployers andessentially attheir cost (German lawofDM624)>orthe
compulsory formula offrozen participation ofthewage-earners intheprofits
ofundertakings ,financed inpart bytheState (French ordinance onthe
participation ofemployees inthegrowing wealth oftheenterprises ).Various
systems ofparticipation onavoluntary basis (butinfact with limited scope )
arepossible intheNetherlands ,intheFederal Republic ofGermany andinthe
United Kingdom ,Moreover note must also betaken ofthedevelopment ,inFrance ,
ofsystems ofshareholding byemployees which arecompulsory incertain public
enterprises andoptional intheprivate sector .Similar systems ,optional
only ,ofshareholding arealso inoperation inDenmark ,intheUnited Kingdom
and intheFederal Republic ofGermany ,
Intherecent past ,theinterest shown inthese problems bycertain
Governments ,aswell asinpolitical ,trade union andprofessional circles ,
isevidenced bythenumber ofstudies ,projects ,different stances taken and
draft laws .Several projects ,vising more novel formulas fortheformation
anddistribution ofassets ,have been elaborated -notably :
–theDanish government 's1973 draft bill which aims atsetting upacentral
fund fortheparticipation ofemployees ininvestments andprofits .This
draft bill ispart ofamodel foracertain form of"economic democracy "
butafinal decision hasnotyetbeen taken inthis matter j
(l)SeeDescriptive Annexure from page 36ownwards "Systems creating incentives
toencourage asset formation byemployees ".

–theGerman Federal government 'sproposed 1974 legislation concerning asset
formation forallemployees through participation intheprofits ofthe
enterprises bymeans ofaclearing fund .Thestudy ofthis scheme hasbeen
temporarily postponed onaccount oftheeconomic situation andlegal and
practical difficulties ;
–theDutch government 's1976 programme concerning employee participation
inthecapital growth oftheenterprises .Twodraft laws embodying sensibly
modified versions ofthis programme were submitted toParliament bythe
present government in1978 }
–theFrench government 's1978 draft lawproviding foracompulsory free
distribution ofshares ofindustrial andcommercial companies quoted on
theStock Exchange ,
The mechanics and the conclusions
The section ofthis memorandum entitled "Themechanics ofasset
formation policy "(l)hasbeen designed asasynthesis wherein aresetout
theaims ,themain problems andthefundamental choices involved inthe
implementation ofsuch apolicy .
These mechanics form thebasis of"conclusions "(2)which donot
contain formal proposals from theCommission but setoutdesirable guidelines
forthefuture ,notably infavour ofcertain formulas orprocedures ;guide­
lines which might constitute thestarting point ofawide debate among all
interested parties andwhich might give anewimpulsion tothis asset formation
policy atCommunity level .
Thefirst series ofguidelines setoutbytheCommission should tend to
reinforce the social aspect ofincentives toindividual savings :
-fixing income ceilings forthebeneficiaries soastofavour mainly the
categories ofthepopulation whose income isrelatively modest ;
-substituting savings premiums fortaxbenefits ;
-freezing thesavings during five years ;
-free choice oftype ofinvestments ;
-protection ofsavings against inflation ; 1
-elimination ofterms and conditions which hinder the free movement of
persons .
Thesecond series ofguidelines isorientated towards thedevelopnent
ofsystems offinancial participation bysalaried employees .
TheCommission hasnaturally advocated theformula whereby employers
paylump sumfringe benefits totheir employees ,inaddition toearnings -
such benefits having been agreed upon in"asset foruation "agreements or
conventions .
However themost advanced novel approach would bebyhaving employees
sharing intheprofits ,thecapital growth orthecapital offirms –such
participation could berendered ,compulsory bylav/orbeleft tofree negotiation
bythetwosides ofindustry ,within alegal framework which facilitates the
application ofsuch ascheme#
(1)Seepages 6-30 ,
(2)Seepages 31-35 ,

This formula would make itpossible -either tolimit theamounts ir -
que ;J'ioutotheemployees ofeach firm concerned ortocreate aclearing
system ,TheCommission suggests amixed formula whereby part oftheamounts
earmarked forasset formation would fcedistributed amongst thestaff ofthe
enterprise concerned while theother part ispaid into oneormore collective
funds .This formula would avoid overlarge discrepancies between employees
ofdifferent firms while ensuring that theincentive foremployees to
participate inthe life andfinancial results oftheir own firra ismaintained .
TheCommission isoftheopinion that employee participation in
productive capital formation constitutes anefficient approach towards the
fundamental goal –from asocial standpoint -ofgreater justice inthe
distribution oftotal wealth .This asset formation policy isfurthermore
amodern means ofregulating theeconomy and ofcontrolling inflation .
Thedesirable economic strategy inthemedium term isthenon inflationary
financing oftheproductive investment necessary forarecovery ofeconomic ,
activity andareturn tosatisfactory investment levels .If, -under those
circumstances ,employees were asked toaccept relatively moderate salary
increases sothat undertakings might reconstitute their investment capacity ,
such apolicy ought (asacounterpart )tobeaccompanied byemployee participa­
tion intheformation ofproductive capital thus brought about .

EMPLOYEE PARTICIPATION
INASSETFORMATION
CONTENTS
Pages
INTRODUCTION 1
THEMECHANICS OFASSETFORMATION POLICY
CHAPTERI-ASSETFORMATION POLICY:DEFINITION ANDOBJECTIVES 6
1°)Definiiion••••••••••••••••••••••••••••••••••••••••••• 6
2°)Principal objectives ••••••••••••••••••••••••••••••••• 9
CHAPTERII-TRENDS ANDPROBLEMS RELATIVE TOEXISTING SYSTEMS 12
1°)Information •••••••••••••••••••••••••••••••••••••••••• 13
2°)Ceilings •••••••••••••••• 13
3°)Incentives ••••••••••••••••••••••••••••••••••••••••••• 14
4°)Freezingthesavings••••••••••••••••••••••••••••••••• 15
5°)Typesofinvestment encouraged ••••••••••••••••••••••• 16
6°)Conditions ofefficacity ••••••••••••••••••••••••••••• 18
7°)Employers 1contributions andwageearners'savings...19
8°)Assetformation andimprovement ofstatistics •••••••• 20
9°)Assetformation andfreemovementofworkers••••••••• 21
CHAPTERIII-DEVELOPMENT ANDPROSPECTS OFASSETFORMATION POLICY 24
1°)Standardassetbenefits•••••••••••••••••••••••••••••• 25
2°)The"investment wage" 26
3°)Assetformation byrises"atrisk"••••••••••••••••••• 27
4°)Participation intheprofitsofundertakings ••••••••• 28
5°)Preferential purchaseorfreedistribution
ofshares 30
CONCLUSIONS 31

EMPLOYEE PARTICIPATION INASSET FORMATION
INTRODUCTION
la In "theframework ofitsownSocial Action Programme which theCouncil
noted inits21st January 1974 Resolution ,and inaccordance with amandate
received earlier from theCouncil ,theCommission hasdrawn upareport on
the "Systems creating incentives toencourage asset formation byemployees ".
This purely descriptive document which isherewith annexed ,makes aninventory
ofthevarious systems inexistence oratthestage ofproposal inMember States ,
which areoffered either tothepopulation atlarge ortomodest income groups
(access tohome ownership ,savings' schemes ,etc#)ormore specifically to
employees (standard asset benefits ,profit sharing ,industrial copartnership ,
etc.). Itbecame ,infact ,apparent that thestudy could notbelimited
solely tothose systems which were specific tosalaried employees since the
latter category could benefit ,just like anyother person ,from themore
general systems offered either tothepopulation atlarge ortothemodest
income groups ofthepopulation .
The section ofthis memorandum entitled "The mechanics ofasset
formation policy "isdesigned asasynthesis andaguide ,which sets out
theaims ,themain problems andthefundamental choices implied inthe
implementation ofsuch apolicy ,
2, Itisworth recalling that theimportance oftheobjectives ,both
social andeconomic ,ofanasset policy hasalready ledtheCouncil and
theGovernments oftheMember States toconsider ,ever since thefirst
Medium-term Economic Policy Programme adopted 6n11April 19^7 »that an
effort inthis direction ,could make itpossible to"conciliate theworkers'
aspiration toreceive agreater share ofproduction andtheexigencies of
investment "(l).
(l)Official Journal oftheEuropean Communities N°79of25April 1967
(p.1549/67).

Inthesecondprogramme adoptedon12May1969(l)itisstatedthat"all
MemberStatesoftheCommunity shouldpursueactiveassetspolicies,
accountbeingtakenoftheparticular circumstances ofeachcountry".The
thirdMediunh-term EconomicPolicyadoptedon9February 1971(2),under­
lines,amongthegeneralobjectives ofsocialdevelopment felttohave
priority inallthemembercountries "greaterjusticeinthedistribution
ofincomeandwealth".
Inthefourthprogramme (3)(1976-1980),adoptedon14March1977»
itis,ontheotherhand,statedthat"greaterparticipation ofwageand
salaryearnersinassetformation shouldbeencouraged ,thoughthisshould
nothavetheeffectofharminginvestment .Suchamovecouldbebasedon
profit-sharing schemes(bydistribution ofstockorotherformsofassets)
or"investment wage"(inwhichpartofthewageorsalaryisputinto
savingsandreinvested).Moregenerally anactivepolicytoencourage
household savingsbymeansofvariousincentives (bonuses,saving
schemes...)wouldimprovetheconditions forfinancing investment ,atthe
sametimecontributing totheestablishment ofabettersocialconsensus .
3.Inthisgeneralcontext,itisnecessary tounderline theimportance
attachedtothesecond"tripartite conference "onthethemeofre-establishing
fullemployment andstability intheCommunity whichwasheldon24June1976
andattended byrepresentatives ofGovernments ,socialpartners andCommunity
objectives andthe"JointStatement "(4),adoptedattheendoftheconference
stipulates inparticular thatGovernments andemployers andlabourwilltake
appropriate measurestopromoteassetformation byworkersandtheirpartic­
ipationinthelifeofundertakings .
(1)OfficialJournaloftheEuropean Communities n°L.129of30May1969
(p.96).
(2)OfficialJournaloftheEuropean Communities n°L.49of1March1971
(p.10).
(3)OfficialJournaloftheEuropean Communities n°L.101of25April
1977(p.22).
(4)OfficialJournaloftheEuropean Communities n°C.173of28July
1976(p.1).

Whilerecalling thisengagement takenbyGovernments andsocialpartners ,
theforewordtothefourthMedium-term EconomicPolicyProgramme (already
quoted)expresses thewishthatdiscussions onthequestionofassetformation
"beheldduring1977thatconcrete reformsbeimplemented inMemberStates
by1980.
4*Moreover ,verypositiveattitudes havebeenexpressed onseveral
occasions bytheEuropean Parliament ,inparticular :
–inits28thNovember 1968Resolution (l),inwhichitexpressesthewish
thatassetformation bepromoted bygettinglargesections ofthepopulation to
participate intheprofitsofundertakings andintheconstitution ofassets
andsuggeststhatastudygroupbeformedtoassembleallthedateandknowledge
available inthisfieldwithaviewtomakingconcreteproposals ,
–inits13thJune1972Resolution (2),whereit"insistsonthefactthat
anincomespolicycannotbeeffective unlessitisaccompanied byapolicy
wherebylargesections ofthepopulation arefavouredinassetformation and
wherebywouldbeavoidedanexcessive concentration ofassetsinthehandsof
afew"#InthissameResolution ,Parliament "invitestheCommission toen­
courageMemberStatestotakemeasures whichshowprogress andcoordination at
Community levelinthefieldofassetformation",
–andinits24thAprilResolution (3),whereit"considersitnecessary for
housingpolicytofacilitate homeownership "and"hopesthatconditions willbe
createdforapolicyofindividual assetformation forworkers,including a
shareinproduction capital–notnecessarily inthesameundertaking"#
5#©ieimportance oftheproblems impliedinanassetformation policy,
whichisatrulycontroversial anddifficult field,justifies theanalysisof
theseproblemsatCommunity levelbytheservicesoftheCommission atthe
Council,srequest# Infact,ajiover-diver siedimplementation ofthevarious
aspectsofthispolicycouldbringaboutproblems (forexample)inthefieldof
(1)OfficiaiJournalof
1968(p.15).
(2)OfficiaiJournalof
(p.15).
(3)OfficiaiJournalof
(î>*2l)otheEuropean Communities
theEuropean Communities
theEuropean Communitiesn°C135of14thDecember
n°C70of1stJuly1972
n°C127of21stMay1979

thefreeplajrofcompetition mthecommonmarket,ofthefreemovement of
persons,services andcapital,etco«oWhencertainrecentproposals which
aremoreadvanced and"basedontheprinciple ofworkers *participation in
profits,"capitalgrowth"orinthecapitalofundertakings ,withorwithout
theinstitution ofan"inter-professional fund",arecloselyconsidered ,can
oneimaginetherepercussions thatwouldfollowtheirrealisation limitedto
certaincountries ,onthedecision ofinvestors andnotablythe"transferof
profits"andthe"flightofcapital"toothercountries whichwouldensue®
Again,onthesocialfrontifitappearspossible (itactuallydoesexistal­
ready)toseecertaincountries moveinthatdirection ,theirpassingonto
theothermoreeffective stagesisnotconceivable iftheothercountries of
theCommunity donotaccepttomoveinthatdirection aswell#
Thisisprecisely why,inviewofthefactthatalltheseproblems
have,atleastincertaincountries ,engendered proposals ,projects and
discussions ,theconfrontation ofideasandobjectives atCommunity levelis
particularly necessary® Theinterestintheelaboration ofaCommunity
conception ofarealassetformation policy,needstobehighlighted® Atthat
levelthemainattitudes andthegeneralorientations foraglobalframework
couldbedrawnup®Thisframework wouldbeindispensably coherent butthere
wouldbewithinsuchaframework acertainmeasureofadaptation soasto
permitMemberStatestotaketheirnationalsituation andtraditions into
account ®
6®Itmustberemembered that,inaprevious memorandum entitled
"Employeeparticipation andcompanystructure "anddevotedessentially tothe
participation ofemployees indecision-making bodiesofenterprises ,the
Commission hasalreadytakenafirststepinanalysing theproblems
concerned withshareandprofitparticipation withinenterprises (l)®
Furthermore ,theSecondCouncilDirective (77/9l/ESC)of13thDecember
1976on"coordination ofsafeguards which,fortheprotection oftheinterest
ofmembersandothers,arerequired byMemberStatesofcompanies withinthe
meaningofthesecondparagraph ofArticle58oftheTreaty,inrespectof
theformation ofpubliclimitedliability companies andthemaintenance and
(l)"Qnployeeparticipation andcompanystructure "(BulletinoftheEuropean
Communities –Supplement 8/75)0

alteration oftheircapital,withaviewtomakingsuchsafeguards equiv*-
alent"(l),alreadyincludesaprovision havingtheexpresspurposeof
facilitating workers *participation inthecapitalofundertakings# Member
StatesmayinfactwaivecertainchangesintheDirective –regarding payment
forsharesissuedforaconsideration atthetimethecompanyisincorporated
orfollowing anincreaseincapital,acquisition "byacompanyofitsownshares
increases incapitalandexercise ofthepre-emptive ri^itofexisting share­
holders–provided suchactionisnecessary fortheadoption orapplication of
arrangements designedtoencourage theparticipation ofemployees inthe
capitalofundertakings *
7oFinally,withinthegeneralframework oftheprogressive realisation of
economic andmonetary union,thedevelopment ofemployeeparticipation inasset
formation isjustified notonly "byaneconomic approachinviewofthewished-
forinvestment growthbutalso "byasocialapproach wherethemainobjective
isafairerdistribution ofthewealthgenerated byundertakings .
Infact,aftertheseriouseconomiccrisiswhichhasaffectedallEEC
countries in1974-75andwhichhasnotyetbeenbroughtundercontrol,the
basicstrategy whichoughttobeconsidered inthemediumtermisthenon­
inflationary financing oftheproductive investment necessary forarecovery
ofeconomicactivity andareturntosatisfactory employment levels# With
thisaim,acceptance ofrelatively moderatesalaryincreases sothatunder­
takingsmayreconstitute theirinvestment capacityought(asacounterpart )
tobeaccompanied byemployeeparticipation inassetformation thusbrought
about#Itisvitalthatthetwoproblems bedealtwithsimultaneously ;other­
wisehighwageclaimsmi^vtbemadeandtheprospects ofabalanced andnon­
inflationary economic expansion couldwellbejeopardized#
(l)OfficialJournaloftheEuropean Communities n°L#26of31s'tJanuary1977

THEMECHANICS
OPASSETFORMATION POLICY

CHAPTER I
A5SST FORMATION POLICY ;DEFINITION AND OBJECTIVES
1°)DEFINITION
8. Thefirst question which arose ,atCommunity level ,was,ofcourse ,
inview particularly ofthegreat diversity ofthesystems existing inthe
Member States ,howtodetermine with maximum precision andjustification the
area tobecovered bythestudy *This wasadifficult task ,inwhich the
essential concern oftheCommission wastoavoid anydogmatic
attitude ,but toallow foracertain degree ofpragmatism .
However ,itsometimes proved difficult toreconcile concerns orfinal aijns
which could appear divergent®
9. Starting from theformulation "systems creating incentives toencourage
asset formation byemployees "(l),there appeared atfirst atendency toextend
thefield ofthestudy tosome degree ,andthefollowing approaches were thus
particularly chosen :
–notonly thesystems specific towage-earners butalso themore general
ones offered either tothepopulation atlarge ortocertain lowincome
groups andfrom which thewage-earner ,like anybody else ,isentitled
tobenefit ;
–notonly theforms ofencouragement inthestrict sense ,i»ea,those aimed
atpromoting personal saving "byindividuals orhouseholds ,butalso the
forms inwhich noprevious saving isdemanded ofthebeneficiaries and
where there areonly payments borne bytheemployers ortheState ;
–exceptionally fandalthough they donotconstitute an"asset "inthestrict
sense orblocked savings ,thedifferent deposits onsight with savings
banks whenever these arethe subject ofameasure ofencouragement -the
reason being that these deposits often constitute afirst essential stage
leading togenuine formation ofmore stable assets .
(l)Seethedescriptive Annexure .

-7-
10.Oniheotherhand,thereappearedanothertendenoytokeepthescope
ofthestudyrelatively narrow,andinthiswaythefollowing,inparticular ,
wereexoluded :
-generalmeasuresaffecting ,forexample,thecapitalmarket,hankdeposits,
theprotection ofshareholders ,thepriviledged taxarrangements for
investments atrisk,etc „
-measuresrelating,nottotheformation buttothetransfer ,ofassets,
forexampledeathduties;
-formswhichtendtofavourtheprofessional activityofthepersons
concerned as3uch,forexampleaidstotheformation ofsmallagricultural
holdingsorsubsidies toartisansforthepurchaseofmaohine-tools ,etoM0;
-formsofparticipation orinvolvement ofwageearnersinprofitswhioh
involve immediately utilisable cashpayments ;
-thewholefield,whichisaveryspecialoneandisthesubjectofother
studies,ofthelegalandextra-legal socialsecurity systems® •
11,TheupshotatCommunity levelofalltheseconsiderations ,which .are
elaborated uponingreaterdetailinthedescriptive Annexure,
wasaoonceptof"assetspolicy 41fairlyclosetothoseusedinthe
various membercountries andcomprising alltheconcrete measures whose
objective isessentially socially butalsoeconomically orientated toencourage
theformation ofabodyofrightsofownership whicharerelatively stableand
donotconstitute aninstrument fortheoccupational activity ofthepersons
concerned .Thisconceptcoversencouragement totheconstitution ofmovable
assetsaswellastotheconstitution ofrealestateproperty,
12*itmastbenotedhoweverthatadelicate problemwasraisedconcerning
thelink .betweenassetformation polioyandworkerparticipation inthe
administration ofenterprises ormoregenerally ineconomic power.
Certaintrendsofopinion,expressed specially amongtradeunions,
wouldhavethedifferent aspectsofoopartioipation includedinthe'present
reportwhereasothersonthecontrary,upheldbyallprofessional employers'
organisations andmostgovernments wereagainstsuchaninclusion.

Itcanncrtbedeniedthatalinkdoesexistbetweencertainformsof
"financial participation "ofworkersintheresultsobtainedintheenterprise
andtheparticipation ofthosescjneworkersintheadministration oftheir
ownenterprise .Thisisparticularly evidentinthecaseoffreedistribution
ofshcxeaortheirpurchaseatpreferential prices("Shareparticipation "
policy).Itisalsotruewhencertainsurasattributed tothestaffinprofit
sharingframework (orof"assetformationcontributions "paidbytheemployer)
areinvested assharesintheenterprise concerned *Awiderviewofthe
question wouldalsoshowthatwhenasalaried workerinvestshissavingsin
sharesofvariouscompanies heacquiresthesamerightsasanyothershare­
holder,Somepeoplebelievethatevenifthesevariousroutestowards co-
participation inadministration arenotreallyimportant andefficient -,spe­
ciallyonaccountoftherelatively smallsumsofmoneyinvolved,theyshould
nothowever beconsidered negligible .
Regarding morerecentplans,whichamongotherthings,proposedthe
creation of"interprofessional funds"fedbypartofprofitsofenterprises
andadministered orco-administered bytradeunions,stresshasbeenlaidon
theimportance thatsuchaformof"assetformation policy"canhaveasan
efficient strategy whichwouldallowcoparticipation inadministration and
economic power.
Parfromdisregarding theeffectofthearguments putforwardinfavour
ofincluding theaspectsof"participation inadministration "inthisreport,
theCommission hashoweverdeemeditpreferable toexcludethem.Asamatter
offact,theCommission hasalwaysconsidered that,independently ofwhether
shareswereheldbythestafforprofitsweresharedout,therightofworkers
toparticipate indeoisiontakingatenterprise level(co-decision orco­
administration )wasjustified bythemerefactthatsalariedworkers,making
upthe"labour"factor,participated asmuch(atleast)inthefunctionof
"production "oftheenterprise astheshareholders whomakeupthe"capital"
factor(theroleof"management "notbeingyetinvolved).
Allthesametheservioes oftheCommission hadtoavoiddoublecounting
specially soasthequestionofworkers *participation intheaclministration

-9-
ofenterprises hadalready been andisstill beinsconsidered inCommunity
initiatives andstudies inanother -framework (l)#
Furthermore ,both thedescriptive report andthereport ontheproblems
have thesame essential object vizasset formation andsome ofthetypes
involved (like aocess tohome ownership forexample )have nothing todowith
theproblems ofparticipation inadministration .
2°)PRINCIPAL OBJECTIVES
13• Among thenumerous objectives which could bepursued bythis "assets
policy ",itwasrecognised ,both bygovernments andbythetwosides ,ofindustry
atnational andCommunity level ,that priority ought tobegiven tothesocial
objectives andmore particularly tothemost important among these ,iae«a
fairer distribution ofwealth ,which ,atpresent ,ismuch toounequal#
However this objective ofmore equal sharing isnotsought bymeans of
aredistribution ofassets already existing butrather asadifferent re­
allocation oftheyearly results ofproduction which would benefit toagreater
degree those less favoured uptonow® .
(l)cf,notâbly :• ' ■
-Proposal foraCouncil Regulation onthestatute forEuropean companies ,
presented bytheCommission totheCouncil on30,6*1970 (together with
theamended proposal transmitted totheCouncil oril3«5»1975 -Doo.
COIl(75 )150final )} .-,
••Proposal fora5^hDirective tocoordinate the "safeguards which are
required byMember States ofcompanies andconcerning theharmonisation
:ofthestructure of"Soci&tes anonymes ",presented bytheCommission to
theCounoil inOctober 1972 (Doc# COIl(72 )837final of27»9»1972)j
**thealready quoted memorandum oftheCommission concerning "Employee
participation andcompany structure "(Bulletin oftheEuropean
Communities –Supplement 8/75)•

10-
Followingthisgeneralline,theappropriate solutionistoheableto
ensureforeverybody acertaindecreeoffinancial independence andgreater
securityinthefaceofthemultiplehazardsandburdensoflife,whichare
stillfarfrombeingentirelycovered,quiteapart,ofcourse,fromanadequate
levelofincomeitself,bylegalorextra-legal socialsecuritysystems,budge-b
transfers,collective consumptions andinvestments ,eto###Itismoreover
neoessary,inourtypeofsociety,thatthesenseofpersonalresponsibility ,
underlined byaoertainamountofassetsoffering genuinepossibilities of
personal accomplishment shouldbepreserved andevenreinforced asfaras
possible.
Onesocialobjective whoseverygreatimportance mustalsobestressed,
andwhichinawayisintegrated withthefirst,istoenableanincreasing
numberofhouseholds tobecomeownersoftheirdwellings.
Finally,inthisfrajnework,theprinciple ofparticipation ,inblocked
form,ofwage-earners intheprofits,thecapitalgrowthandthecapitalof
enterprises alsoarose,andwillariseevenmoreinthefuture,
14#Theimplementation ofsuchanassetspolicyisalsocalculated to
respondtoessential objectives ofaneconomic naturedesignedchiefly :
-toensuretheoveralllevelofsavingnecessary forthefinancing of
investments ;
-toobtaingreaterparticipation ofhouseholds inglobalsaving;
-tocreateastateofaffairsinwhichthishousehold savingwill"turn
morethanatpresenttowards mediumandlong-term formsofinvestment
-andtore-establish andmaintainrelatively stablepricesthankstoa
betterconciliation betweentheprogress ofincomesandthedesired
equilibrium ofconsumption ,savingsandinvestment.
Assetformation policytherefore constitutes amodernmethodfor
regulating theeconomy.

11
15.Allsocialand.eoonomioobjectives axealsotobefoundtogetherin
thestrugglefortheredistribution ofthefruitsofproductive efforts,,
Asamatteroffact,theimplementation ofanassetspolicyoouldconsiderably
changetheinstruments usedhithertointhefightforredistributing income*
Insteadoftryingtoattaintherelevantobjectives solelybyactingonthe
evolution ofnominalincome,notablyofsalariesandwages,thesocialpartners
andpublicauthorities couldactthroughthatredistribution byhavingtaore
reooursetotheinstruments available underassetspolicy*Thusthepossibilities
ofachieving greaterjusticeintheredistribution ofincomewillbeincreased
withoutgettinginvolvedinthefaotorsofgeneraleconomicequilibrium ,more
specifically inthelevelofpricesandthevalueofcurrency *
χ
X X

-12-
CHAPTERII
TRENDSliHDPROBLEMS FCLATIVE TOET3STIRO SYSTEMS
16•Itisnormalandevendesirable -thai:thereshouldcoexist,rotonlyin
theCommunity "butalsowithinoneendthesamecountry,varioussystemsof
encouragement forvoluntary savingbyindividuals andhouseholds ,These
systems maybeaimedatthewholepopulation oronlyatthoseinmodestincome
groups,atwageearnersaloneor,sometimes,atcertainspecialcategories ,
suchascivilservants,forexampleor,whenthemainconcerniseducational ,
atyoiuvjpeople.Thetypesofsavingwhichbenefitfromaidmeasures are
themselves veryvaried:deposits onsight,blockedaccounts,insurance 's,
fixed-income securities ,investments atrislc,purchaseorbuildingofa
dwelling,etc
Whentheultimate aimisofanessentially socialorder,thevarious
systemsofassetformation areeventually reserved onlytotherelatively
lesswell-off groupsinthepopulation ,whethertheybewage-earners crnot.
Incertaincountries ,apartfromthesesystemswithasocialpurposet
whichinessencecorrespond totheconceptacceptedinthepreceding chapter,
itproveduseful,withaviewtomorespecifically economicobjectives ,
concernedforexample,withthefinancing ofinvestmentsj toadoptformsof
encouragement tosavewhichareevenmorediverseandareaimedatdifferent
socialcategories withastrongpropensity tosave.However,inthiscase,
itwouldhavetobekeptinmindthatover-numerous andover-diversified
incentives couldproveexoessively costlyasawhole,andatthesametime
insufficient andinoperative asregardsindividual advantages *
Asregardsonlythesystemsofencouragement dealtwithinthepresent
memorandum ,areviewwillbemadeofthemainproblemsthathavearisenwhen
implementing thosesystemsorwhichhavestilltobesolvedbeforereaching
thedeclared aims.

-13
1®)INFORMATION
17• First ofall ,itisessential tonote ,that inmost Member States ,the
public lacks infomati onconcerning themany terms andconditions ofthese
systems *These often differ between themselves within oneandthe .same country
a3regards conditions ofaccess ,time limits ,taxorother facilities ,etc ,,,
This iswhy ithasbeen suggested that aserious publicity campaign bemounted
orintensified intheMember States with aview torender -prospective beneficiaries
more accr-.airted with the schemes ,=■ •
2°)CEÏLÏÏÏGS
18. Ithasbeen possible tonote andregret that certain forms ofencour­
agement tosaving ofmoveable andtoowner occupation sometimes benefited to
anoteworthy extent ,holders ofrelatively high incomes ,I:isuch oases ,there­
fore ,theadvantages offered .achieve only amere shift –towards formulas
whioh areoften very costly forthepublic authorities ofsavings which toa
large extent would doubtless have been made inanycase .This isthereason
whyfrom thechosen standpoint oftheessentially social objectives ofan
assets policy ,theidea occurred offixing either anincomes ceiling forthe
saver ,oraceiling oftheprivileged amount saved ,.oraceiling tothe
advantages granted ,
19, With aview tolimiting thebenefit ofthefinancial incentives tothe .
social categories forwhich theeffort ofsaving isthemost difficult ,it
would indeed seem that themost effective ceiling istheoneontheamount
ofincome received .
Inthis respect Vitisgenerally thefiscal income which ischosen,' ,
Different ceilings areoften fixed forbachelors andmarried persons .Ceilings
canalso beraised inorder totake dependent children into consideration .
Furthermore thelevel ofceilings isoften periodically revised totake into
account theprogress ofthecost ofliving orthegeneral increase inincomes .

14-
Inconsidering thefiscalincomeitmustberemembered thatinoertain
membercountries,andinvaryingdegrees,theincomesdeclared bycertain
categories oftar-payer 'smaybeappreciably lowerthanthoseactually received *
20#.Promthesameangle,itwouldseemnecessary torecallanotherlimiting
condition alreadyappliedincertain MemberStateswithrespecttoafewforms
ofaidaffecting accesstoowneroccupation forexamplewherethesizeofthe
realandmoveable property alreadyheldbythesaverisconsidered inrelation
tohislevelofresources -
3°)ETCEFTIVES
21*Thechiefmeasures takenbytheStateinfavourofthebeneficiaries of
systemsofencouragement arecapitalpremiums andtaxexemptions orreductions .
However,onecannotbutnote,againinthisfield,thatincometaxallowances ,
inpraotioe,chieflyfavourtheholdersofrelatively highincomes.Consideration
mustbegiventothefactthatincertaincountries asometimes considerable
proportion ofind5.viduals donotpayanytaxontheirincomes,astheseare
exemptedornotdeclaredbecausetheyaretoolow.Furthermore ,itisevident,
talcingintoaccounttheprogressive natureoftheschedules,thattaxallowances
areallthemoreprofitable forsaverswhentheirincomeattainstheupper
levels,wheretheratesoftaxarethehighest.
Inaddition,itisclearthat,althoughthedesiretosavereallyexists
amongthosewithsmall,orevenverysmallincomes,thefinancialpossibilities
ofmanyofthemarestilltoolimitedtoallowofsuchsavinginpractice,a
fortioriifthisdifficulteffortdoesnotbenefitfromanyincentive ,orif
theincentive offeredistooweakinthesettingoftaxexemptions .
Thisiswhypremiums havebeensubstituted totaxallowances insome
importantcasesinthelastfewyears(the624DMLawinGermany,for
example).

-15-
Theschemeofpremiumsalsomakesitpossible "toobtaingreater
flexibility inordertotakeaccount,ifthisisconsidered usefuland
desirable ,oftheamountsaved,thefirstinstalments ofsavingenjoying .,
higherpremiums,whichthengradually taperoffuntiltheydisappear atthe
levelofaceilingofaidedsavingsmentioned atpoint18above.Thesame
flexibility canalsobeutilisedifitisdesiredtomodulatetherateofthe
premium,asthisisalreadydoneincertaincountries (inBelgiumforexample
forbuildinggrants)inthelightofthefamilyburdensofthesaversor
differences intheirincomes,ahigherpremiumbeingreservedforthosepersons
whoseinoo.rroisbelowaocrtainceiling.Thepremiumsystemalsoleads-an
advantago whichisnotnegligible -tocleareraccounting oftheeffortsmade
bytheState,thanthelossofbudgetrevenueresulting fromtaxexemptions.
4°)FEEECTG THESA7BTGS
22.Asassetspolicyhastoaimattheconstitution ofabodyofrelatively
stablerights,aoertainperiodofimmobilisation ofsavingsisrequiredin
ordertoobtainaidmeasures fromthepublicauthorities .Thisrequirement
oanbemeteitherbytheverynatureoftheinvestment ,ifitisamatter,for
example,oftheacquisition ofadwelling,orinthefieldofmoveablesavings,
bymeansofafreeze.ThefreezingperiodatpresentappliedintheMember
Statesisgenerally oftheorderoffiveyears,whichseemsreasonable inthe
lightofthedesiredobjectives ofmediumorevenlong-term investments .It
isclear,however,that,there .isaconnection between'thefreezingperiodand
theimportance oftheadvantages granted,aconnection whichisexpressly
grantedbyseveralexisting systems.Forexamplerintheeventthatthese
advantages arerelatively small,afive-year periodmayturnouttobe■
excessive.Ontheotherhand,itwouldbeallthemoredifficultfor
individuals andhouseholds toacceptafreezeofacertainduration,asthe
inflationary strainsgrowstronger andarenotcompensated for.
23•Variouscausesforunblocking areatpresentprovidedforinthe
MemberStatesandtheydiffer,moreover,withtheincentives system.The
chiefonesconcernthemarriageofthepersoninvolved,lossofprofessional
activity,particularly intheeventofinvalidity orpension ?ng-off,decease
ofthesaver,eto...

-16-
Theextension ofthecausesofunblocking isameansofattracting
"theinterestofwidersectorscfthepopulation inconstituting assets*The
utilisation ofthesumsinvested withsimultaneous maintenance ofthe
advantages acquiredandparticularly ofthepremiums,shouldbepossible any­
timethatarealneedappears;wemaythinkforexampleofseriousillness,
thedeceaseofthespouseorofachild,expenditure onvocational training
andrecycling ,emigration ,etcFurthermore ,greaterflexibility could
alsobeenvisaged injustified cases,whioharelessseriousthanthosemen­
tionedabove,buttheninvolveapartiallossoftheadvantages acquired *
Itwouldseemadvisable toendeavour toreconcile theprinciple ofrelative
stability ofsavingsinthesettingofanassetspolicy,andthedesireof
categories ofthepopulation withmodestincomestobeinapositiontohave
acoess,intheeventofneed,tothemoneytheyhavesavedandinvested,
24.Inthesamesense,andasalreadyindicatedinpoint9»theonly
exoept-ion regarding theveiynatureoftheinvestment whichismadetothe
principle cftheconstitution ofstablepropertyrightsconcernsdeposits
onsi^itwithSavingsBanks,
Thesenonblockedforrasofsavingcanplay,anddoinfactplay,avery
important roleamongcategories ofthepopulation withrelatively modest
incomes ;bydeveloping theirpropensity tosave*Inadditiontotheirobvious
socialrolefortheacquisition byhouseholds ofsemi-durable goods,these
typesofliquidsavingoftenconstitute afirststagetowardslonger-term
moveable orimmoveable investments ,
5°)TYPESOFXITVESTMSNTS EUCOURAGGD
25.Undertheheadingofassetformation,itshouldbepossibletoauthorize
alltypesofinvestments providedtheyarerelatively stable,buttalcingaccount
ofcourse,ofthespecialcaseofdepositsavingjustmentioned *Itfollows
fromthisthatthegreatestlibertyinthechoiceoftheinvestment shouldbe
lefttothebeneficiaries oftheaidmeasures.
However,certaindepastures fromthisprinciple ofneutrality mayappear
desirable,justifying selective encouragement ,eitherinthefieldofreal
property investment orinthatofmoveableproperty.

-17-
26.Inthisway,measuresofencouragement could,"betakeninfavourof
moveable investment ifimportant problems shouldariseinthecountry
ooncemed forthefinancing ofproductive investments *
Inthiswayalsoprivileged treatment oouldbegiventothepurchase and
construction ofadwellingifloopholes anddifficulties weretooccurinthis
field.Inthisrespect ?particular stressshouldbelaidonthespecial
character assumed,amongthedifferent typesofinvestment ,bythisaccessto
owneroccupation which,apartfromthesecurityitgivestothesavorsc.s
regardst.ierealvalueoftheinvestment ,answersadeeplyfeltsocialneed,
even-andsometimes aboveall–amongtherelatively modectincomegroupsof
thepopulation asisshownbythesuccessobtained bytherecentandmore
advantageous formsofhousingsavings,
Itispossiblethat,apartfromthelegitimate and,inawcy,traditional
aspiration (ofapsyoho-sociological order)ofhouseholds tohavea"roofof
theirownovertheirhead",growingawareness inthefaceofoeriainrents
whichareappreciably highinrelationtoavailable resources ,andsometimes
ofthesameorderofmagnitude asthemonthlypayments necessary toacquire
adwelling,havealsoplayedarole.
Itistobenotedthatinpresenttimesimmoveable savingisparticularly
interesting .Infact,ontheonehand,itallowsforreflating thebuilding
industry whichisaparticularly important seotorasregardsitsnultiplicator
effectontheeconomyandalsoduetoitshighutilisation oflabour;andonthe
otherhandtheincrease inthenumberofhouseholds owningtheirovmhouseand
beingconsequently morelikelytokeepitingoodtrim,wouldcontribute to
theimprovement avidtotheupkeepofbetterqualityofhousing.
Itishowevernecessary tobecarefullestapolioyofaccesstoowner
occupation ,theprimedrivingforceofsavings,beturnedawayfromitssocial
endsandthatthefinancial efforts oftheStatedonotbenefitthosewhose
inoomesarerelatively highbyallowing themtoacquireluxuryhomes,buildings
forrenting,secondary homesyetc,os>
Mo--eoveritisalsoclearthatthesystemsinquestion wouldneedtobe
insertedwithinageneralbut"modulated "housingpolicywhereparticular account
wouldbetakenoftherequirements ofthepopulation forlowrentsubsidised
dwellings andfurthermore severalaccompanying measures wouldneedtobetaken
(housingclearingofficeforexample)soastoavoidexcessive lagsinman­
powermobility.

-18-
6°)0QHDCTI0IT3 0?EFFICACITE
2".Thesearchforadequateefficacity ofthesystemsofencouragement to
voluntary saving,particularly inrespectofthegeneralobjectives laiddown
atthebeginning ofthepresentreport,impliestheneedforadeliberate assets
polioyof.sufficient andconstant soopeinthemediumandthelongterms,In
faot,onlyresultsbuiltupovertheyearscanmakeanyimpression onthe
rigidity oftheexistingstructure ofownership,
28.Howeverotherconditions ,concerning thegeneraleconomicandsocial
policy,mustalsobefulfilledifonereallywantstoobtainadequateefficacity
ofthesemeasures ofencouragement tosaving.
Althoughitisoutsidethescopeofthepresentreporttodealwithand
elaborate onthesevariousconditions itwouldnevertheless appearindispensable
tomentionthemostimportant amongthem:
'-theimplementation ,whilstofcourserespecting theautonomyofmanagement
andlabour,ofanincomespolicywhichisabletoensureadecentlevel ■
ofincometoallworkers;
-protection andinformation ofconsumers,particularly soastopermitthem
tomakethebestpossibleuseoftheirresources ^"*"^
-lastbutnotleast,theimplementation ofacoherentpolicytocombat
inflation,
29.Theimportance ofthislastcondition deservestobespecially stressed,
for,iirithoutapolioyofrelativepricestability ,andtherefore moneystability
anypolicyofencouragement toindividual savir^gindeedseemstobedoomedto
failure.Asamatteroffact,inperiodsofacoelorated inflation ,saverssee
theireffortstosavelargelywipedoutbycurrency depreciation .Therealvalue
ofinterestpaidtosaverscanactually benegativeinthesensethatitwillno
longercompensate thelossinpurchasing powerduetocurrency devaluation ,even
thoughnominalratesofinterestareincreased ,sometimes quitesubstantially .
(l)cftheCouncilResolution of14April1975onapreliminary programme of
theEuropean Economic Community foraconsumerprotection andinformation
policy(0oJ*oftheEuropeanCommunities No,C,92of25April1975)«

-19-
Asfarasthesaverisooncemed ,hisprimeinterestliesinconserving his
asset.Itshould "bepossibletogiveaseriousguarantee atleasttothelow
incomegroups,sothatmediumandlongtermssavings maykeeptheirrealValue®
Thisprotection couldbeobtainedforexanplebyindexingthenominalvalueof
thecapita],orbydifferentiating savingsincrements alongwithinflation .Theurc
ofsuchformulas shouldnot,allthesame,causepublicauthorities todeviate
fromtheirfundamental objective ,namelytheimplementation ofatrulyanti-
inflationist policy(l).
7°)EHPI.Q\TRS'COITTRIBUTIONS ANDWAGEEimTWS'..SAVINGS
30.Inageneralsense,ifoneconfinesoneselftopresentconditions ,the
variousproblems andguidelines towhichreference hasbeenmadeuptorowand
whichconcernoertainbasicchoicesasregardssystemsofencouragement to
individual savingandaccesstoowneroccupation ,areapplicable ,mutatis
mutandis ,inthefieldofspecific systemsforwage-earners ,
31.However,stillkeepingtotheobjective ,recognised asfundamental ,of
anassetspolicy,thatistosay,afairerdistribution ofwealth,andtaking
intoaccountthefact,alreadystressed ,thattheconstitution ofsavings,even
whenencouraged bytheState,isverydifficult ,andevenimpossible aslongas
anadequate incomelevelhasnotbeenattained,ithasbecomefashionable ,as
regardsthesystems "specifictowage-earners ,nottostart,asisdoneinthe
caseshitherto mentioned ,fromtheprinciple ofincentive topriorindividual
savings.Thetendencyisforoapitalbenefits or"assetbenefits "tobepaid
bytheemployer tothewage-earners . '
Thus,inGermany,wheretheearliestassetspolicyhasbeendeliberately
implemented witheffioacity ,manyofthecollective bargaining agreements
concluded intheframework ofthe"624DMLaw"nolongerconsider thebenefits
paidbytheemployers asbeingcomplementary toandconditional onpersonal
Bavingsbytheworker.Thesestandardcapitalbenefits ,independent ofthe
amountofwagesandidentical fora.'.lthewage-earners coveredbyeach
collective agreement ,willthenincreasingly constitute aparticularly
important contribution totheformation ofassetsfortheworkers,Asimilar
(l)SeetheCommunication fromtheCommission totheEuropeanParliament ,
entitled "TheProtection ofSavingsinTimesofInflation andtheQuest -io".
ofIndexation "-COM(77)549finalof10November 1977(inparticular
p.59-63).

-20-
butmuch more limited system hasbeen implemented intheNetherlands .For
itspart theFrench 19^7 Ordinance which instituted anobligatory system of
wage-earners' participation inthefruits oftheexpansion ofundertakings ,
didnotmake thegrant ofthesumthus distributed conditional upon prior
saving bytheworkers either .
32. However ,there isnoreason whyanopportunity should notbegiven
tothose workers ,whosodesire ,toaddtheir ownpayments ,saved from wages ,
tothese employer contributions tocapital .Inthis case ,asalready exists
incertain countries ,itispossible toestablish alink with thegeneral
system orsystems ofencouragement tosavings ,sothat these workers might
also benefit from thefinancial advantages offered bytheState ,provided ,
ofcourse ,that they comply with theconditions laid down bythese general
systems . ^
8°)ASSET FORMATION ANDIMPROVEMENT OFSTATISTICS
33. Inaddition ,further efforts would need tobeundertaken inthefield
ofstatistical information tocollect data about theresults obtained bythe
various schemes ofstsset formation .Atpresent there arestill important
gaps inthis field ,ascould benoted during theelaboration ofthedescriptive
report which isannexed .These
data should cover theamounts earmarked each year forasset formation ,whether
these bevoluntary and "aided "savings byhouseholds ,employers *contributions
andcontributions oftheState ,taking into account ,inaddition tothesocio­
economic categories andtheclasses ofincomes ofthebeneficiaries ,the
various forms ofinvestments chosen :deposits atsight andfrozen accounts ,
construction andpurchase ofdwellings ,shares ,bonds ,etc ...Itwould also
bedesirable tohave these basic data ,particularly those covering gross
capital formation ,transfers andother financial operations grouped and
presented together atnational andatCommunity level ,inthesetting ofthe
"European system ofintegrated economic accounts "(S.E.C. )andofthe"social
accounts ".

-21-
Suohstatistical information wouldmakepossibleamorepreciseevaluation
oftheeffectiveness ofthesystemsofassetformation appliedinrelationtothe
variouseconomic andsocialobjectives pursued :effectsonthetotallevelof
savingsandonthatofhousehold savings,orientation ofthissavingtowards
medium-andlon^-tenn investment tstructural ohange3intheownership ofcapital
andproperty "bysocio-economic categories andolassesofincomes,eto
34•Withregardstothelastpoint,notemustbeparticularly takenofthe
needtoworkoutaCotomunAty outlineplanof"Assetaccounts ",Inlinewith
thisobjective ,theCommission hasaskedindependent expertstomakeapreparatory
studysettingoutallthestatistical dataatpresentavailable nationally re­
gainingthelevelandstructure ofassetsheld,specially thoseinthehandsof
households (holdingsofrealcapitalandequity).Inordertotryendavoidthe
numerousdifficulties ,whetherinconceptorinpractice,whiohstillbesetthe
preparation ofstatistics andaccountsofassets,/theexpertshavebeenaskedto
suggestway3andmeansofimproving thepresentsituation,Itmusthoweverbe-
notedthatanyexpectedprogress cannothelpbutberelatively slowasthefield
ofaotionissuchthatimportant technical aswellaspolitical difficulties
willbeencountered ,
9°)ASSETFORMATION AM)FREEliOVEMEcTT OFWORKERS
35.Article7Regulation (EEC)n°1612/68laysdownthataworkerwhoisa
national ofaMemberStatemaynotbyreasonofhisnationality betreated 1
differently ontheterritory oftheotherMemberStatesasregardsanyocndition
ofemployment orworkparticularly inthematterof"remuneration .Heshallenjoy
thesame'socialandfisoaladvantages asnationalworkers.Article9lays'down
thatsuohaworkershallenjoyalltherightsandalltheadvantages accordedto
nationalworkersasregardshousing,including owneroccupation ofthedwelling
herequires.

-22-
Theexpression 'social andfiscal advantages "must "beinterpreted in
such awayastoinclude ,notonly theadvantages connected with theexercise
ofpaid employment ,"butalltheadvantages offered towage-earners ,even if
they arenotexclusively reserved tothelatter .Consequently thesystems
ofasset formation cannot laydown limiting nationality conditions where
nationals ofEEC countries are concerned .
36. Butother requirements ,whilst notconstituting real legal "discrimin­
ation "canturn outtobeactual stumbling blocks inthewayoffree movement .
Thenon-granting offinancial advantages foraccess toowner occupation
when thedwelling isnotonnational territory ,canbecited asanexample .
Ascertain national housing policies aiming toincrease thenumber ofavailable
dwellings intheface ofscarcity ,this restriction seems justified atleast
where building orpurchase premiums ,loans and interest subsidies areconcerned .
However anexception tothis restrictive principle should bepossible inthe
framework ofahousing savings contract when the amounts saved areused to
acquire adwelling inanother Member State .The loss ofevery advantage would
appear inthis case tobeanexcessive penalisation which does nottake account ,
inparticular ,ofthepossibly considerable duration ofthesaving effected .
These are also systems which provide forvery long freezes which are sometimes
additional topayments which have hadtobemade over several years .Theworker
who wishes toleave for another Member State can encounter two sorts of
difficulties .Ontheonehand ,hemayfind himself obliged ,byreasons ofthe
freeze ,toleave inhisfirst country amounts which could bevery useful to
him ,andontheother ,ifhewishes tocontinue thepayments provided for ,
butfinds himself prevented from doing sobyaresidence orother condition ,

-23-
helosestheadvantages ,inviewofwhichhehadacceptedtoabstainfrom
oonsuming foryears*Twosolutions could "beenvisaged fortheseproblems :
firstlyreoognize emigration ,asthishasalreadysometimes beenprovidedfor,
asoneofthecausesforearlyunblocking withoutlossoftheadvantages
acquired and,secondly,authorise thecontinuation ofthepaymentswithout
lossoftheadvantages ,evenifcertainconditions ofparticipation ina
system,inparticular residence,arenolongerfulfilled.
37•Atthesametime,personswho,intheframework oftherightof
establishment ,movewithintheCommonMarketforthepurposeofexercising a
non-wage-earningactivity arelikelytofindthemselves confronted bythe
saneproblems.Inexactlythesamewayaswage-earners theywillhavethe
possibility toparticipate inthesystemsofferedtoresidents andtheywill
meet..withthesamedifficulties oncetheyreturntotheircountryoforigin
ormigratetoanother MemberState.
χ
χ X

CHAPTER III
DEVELOPMENT AND PROSPECTS OFASSET FORMATION POLICY
38. Certain measures regarding asset formation arealready inforce inall
Member States –insome cases foralong time -particularly inthefield
ofincentives tosaving byhouseholds andaccess toowner occupation :fiscal
benefits ,savings increments ,loans forhome building ,rebate oninterest ,
etc ••• Efforts toexpand andcomplete these measures have been progressively
made inalmost allthemember countries under various forms adapted tonational
structures ,particular conditions andresources :youth savings ,home building
saving schemes ,indexed saving schemes ,etc ...
Furthermore ,incertain member countries ,newforms have appeared which
arespecific towage-earners butconceived inaccordance with different basic
principles .Themost important ofthese chose either theformula ,negotiated
jointly ,ofanasset benefit granted atastandard rate inabsolute value by
theemployers andessentially attheir cost (German lawofDM624),orthe
compulsory formula offrozen participation ofthewage–earners intheprofits
ofundertakings ,financed inpart bytheState (French ordinance onthe
participation ofemployees inthegrowing wealth oftheenterprises ).Further­
more tonote inFrance thedevelopment ofsystems ofshareholding bythe
employees which arecompulsory incertain public enterprises andoptional
intheprivate sector .
39. Theresults ofthese efforts arefarfrom being negligible ,whether
itisamatter ofsaving byhouseholds ,ofaccess toowner occupation ,or
ofasset formation among wage–earners atthelevel oftheundertaking .
However onecannot help noting ,atCommunity level ,that incertain
member countries there still isnonoteworthy achievement inthefield of
asset formation specific towage-earners ,andthat besides ,even inthose
countries which aremost advanced along theroad towards anassets policy ,
thefinal objective ofgreater justice inthesharing ofassets still appears
very faroff.
This iswhyasset policy is,atleast incertain Member States ,still
atthestudy ,research ordiscussion stage .Several projects have been
undertaken ,using formulas permitting awider scope fortheformation and
distribution ofassets .These are inparticular :

-25-
–thedraft "bill of1973 oftheDanish government which aims atsetting up
acentral fund fortheparticipation ofemployees ininvestments and
profits .This draft ispart ofamodel foracertain form of"economic
democracy "butafinal decision hasnotyet "been taken inthis matter }
–thelegislation proposed bytheGerman Federal government in1974
concerning asset formation forallemployees through participation inthe
profits oftheenterprises bymeans ofaclearing fund .Thestudy ofthis
scheme hasbeen postponed temporarily because oftheeconomic situation
andlegal andpractical difficulties !
–theprogramme of1976 oftheDutch government concerning employee participa­
tion inthecapital growth oftheenterprises .In1978 twodraft laws of
astrongly modified version ofthis programme were submitted toParliament
bythepresent government ;
–thedraft lawofOctober 1978 oftheFrench government providing fora
compulsory free distribution ofshares ofindustrial andcommercial
companies quoted ontheStock Exchange .
Intheframework ofthis overall situation those principal formulas
will beexamined hereafter which arelikely toform thesubject ofastimulus
foraCommunity approach with aview toamore advanced form ofemployee
participation inasset formation based onananalysis ofthemost significant
realisations andtheperspectives offered forthefuture .
1°)Standard asset benefits
40. Thesystem ofstandard asset benefits paid bytheemployers totheir
workers hasseveral advantages which areworth stressing .Ontheonehand
itdoes notpresuppose tinitsrecent form ,anyprior saving bytheworkers ,
andthis makes thesystem particularly interesting forthelow^-income categories .
Ontheother hand ,theamounts attributed areequal forallthebeneficiaries
inthesame enterprise ,oreven thesame branch ,andthis also isrelatively
favourable tothelow-income workers .This formula also helps toinject a
taste forsaving into strata ofthepopulation where this habit isgenerally
notvery widespread .
Such systems canbeestablished byaframework lawwhereby thetwosides
ofindustry would have thepossibility ofconcluding "asset "conventions or
agreements .Thelegislative arrangements should inparticular laydown the
maximum annual amount ofasset benefits which could attract complementary
premiums from theState :theamount ,which would need tobesufficiently

-26-
attractive ,ofthese complementary premiuns intended forworkers j
the tajcadvantages offered totheemployers ;thevarious forris ofinvestment
authorised ;thefreeze period ;theincome ceilings ofthebeneficiaries ,etc
Into this general framework would befitted collective "asset bargaining "
agreements ,freely negotiated bytheSocial Partners andwherein would belaid
down inparticular theactual amount ofthebenefits granted bytheemployers ,
theprocedures forpayment ,theforms ofpublicity andcontrol ,etc«»• The
aimofthese systems being theachievement ofstructural modifications of
assets ,which implies ,ashasalready been mentioned ,acertain constancy .
atmidandlong term ,these conventional agreements would have tobesigned ,
asfaraspossible ,foramultiyear period andshould only accept revision
forwards astheacquired rights could notbelost#
41# Theestablishment ofthesystems mentioned earlier ,viz,ofstandard
benefits borne bytheemployers andtheState should enable considerable
progress tobemade towards abetter distribution ofassets byprolonging
andre-inf orexngtheresults obtained bythegeneral systems ofencouragement
tomoveable savings andaccess toowner occupation .
However ,asthese standard asset benefits areconsidered asconstituting ,
defacto ,anextra manpower cost fortheundertaking ,itmaybeimagined that
the "elbow room "thus offered toincreases inthese benefits islikely to
turn outtoberelatively narrox*# Moreover these new "salary charges "could
well ,ontheonehand bereflected onprices ,andontheother hand they could
penalise andconsequently discourage those sectors ofactivity where there is
high labour utilisation .
This iswhy ,inrecent years ,more interest hasbeen shown inother
forms andspecially intheparticipation bywage–earners intheprofits of
undertakings andinthecapital increases ofundertakings *These systems are
considered more advanced andhaving agreater future potential *
2°)The "investment wage"
42, The "investment wage "isanother variety oftheasset benefit system
above mentioned ,buthere theimportant difference resides inthefact that
thebenefits allocated constitute part ofwage increases paid .Infact ,the

-27-
"investnent wage"system implies that part ofanywage increases duetothe
worker must bereserved forsaving andinvestment .Thus thewage earner
receives anextra paywhich iscompulsorily saved andI'rczen foragiven time ,
over andabove hisnormal paywhich ispaid oash andwhich heoanuseatwill
butwhose progress ismore moderate *There arevarious ways andmeans of
applying suoh asystem andtheformulas canbenegotiated andapplied atthe
level ofthebranches ofactivity oroftheundertakings .
3°)Asset formation byrises "atrisk"'tilr-rliiii■iYiii■i■ nmm ■i■■
43* Another system which hasalso emerged andwhich hasbeen much discussed ,
particularly inGermany ,isthesocalled asset increases "atrisk".The
greater flexibility ofthis system permits undertakings indire circumstances
toavoid extra expenses –thesystem itself isabout mid traybetween the
"investment wage "system andstraight participation inprofits .
Inthis formula ,vrage~earners aocept that their wage inoreases bebroken
down intwoparts tonepart conventionally agreed upon would befixed ata
steady level aspercurrent custom while theother part ,negotiated also through
conventional agreement ,would befixed atalevel corresponding tothe"normal "
turnover oftheundertaking .This second portion ofthewage increase oould
vary according totheprogress oftheundertaking andwould thus ,inacertain
measure ,be"atrisk "where thewage-earners areconcerned .Itwould also be
subjected toafreeze during acertain period andwould thus constitute capital
bearing income .
When such asystem would have been instituted ,wage–earners would reoeive t
–thewage increases firmly fixed byconventional agreement }
–ontheother *hand when thebusiness progress is"normal "or,afortiori better ,
they would gain theasset formation ofrises "atrisk"} :
•»andfurthermore thecapital thus constituted would bear income .
Theinstitution ofsuch asystem would have Valuable advantages tfirst
ofallthegrowth policy asitdoes notseem toendanger thepropensity to
invest astheemployees participate intheundertaking 'srisks ,secondly for
.thestability polioy asitwould make itmore difficult totransfer extra
costs onto prices .

-28-
Theinplenentation of-euohaffystenalso-implies-thatsolutions are
foundtocertainproblems suchas:theconstitution ofaframework which
wouldfacilitate theapplication ofsuchasystem,thedefinition ofprofits
which "betterreflecttheprogressofthebusiness,theevolution ofaplan
whichwouldserveasaclearingbetweentheamountspaidbyundertalri.ngs in
different circumstances withoutforallthataffecting toomuchtheinterest
ofwago-earners intheirownundertakings ,eto
4°)Participation intheprofitsofundertaking
44»Anovelobjective,xiihichisfeltincreasingly intheMemberStates,
tendstomodifythepresentconditions ofdistribution andutilisation of
theprofitorprofitmarginsofenterprises *Thisprofithasalreadybeen
devotedincreasingly ,particularly injoint-»stock conpanies,:butalsoina
largenumberofindividual firmsofacertainsize,tothedevelopment of
thefirmitselfintheformoffasterdepreciation andself«=finaneing.This
trendhasmadeitpossibletocopewithtechnological progress ...andthe
obsolescence ofequipment whichimposeonfirmsrapidandconstant renewal
oftheirplant -andwhichliaslargelycontributed toeconomicdevelopment ,
particularly theindustrial side*
However,whatisbeingevermoreprofoundly feltassomething which
mustbecalledintoquestionisthefactthattheseincreases insolf–financed
assetsgenerallyprofit,intheformofcapitalappreciation ,onlytoholders
ofcapitalandtocamera,asituation whichinevitably leadstoanaccumulation
ofcapitalandtoaconcentration ofwealth,whereaswage–earners whodonot
receiveanyfinancial counterpart oftheactivegrowthapartfromtheirsalary,
havenevertheless contributed tothisgrowthofwealthandmadeitpossible
fortheundertaJcingtofurtheritsequipment programme.Theoverallobjective
istherefore tobettershareouttheresultsoftheproduction effortsamongst
allpartiesconcerned#

-29-
45• Inthis general outlook andkeeping asclose aspossible tothose
experiments already implemented or "being nowenvisaged insome Member States ,
thefollowing elements can "bementioned foraCommunity approach tothe
question oftheparticipation intheprofits orthecapital growth ofthe
enterprises ,
Asystem might beenvisaged which gives workers theright toshare
inacertain proportion ofthetotal profits ,whether ornotthey are
distributed ,ofindustrial ,commercial oragricultural undertakings ofa
certain size (afunction ofnumbers employed ,turnover ,profits ,etc•)•
Thefirst question tobeexamined iswhether the suras released in
this wayshould bedistributed atfirm level orbeused tosetuponeor
more collective funds •
Ascheme ofone ormore collective funds would enable securities
("share certificates "or"investment units ")tobeoffered free ofcharge
oratavery lowrate toallemployed workers concerned whose income did
notexceed acertain ceiling ,orindeed toallpopulation groups whose
income didnotexceed this same ceiling .Byintroducing aclearing system ,
this option would thus prevent theintroduction according totheways and
means chosen ofnewsocial disparities between employees inlabour –intensive
industries andincapital –intensive industries ,between employees ofpros­
perous firms andemployees ofunprof itable firms ,between employees and
low-income self–employed ,etc.Buttheamounts thus accumulated could also
beused forother purposes :supplementary pensions ,improvement ofthe
lowest pensions ,partial financing ofearly retirement schemes ,etc,,,
Inthefirst case ,ontheother hand ,inwhich theshare funds are
setupineach firm concerned ,thesums inquestion would bedistributed ,
intheform offrozen capital ,among itsownemployees .Bearing inmind
thebasic aimofafairer distribution ofwealth ,thesame amount should be
distributed toallcategories ofworkers ,whether manual workers ,office
staff orexecutives or,atthevery least ,therange ofrights granted to
employees should bedistinctly narrower than therange ofofficial pay
scales -this could beensured byfixing lower andupper limits .

-30-
Acompromise could perhaps lieinamixed formula whereby part of
theamounts earmarked forasset formation would bedistributed amongst the
staff oftheenterprise concerned while theother part ispaid into a
collective fund .
Assuming thecreation ofsuch aninterprofessional fund ,another
question would bethechoice ofpeople responsible foradministering it.
According tothetrade unions ,they should besolely responsible for its
administration ,buttheemployers' organizations areopposed tothis ,A
management might beenvisaged inwhich theState isconjointly represented
with thesocial partners oreventually with thetrade unions only ,
5°)Preferential purchase orfree distribution ofshares
46, Another formula ,often known foralong time insome countries ,and
about which legislation hasbeen passed insome Member States inrecent
years ,tends toencourage wage-earners tobecome shareholders intheir own
undertaking .This could take theform ofsale atpreferential prices orof
free distribution –eventually intheframework ofprofit sharing –by
subsidies forpurchasing atmarket value ,orbygranting options ,valid
foracertain period ,ataprice fixed inadvance .Even when some ofthese
dispositions have existed foralong time ,thefield ofapplication has ,in
practice ,been rather limited .Infact criticism hasbeen made against these
systems ,specially bytrade unions :ifthesituation oftheundertaking
were critical ,theworker could lose notonly his jobbutalso hiscapital
investment .Itwill nevertheless beinteresting tofollow theprogress
oftherecent schemes established inFrance ,Denmark andtheUnited Kingdom
saidtoponder ontheresults .
χ
Χ X

-31-
EMPLOYEE PARTICIPATION
INASSET FORMATION
CONCLUSIONS
47• Itisquite evident notonly from thepurely factual report which
constitutes theAnnexure tothepresent memorandum hutalso from the
foregoing study ofthemechanics (ofthematter )that asset formation policy
has ,inthepast years ,played animportant role inmost Member States within
theframework ofageneral objective aimed atgradually decreasing inequal­
ities ,considered excessive anddeemed injust ,inthesharing-out ofassets .
Itmust however "benoted that ,notwithstanding themeasures taken andthe
intention thus expressed ,thedistribution oftotal wealth andparticularly
oftheproductive capital ofundertakings ,hasnotbeen significantly modified
soastobenefit therelatively modest population groups –andthis situation
isrecognized bymost governments .Ifoneconsiders thenumerous studies ,
surveys ,discussions ,concrete profits anddraft laws onthesubject ,itis
obvious that nearly allMember States continue todevote great importance
tothis policy ofasset formation under various aspects ,whether intheguise
ofincentives toindividual savings inlarge sectors ofthepopulation special ]
intherelatively lowincome groups ,orwhether asemployee participation in
theformation ofproductive capital .
Thepolicy tobefollowed should receive anewimpulsion from these
twoorientations andprincipally from thesecond oneinview oftheinterest
aroused bythis approach inthepresent economic andsocial context 0
Incentives toindividual savings
48. Where thesystems ofincentive topromote individual savings axe
concerned ,Member States should develop them more extensively ,probably in
diverse ways buttending however toensure that adegree of"convergence "
isachieved along with thefollowing guidelines :
–these systems should bedirected ,more sothan atpresent ,atthose with
relatively modest incomes .Thebest practical way ofachieving this does

-32-
indeed seem to "bebyfixing anincomes ceiling forthebeneficiaries
–such ceiling tobeperiodically revised inthelight oftheeconomic
development –andeventually accompanies byother limiting conditions
such astheimportance ofassets already inthehands ofthesaver for
example ;
–asincentives ,premiums should bepreferred totaxbenefits –atleast
tomost ofthem iaesthose which benefit only those taxpayers within the
relatively high–income brackets ;
–thesums invested forasset formation should befrozen forafairly long
(about five years )period ,butprovision should bemade fortheir advance
release incertain circumstances ,without anyloss ofthebenefits acquired ;
–itshould bepossible tochoose between anumber oftypes ofinvestment ,
varied according totheneeds andtraditions ofeach Member State with
particular emphasis being placed onencouraging ownership ofafirst
residence ;
–theinvested savings should beprotected byadequate andefficient means
sothat their real value isnoteroded byinflation ;this could bedone ,
forexample ,byadjusting savings *premiums along with thegeneral level
ofprices orbyschemes forindexing savings infavour ofparticular
categories ofsavers ;this protection should however beensured bya
general anti–inflation policy ;
–itmight also benecessary toamend some oftheterms andconditions
governing thevarious incentive systems which arelikely tohinder the
free movement ofpersons andwhich subsist after theelimination of
discrimination ,inthestrict sense oftheword ,ontheground ofnationr *
ality -andwhich isprohibited between nationals ofMember States ;
–finally itwould benecessary toensure that ,inallMember States ,
eventual beneficiaries ofthevarious systems ofincentives topromote
savings andasset formation ,begiven thefullest information regarding
these various systems .

-33-
Employee participation inproductive capital formation
49* TheCommission would like tounderline theimportance ofanasset
formation policy inline with thesecond ofthetwoguidelines mentioned
above ,i.e. employee participation inproductive capital formation ,because
itconstitutes amore positive andabove allamore efficient approach
towards thefundamental goal –from asocial standpoint –ofgreater justice
inthedistribution oftotal wealth .
Thefurtherance ofsuch apolicy isalso justified from theeconomic
point ofview :theCommunity isstriving atpresent foranadequate level
ofnon–inf lationary selective growth ,which constitutes notonly anessential
condition forareturn tosatisfactory employment levels but itisalso the
source ofincreases inthestandard ofliving andwelfare *Inthis context
productive investment hasastrategic role toplay *Although many factors
have animpact onthecreation ofadequate andsocially desirable investment ,
anactive asset formation policy which furthermore isamodern means of
regulating theeconomy andspecifically ofcontrolling inflation could provide
animportant contribution *
This conjunction ofsocial andeconomic aims needs tobeparticularly
emphasized *Inourdynamic society ,where participation andco-decision
carry more andmore weight ,workers' demand forparticipating intheprofits
orintheassets ofundertakings ,istheexpression ofjust andlogical
progress *Inthepresent circumstances ifemployees were ,afortiori ,asked
toaccept relatively modest salary increases sothat undertakings might
reconstitute their investment capacity ,such apolicy ought (asacounterpart )
tobeaccompanied byemployee participation intheformation ofproductive
capital thus brought about .
Present policy inthis area inthevarious Member States should be
developed along thefollowing main guidelines :
a)First method
–According tothefirst method theemployers intheprivate sector and
theState would paytheir employees lump sumfringe benefits in
addition toearnings ,which would befrozen foraspecified period .

–Suchasystemwouldbeoptionalinthesensethatitwouldheleftto
thetwosidesofindustrytonegotiate agreements onassetformation
withinalegalframework *Thisoutlinelawwouldlaydownthegeneral
conditions whichsuchagreements willhavetofulfilinorderthatthe
fullbenefitoftheincentives offeredbytheState,forexample,be
obtained •
–Therecouldbeadegreeofflexibility inthismethodwhichmight
conceivably taketheformofaninvestment wagenegotiated atthe
sametimeasawageincrease *
b)Secondmoreadvanced method
–Amoreadvanced approach wouldbea"frozen"sharebyemployees inthe
profits,thecapitalgrowthorthecapitaloffirms.
–Depending onnational choicesandtraditions thisparticipation could
berendered compulsory bylaworbelefttofreedetermination or
negotiation bythetwosidesofindustrywithinalegalframework
whichfacilitates theapplication ofsuchascheme.
–Thefundstransferred totheemployees ,preferably intheformofowner­
shiptitles,couldbelimitedtotheemployees ofthecompanyconcerned
orcouldbenefittheemployees ofaparticular industry orallemployees
ingeneralbysettingupacommonfund*Whereasinthefirstmode,
emphasisislaidonparticipation ofemployees intheprofitsoftheir
ownundertakings ,likelytobringaboutanimprovement inthework
atmosphere ,theemphasisinthesecondmodeislaidmoreparticularly
onassetformation byallemployees ,themainconcernbeingtoavoid
introducing newsocialdisparities betweenemployees ofprosperous firms
andemployees ofunprofitable firms,betweenemployees inlabour--
intensive industries andincapital–intensive industries andsoon*
–Acompromise solution mightperhapsconsistofamixedformulawhereby
partoftheamountsearmarked forassetformation wouldbedistributed
amongstthestaffoftheenterprise concerned whiletheotherpartis
paidintoaninterprofessional fundinwhichnotonlytheemployees
intheprivatesectorcouldparticipate butalsopersonsemployed by

-35-
theState ,oreven allpersons liiose income orwealth does notexceed
acertain ceiling *This method would avoid ovei^-large discrepancies
"between different firms .Atthesame time ,itwould ensure that the
incentive foremployees toparticipate inthelife andfinancial
results oftheir ownfirm ismaintained .Aslong asimportant restruc­
turing andinvestments axeneeded toresorb unemployment ,itwould "be
desirable –allthings being equal –togive preference tothescheme
likely tobest stimulate workers' mobility anddirectly increase the'
capacity ofundertakings toinvest ,
–Thecreation ofaclearing system does notautomatically entail the
centralised assignment andmanagement ofthesums ofmoney frozen .
Should this clearing system beentrusted toafund ,it(thefund )could
issue title deeds orcertificates tothebenefit oftheemployees or
other beneficiaries .Astotheallotment ofthefrozen sums ofmoney ,
andwithout prejudice totheproblem ofemployee participation inthe
administration ofenterprises ,itwould befitting forthese sums tobe
atthedisposal ofundertakings foruse increating jobs under adequate
conditions with regards tonormal viability criteria .Themoney could
however beused differently –forexample itcould gotowards improving
the lowest pensions orthose ofallthewage earners oritcould beused
topartially finance early retirement schemes ,
–The administration offunds soconstituted could take various forms –
i,e,tripartite bodies (public authorities ,trade unions andgroups
ofundertakings )oreventually bipartite bodies (public euthorities
andtrade unions ),
–Ontheother hand ,theeventual creation ofsuch funds should innoway
prejudge theresults ofthegeneral debate initiated bytheCommission
onthegeneral problem ofemployee participation intheadministration
ofenterprises ,without forallthat denying theconnection which canbe
established between thetwoapproaches .Asamatter offact ,theCommission
hasalways considered that employees' right toparticipation indecision
making atenterprise level wasjustified whether ornotshares were held
bythestaff orprofits were shared out.

-35a-
Statistical information
50,Withaviewtodeveloping assetformation policyandproducing an
assessment oftheeffectiveness ofmeasurescurrently inforce,theCommission
wishestostresstheneedforfurthereffortsinthefieldofstatistical
information regarding thelevel,structure anddistribution ofwealth
(physicalandfinancialcapital)heldbyhouseholds andundertakings .
Itwouldalsobeusefultocollectstatistical datamoresystemat­
icallyontheresultsobtained bythevariousschemestopromoteindividual
savingsandemployeeparticipation inproductive capital,inparticular on
theannualamountspaidoutandinvested ,theinstruments ofinvestment
chosen,thegroupsofbeneficiaries ,etc•••
χ
XX
51•Theguidelines andpossibilities ,abovementioned ,presentelements
whichcallforawidedebatewithallinterested parties saiddonotinany
wayconstitute formalproposals fromtheCommission ,HowevertheCommission
hopesthatthisdebatewillgivebetterreciprocal knowledge ofassetformat
tionpolicies ,inoperation orunderconsideration inMemberStatesandthat
converging guidelines emerge.Promthepointofviewofsocialprogress
aswellasfromthepointsofviewofmacro-economic performances and
competition ,suchaconverging ofguidelines couldmakeitpossible togive
awell–balanced impetuswithintheCommunity toworkers *participation in
assetformation policy.

DESCRIPTIVE ANNEXOHE
SYSTEMS CREATING INCENTIVES TOENCOURAGE
ASSETFORMATION BYEMPLOYEES

SYSTEMS CREATING INCENTIVES TOENCOURAGE ASSET FORMATION
BYEMPLOYEES
CONTENTS
Pages
INTRODUCTION sGENERAL ASSET FORMATION POLICY
A–Definiti on..••••••••••••••••••••••••••••••••••••••••••••••• 36
B–Short account ofpolicy bycountry ••••••••••••••••••••••••• 40
–Belgium ,Denmark ,Fed«Rep,ofGermany ••••••••••••••••••• 40
–France ••••••••••••••••••••••••••••••••••••••••••••••••••• 41
–Ireland ,Italy ,Luxemburg 42
–Netherlands ,United Kingdom •••••••••••••••••••••••••••••• 43
C–Objectives •••••••••••••••••••••••••••• '••••••••••••••••••••• 44
D-Position ofthevarious social categories ;proposals ••••••• 49
–Federal Republic ofGermany •••••••••••••••••••••••••••••• 50
–Netherlands •••••••••••••••••••••••••••••••••••••••••••••• 53
–France 55
-Denmark •••••••••••••••••••••••••••••••••••••••••••••••••• 5°
–Belgium •••••••••••••••••••••••••••••••••••••••••••••••••• oO
-Italy 61
–United Kingdom ••••••••••••••••••••••••••••••••••••••••••• 63
–Ireland ,Luxemburg ••••••••••••••••••••••••••••••••••••••• 64
I.INCENTIVES OFFERED TOTHEPOPULATION ASAWHOLE
A.Incentives forsaving inthe form ofdeposits and securities
1.Fiscal benefits •••••••••••••••••••••••••••••••••••••••••• 65
–Income from savings accounts
(B,L,NL,F,I,UK,IRL,D)(l)
–Interest onbonds and similar income
(F,NL,I,IRL,UK,D)
–Long-term savings schemes (F)
–Insurance contracts (B,D,F,L,UK,IRL,DK)
–Additional income :other (D,IRL,UK)
(l)B«Belgium ,DK■Denmark ,D=Germany ,F»Franc e,IRL=Ireland ,
I«Italy ,L=Luxemburg ,NL■Netherlands ,UK=United Kingdom .

-II-
Pages
2.Savmgs premrums ;index-linked savings •••••••••••••••••••• 70
–Savings premiums (D,IRL,UK)
–Index-linked savings (IRL,UK,L)
–Youth savings (NL)
3*Various types ••••••••••••••••••••••••••••••••••••••••••••• 74
–School savings ,etc••• (L)
B.Incentives for savings inthe form ofreal property
4«Fiscal advantages ••••••••••••••••••••••••••••••••••••••••• 75
–Income tax (NL,DK,I,L,B,P,D,IRL,UK)
5.Saving forhome–ownership andpremiums •••••••••••••••••••• 7°
–Saving forhome-ownership (D,B,L,F,DK,UK)
–State subsidies andguarantees bylocal authorities (NL)
6*Home–building loans •••••••••••••••••••••••<>••••••••••••••• 80
–Special loans (P,IRL)
I.TYPES OFINCENTIVE OFFERED TOLOW-INCOME GROUPS
A,Incentives for savings inthe form ofdeposits and securities
7*Fiscal advantages ••••••••••••••••••••••••••••••••••••••••• 83
–Purchase ofsecurities (NL)
8SSavings premiums •••••••••••••••••••••••••••••••••••••••••• 84
Savings premiums (NL)
9.Popularizing investment insecurities ••••••••••••••••••••• 84
–Denationalisation ofcertain industries (D)
B.Incentives for savings inthe form ofreal property
10.Fiscal advantages •••••••••••••••••••••••••••••••••••••••• 86
–Indirect taxation (B,L)
–Direct taxation (D,B,I)

-III-
Paeres
11.Loansatreducedrates,interest ratesubsidies ,
Stateguarantees ,rental–sale••••••••••••••••••••••••• 87
–Low-renthousing(HLM)(p)
–Supplementary familyloans(F)
–Loansatreducedratesandinterest ratesubsidies
(I,D,B)
–Interestsubsidies (L)
–Stateguarantee (B)
–Localauthority loans(IRL)
–Mortgagesubsidies (UK)
–Rental–sale (IRL,L)
12.Premiums 93
–Premiumsforhome-building and/orpurchase
(B,IRL,L)
–Statesubsidies ,savingspremiums (NL)
13.Varioustypes•••••••••••••••••••••••••••••••••••••<>••• 9&
–Home-ownership grants(P,D)
–Personal home–ownership grants(P)
III.TYPESOPCTOMTIVES OFFERED OHLYTOWAGEANDSALARY EARNERS
A,Incentives totheformation ofassetsintheform
ofdeposits andsecurities
14*Savingsincentives •••••••••••••••••••••••••••••••••••* 99
–EM624Law(D)
–Saleofsharestopersonnel (D,I,F)
–Savingschemesforcivilservants (NL)
–Savingschemesinundertakings (NL)
–Typesofsavingsnotsubjecttoaholdingperiod
(D,L)
15•"Mixed"types••••••••••••••••••••••••••••••••••••••••* 103
-DM624Law(D)
–Savingschemesinundertakings (F,NL)

-IV-
Pages
Employers *contributions •••••••••••••••••••••••••••••• 110
–Profit-sharing (DK,F,NL,D)
–Contributions notlinked with profit –sharing (D)
–Hon–statutory types (DfUK)
17*Various types ••••••••••••••••••••••••••••••••••••••••• 122
–Workers *shares (P,UK)
–Seniority allowances (i)
B«Incentives for asset formation intheform ofreal property
18.Homebuilding ,reduced interest loans and
interest rate subsidies ••••••••••••••••••••••••••••••• 126
–GESCAL schemes (i)
–Cassa perilMezzogiorno (i)
–Special arrangements forcivil servants (i,P)
–Home-building loans forminers (B)
–Employers 1compulsory contributions (P)
19.Premiums andfiscal advantages •••••••••••••••••••••••• 130
–Employées *savings .employers *contributions (D)
–Savings premiums (NL)
–Loans toemployees (B)
20.Non-statutory types ••••••••••••••••••••••••••••••••••« 131
–Various arrangements (B,DK,D,I.L.NL.UK)

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INTRODUCTION
GENERAL ASSET FORMATION POLICY
A–Definition
a) Theconcept ofasset formation policy used inthis report todetermine
which measures are included andwhich excluded ismore orless theconcept
currently employed inthenine countries .Itmust beapolicy ,namely a
continuous action with awell-defined purpose –inthis case ,incentive to
asset formation –notanisolated measure ,which although identical incontent ,
hasbeen created forother purposes :accordingly this excluded interest
rates paid bybanks ondeposit accounts ,which cangive benefits equivalent
tothose available under incentive schemes ,andmayindeed have features in
common with them ,forexample ,theconditions fordeposit accounts being
comparable toholding periods .
Thereport relates tospecific measures ,that is,they must beappli­
cable andbeapplied inpractice ,nottovague declarations ofprinciple ;
even more important ,they must bemeasures with asocial purpose .For
example ,theprovisions fortheprotection ofshareholders orthelegislation
oninvestment funds ,although ofthegreatest importance (from another point
ofview ),arenotincluded here .
Theaimofthis policy must beasset formation .Theword "formation "
isclear enough ;above allitemphasises thedynamic aspects ,namely the
process bywhich assets areaccruired :thus their transfer (byinheritance
etc,)hasnotbeen taken into account ,andneither have certain measures
more closely related totheir administration (e,g,reduced taxpaid ona
building which isowner«-occupied ),
Thedefinition ofassets ismore complicated ;inthelegal sense it
includes alltheassets (actual rights andobligations )held byanindividual
atagiven moment .Butobviously asset formation policy ,asdefined and
acted upon intheCommunity countries ,isnotsobroad inscope .Anexam­
ination oftherelated measures shows that assets inthis case areconsidered

-37-
inamore restricted sense oftheword :firstly ,they donotseem tohave
anydirect connection with theholder 'soccupation .Thesocial aims ofthe
incentives aresuch that they should not "beconsidered inthesame wayas
measures which further thepursuit ofanoccupation ,even ifthesame legal
means (incentives toacquire real property )areoften employed inboth cases ,
forexample ,grants forthepurchase ofsmall agricultural holdings ,and
subsidies tocraft –workers forthepurchase ofmachinery ,both ofwhich axe
excluded from this report (l).
Ontheother hand ,assets –inthebroader sense notused here –are
thetotality ofrights which increase anddiminish continually (receipt of
income ,purchase ofconsumer goods ,debts ,etc.);asset formation policy ,
however ,relates toarelatively stable "whole "made upofrights toassets
which remain inthepossession ofoneperson forarelatively long period .
Accordingly tprofit–sharing schemes ,which provide for thepayment
ofmoney which isimmediately available ,are not included inthe incentive
schemes .
Only certain types ofdurable property areincluded inincentive
schemes :they vary from country tocountry ,andalso from time totime ,
thebasic types being housing ,savings subject toaholding period and
securities .
This report also covers incentive systems forsavings which arenot
sub.ject toaholding period .Even ifthere isnoabsolute guarantee that
such saving will beforalong term ,itisnevertheless asufficiently stable
choice ofinvestment bytheinvestor tojustify itsinclusion aspart ofthe
assets asdefined here .Moreover ,this kind ofmeasure incertain countries
provides the most important form ofincentive for savings intheform of
deposits and securities which ,intheir turn ,arenecessary tobenefit from
incentives for savings inthe form ofreal property .
(l)This also accounts fortheexclusion from this Report oftheFrench
provision of1977 creating asavings book formanual workers ,intended
tomake available tothose who are interested the resources needed to
setuporacquire crafts undertakings .

-38-
Aspecial kind ofsaving isthat made "bymeans ofcertain insurance
contracts which provide forthepayment ofacapital sumondeath ,orupon
the assirree 'sreaching acertain age.Since such contracts areconcluded
forafairly long period ,they involve prolonged saving .Moreover ,the
amount initself oftheinsured capital guarantees thepermanence ofthe
asset foracertain period oftime .Thecase ofsupplementary social
security schemes isquite different ,"because even intheform most similar
totheinsurance contracts considered inthis report ,i,e,old–ageinsurance ,
there isnoprovision foracapital payment ,hutforapension instead .
Such pensions ,"being small inamount andavailable immediately ,cannot really
"beconsidered aspart ofassets .They have also "been theobject ofad-hoc
studies .
Theabove applies equally tothenational statutory social security
systems .
Measures encouraging thecreation ofcooperatives –with theexception
ofbuilding cooperatives –arenotincluded inthis report .These groups
areoften important ,butthey axeconcerned more with income andstandard of
living than with asset formation .Inthose cooperatives which produce goods ,
thecommon capital isaworking tool forthemembers ofthecooperative :as
aresult ,themeasures inthis field ,cannot beincluded inasset formation
policy ,
b) Even ifallasset formation measures have asocial objective ,they
arenotall ofequal interest from thepoint ofview ofsocial policy :those
which concern thewhole population areinthis respect less significant than
those which concern low-income groups ,andmore important still arethose
relating toemployees ,andifwemaysayso,they aretheonly ones which
arewithin thefield of"social "policy ,initstraditional sense ,NeveJ >-
theless ,this report includes allthesystems giving incentives toasset
formation ,both because oftheir intrinsic social aim–itshould be
remembered that theextension ofsocial policy tocover thewhole popular -
tion isoneofthemore interesting developments ofthese last years –and
because oftheworkers widespread participation intheincentives offered
tolow-income groups ,andtothepopulation atlarge ,saidfinally because

-39-
all "these different systems areinterconnected .Insome cases ,alawgives
workers special benefits inaddition tothose given tothepopulation at
large :therefore ,aknowledge ofthesystem asawhole isnecessary .
However itseemed advisable todistinguish between thevarious forms
indrawing upthis report :there isashort account oftheprovisions
applicable tothepopulation atlarge (Part i);thepart relating to
incentives forasset formation inlow-income groups issomewhat longer
(Part Il)j andthemost coverage isgiven toincentive systems forworkers
(Part III).
Inrelation totheformation ofassets intheform ofreal property ,
thesubdivision ofthematerial between Part IandPart IIpresented some
problems .Thesystems which donotfixamyceiling onincome oronvalue ,
obviously should beincluded inPart I,whilst those which provide foran
income ceiling should beincluded inPart II.
Butdoubts arise when fairly strict limits areimposed onthevalue
and/ordimensions ofthepurchased property ,since this indirectly amounts
toalimit astovalue .Itisclear that such property maylegally be
bought equally well bylo;>-income groups ,asbyother people ,butinfact
itshould rather betheformer whobenefit from these provisions –hence
they have been included inPart II.
Ontheother hand ,there hasbeen noattempt toformulate aCommunity
concept ofwhat constitutes alow–income group jinstead thecriteria fixed
bynational legislation have been relied upon .Thus theceilings relating
toincome ,value anddimensions vary considerably from onecountry to
another ,andtherefore certain reservations must bemade regarding compara­
bility .

-40-
B–Shortaccountofpolicybycountry
a)Duetothesubdivision ofthesystemsbyrecipient ,andwithineach
groupthebreakdown byformofsavings saidtechniques applied,the
descriptions ofnationallegislation havehadtobegivenpiecemeal# There­
foreaverybriefrecapitulation bycountryofthemostimportant aspects
oftheirassetformation policyisincluded intheintroduction# Thisshould
mekeiteasiertocomparethedifferences betweentheninebodiesofnational
legislation .
InBelgium,theprimaryobjective ofincentive measuresistocreate
realpropertyassetsaboveallbypremiums andtaxexemption ,butalsoby
loansandnon-institutionalised housingsavingsschemes.Mostofthese
measures areaimedatpersonspurchasing orbuilding subsidised housing,or
thelike.Certainkindsofloansarereservedforcertainsocialgroups;
inparticular miners,andheadsoflargefamilies.
Fiscalbenefits areprovidedforthosederiving incomefromsavings
accounts andinsurance contracts .Fiscalbenefits arealsousedtoencourage
companies tomakehousinggrantstotheiremployees.Acollective agreement
contained provisions relatingtofacilities forhousepurchasing ,butthe
fundhassincegoneintoliquidation .
b)InDenmark,since1958,workers *sharesandworkers *bondscanbe
issuedbycompanies totheirownemployees .Othermeanstoencourage
savingsareappliedatundertaking level,mostlyintheformofbuilding
loans.AdraftBillwasintroduced bytheprevious Government on31January
1973»aimedatworkerparticipation inthecapitalgrowthofcompanies by
meansofa"CentralInvestment Fund".TheGovernment hasnotyetdecided
onhowtoproceedwiththisquestion (Seep.59)•
c)IntheFederalRepublicofGermany,savingspremiums andhome
building premiums areprovidedforbylegislation ;taxexemption onmoney
setasideforhomebuilding premiums andforthepaymentofcertaininsurance

-41
premiums isalso possible# Theconstruction andpurchase ofnewdwellings
isencouraged bymeans oftaxmeasures andreduced interest loans# In
thefield ofsubsidised housing construction thepurchase ofhouse property
(houses foroneortwofamilies ,flats ,etc,)will beespecially stimulated
bymaking available public funds asloans ,subsidies ,etc.Additionally
thesame objective issought through anumber ofbenefits forthepurchase
ofbuilding land fortheconstruction ofhousing anditsoccupation#
Denationalization ofpart oftheFederal industrial property hasoccasioned
distribution ofshares toworkers# Furthermore ,thetaxbenefits granted
on"supplementary income "should bementioned .
There isaconsiderable number ofprovisions relating toworkers#
Ifthey invest incertain ways ,theState will grant premiums ;insome
cases these areadded tothose paid toanyinvestor# Thesame mile applies
tocontributions made bycompanies totheir employees ,inorder toprovide
incentives forasset formation (DM624Law)# Moreover ,various measures
have been taken byemployers ,over andabove their legal obligations# An
important draft ofnewasset formation scheme wasprepared on22February
1974 bytheFederal Government butowing totheeconomic situation and
legal andpractical difficulties ,theGovernment does notintend toimplement
this scheme inthenear future (Seep#50)•
d) InFrance ,benefits areprovided for ,both forsight savings
(savings accounts ,bonds ,shares )andthose subject toaholding period
(lon^-term saving schemes)# Some insurance premiums canbededucted from
taxable income .Asfarashousing isconcerned ,taxexemptions aremade
forboth types ofsavings (sight andsubject toaholding period )and
building premiums aregranted ,asarereduced interest loans ,housing
allowances andpersonal housing grants .TheState also takes action in
itsrole ofemployer tohelp itscivil servants acquire housing .
Anoptional profit-sharing scheme (order of7January 1959 )anda
compulsory scheme forworker participation have been setup(orders of

-42-
17August 1967 );employees mayalso take part intheir employers' savings
schemes .Also tobenoted here isthe lawauthorising free issues ofshares
toworkers bytheState –owned Renault factories .This system hasbeen
widened toinclude thenationalised bank andinsurance companies and ,ona
voluntary basis ,totheprivate sector .InOctober 1978 ,theCabinet adopted
adraft lawproviding forthecompulsory distribution ofshares toworkers
inindustrial andcommercial undertakings quoted onthestock exchange
(seep,56),Moreover ,inNovember 1976 ,theHead ofState requested the
Government toestablish ,forsmall investors ,anindex-linked savings scheme
which ,through carrying alowinterest rate andrequiring stable deposits ,
would protect savings against inflation ,
e) InIreland ,themain incentives forasset formation take theform
oftwo index –linked saving schemes ,tax exemptions forsavings and life
assurance contracts aswell asavariety ofmeasures (e,g,state subsidies
andtaxexemptions )toencourage theconstruction andpurchase ofprivate
housing ,
f) InItaly ,taxconcessions aregranted ontheincome from savings
accounts andshares giving afixed return .Life insurance premiums maybe
deducted from taxable income ,There isawide
variety ofmeasures relating tohousing forlowincome groups ,forall
workers (GESCAL plan )andforcivil servants .Thelawonseniority
allowances ,andthefiscal provisions therein ,provide certain concessions
toworkers topromote asset formation .Recently ,theCouncil ofMinisters
adopted ahome–ownership savings scheme ,
g) InLuxembourg ,taxexemptions aregranted onincome from savings
accounts andsome insurance premiums .Special types ofindex –linked savings
have been created forthewhole population andcertain special savings schemes
foryoung people .Interest subsidies andpremiums forbuilding andpurchase
encourage home ownership .Some measures have been taken byemployers with
regard toassets intheform ofdeposits andsecurities andhousing .

-43-
h) IntheNetherlands ,savings premiums arepaid toyoung people upto
theageof21(asthey were until 1973 toadults uptotheageof60whocould
participate inother saving schemes andwhose income didnotexceed acertain
ceiling ).Taxexemptions aidsmall investors topurchase stocks andshares .
Subsidies andguarantees encourage thepurchase orconstruction ofnew
dwellings ,orthepurchase oflow-cost housing bysitting tenants inlow
income groups .
Voluntary participation byworkers inpremium savings schemes and
profit-sharing schemes isencouraged byfull exemption from taxes onamounts
paid byemployers inrespect ofsavings andsocial security contributions .
Inaddition ,group participation inearnings –savings schemes isencouraged
byfully exempting employees from liability fortaxes and social contribu­
tions onthese payments ,while theemployer istaxed ataflat rate .However ,
these systems arenotwidespread .Civil servants benefit from aspecial
savings premium scheme .Some measures have also been adopted byundertakings
outside thestatutory framework .
InMay 1975 <the Government submitted toParliament adocument on
incomes policy containing amajor programme forworker participation in
company growth ,which wasthesubject oftwodraft laws in1978 (seep.54)«
i) IntheUnited Kingdom ,aconsiderable proportion ofpersonal savings
ischannelled onacontractual basis into pension funds and the various
facilities offered bylife assurance offices .Most ofthese are eligible
forsome degree oftaxrelief .Government policies inthefield ofsmall
savings areconcentrated onthepromotion andsale ofNational Savings
Certificates available toall ,which include several facilities (National
Savings Certificates ,Saving Bonds ,Premium Saving Bonds ,Save–As-You-^Earn,
andsoon).Inaddition ,twoindex –linked savings schemes came into effect
in1975 .
House purchase isencouraged bytaxrelief onmortgage interest
payments ,anoption mortgage scheme andhouse improvement grants .In1978 »

-44-
Parliament voted onaDill concerning access tohome ownership introduced by
the Minister for theEnvironment .
The1978 Budget also provided that from April 1979 undertakings could
issue totheir staff shares benefiting from preferential tentreatment .
0–Objectives (l)
a) Itisappropriate torecall here ,after this short account ofthe
different national systems andbefore describing them ingreater detail ,
theobjectives which thedifferent countries seek toachieve through their
asset formation policy .Considerable axeas ofcommon interest will benoted ,
andeven ifsome differences maybeobserved ,they are ,ingeneral ,minor .
b) Themeasures taken inBelgium toencourage personal saving have
social orsocio-political aims ;some ofthese measures ,however ,have
economic goals :toencourage building ,andtofuel thecapital market by
encouraging personal saving .Inrelation tohousing ,there also exists an
aimtoimprove family life ,andinthis field allthemeasures taken aimat
dealing more andmore completely with thespecific needs ofdifferent types
oflowincome groups .
c) InDenmark .1theGovernment seeks tofacilitate asset formation asa
means toimprove thedistribution ofwealth andmake undertakings andtheir
employees realise thevalue ofcommon economic interests andcooperation .(2).
d) IntheFederal Republic ofGermany ,asset formation byworkers is
encouraged basically forsocial policy reasons ,because ithasbeen realised
that ownership ofproperty ensures greater spiritual andmaterial freedon
fortheindividual .Ageneral conclusion hasbeen reached that aneconomic
system founded onprivate property will not inthelong term beviable ,and
(1)Theinformation contained inthis ohapter derives essentially from
contributions byGovernment experts .
(2)This policy also ledtotheinstitution ofthe"social funds ".

-45-
free from social unrest ,unless itshares outeconomic wealth asevenly as
possible# Theincrease inassets ,which islinked toeconomic growth ,
cannot therefore continue toaddtowealth ,where great riches arealready -
amassed .Inaddition ,inconnection with permanent structural changes ,the
worker isrequired tobeable andwilling toadapt toalarge extent .This
presupposes that thewealth sharing system ensures theworker areasonable
share inincreased assets ,aswell asafair income .
Ajust sharing out ofthe increased national wealth must berelated
tothevolume ,aswell asthemethods ofsharing .Inthe long term itis
notsufficient toencourage asset formation inliquid savings only .
Statistics show that anincrease innominal wages has only aminor effect
onincome distribution .Onthecontrary ,itismore than ever necessary to
develop systems togive workers anincentive tosave through participation .
When thelawonsavings premiums waspromulgated ,thebasic aimwas
acapital market policy tomobilize long-term savings andfree them for
investment ;similarly ,inthecase ofthelawonhome building premiums ,
the most important aim wastoboost home–building .These objectives still
exist ,especially since there isapossibility that thetraditional capital
market has too narrow abase inview offuture investments which will be
necessary inthepublic andprivate sectors ;however ,with time ,they have
become social policy aims .Amajor step topromote asset formation was
the introduction oftheLM624Law.
Themeasures encouraging home building must betreated separately ;
while they aremeant toprovide anincentive forasset formation ,they
come essentially under thehead ofsocial policy onhousing .
e) InFrance ,adistinction canbemade between specific social measures
aimed atencouraging asset formation andother measures which mayhave the
same result ,although their motivation mayhave been different .Some
measures ,infact ,were basically intended tocreate non–inflationary

-46-
financing forinvestment bygiving families incentives forsaving ,preferably -
long term .Inthefirst category are :measures tofacilitate home-ownership
(savings accounts fordwellings andspecial loans forbuilding ),workers *
profit –sharing schemes andexemption from taxation ofcategory "A"books
issued bySaving Banks .Inthesecond category ,there arethefollowing
measures ,whose social importance wasalso taken into account :taxrelief
oninterest from bonds ,long-term savings schemes ,andexemption onlife
insurance premiums .
Thespecific purpose oftheOrders relating toprofit sharing andto
participation issocial aswell aseconomic .
Inrelation tosocial policy :
ThetwoOrders contribute toimproving employer /worker relations bydevelop­
ingasense ofcontractual obligation inundertakings through agreements
which ,bygiving workers ashare inthelife andprofits oftheir firm ,
increase individual awareness ofthecommunity ofinterests within the
undertaking .
With thesame endinview ,such agreements should make provision for
employees tohave access toinformation andmeans ofcontrol necessary to
have abetter understanding oftheundertaking 'soperations andfollow the
application ofthesystem .
Inthecase ofeither theOrder of7January 1959 »orthat of17
August 1967 1or "theharmonization lawof27December 1973 ,their enforcement
should ensure employees extra income ,which does notfall under theheading
ofcompany wages policy ,since theprocedure forwage-negotiations and
fixing must remain quite separate andnotbeallowed toinfluence the
setting upofparticipation orprofit-sharing schemes .
Inrelation toeconomic policy :
Worker participation schemes arebased oncompany growth ,andthelegislar -
tion contains taxprovisions encouraging this ,sothat they canincrease
their investment capacity .The1967 Order provides forthepossibility

-47-
forcompanies tosetup,taxfree (l),aninvestment fund foranamount
equal tothat distributed totheworkers ,oncondition that itmust beused
within oneyear forthepurchase orcreation offixed assets .
Finally ,itshould "benoted that aims have changed during these last
years ,andtheOrder of1967 »incomparison with that of1959t hasstressed
thefollowing objectives :
–employees *savings –since itsets upaholding period forthesums
granted ,
-investment :bygiving theright toemployers –inaddition tothe
possibility given toemployees toinvest inthecompany theamounts
granted tothem –tosetupaninvestment fund free oftax.
Moreover itshould benoted that the1959 Order setupanoptional
system ,whereas the19^7 Order creates asystem which iscompulsory for
companies with more than 100workers ,
f) Theincentives inoperation inIreland derive from both social and
socio-economic objectives .Themeasures toencourage savings ,especially
bythepoorer sector ofthepopulation ,were introduced basically for
social reasons butover time they have assumed considerable economic
importance .
Thebasic objective oftheGovernment 'shousing policy issocial –
toensure that ,asfarasresources permit ,every family canobtain a
dwelling ofgood standard ataprice orrent which itcanafford ,
g) Themeasures taken bytheItalian Government basically relate to
social policy ,bytrying toimprove theliving standards ofthose benefiting
from them andbytrying toshare outthenational wealth more fairly .This
Government undertaking hastaken theform ofsubsidised housing which has
theparticular aimofholding back rent increases ,andofencouraging
savings intheform ofdeposits andsecurities .
(l)Only partly ,since the1574 budget .

-48-
h)InLuxemburg ,incentives aregiventoworkersforassetformation '
aboveallforsocialandfamilypolicyreasons.
Thus,publicauthorities encourage home–ownership "becauseowninga
homemakesforbetterconditions offamilylife,andamorestablebasis
ofexistence *
i)IntheNetherlands ,theaimofassetformation policyisexpressed
clearlyinthepreambletotheGeneral Lawonsavingspremiums inthe
following way(stillvalid,althoughthelawwasrepealedatend–1973):
Thefactofowningpersonalassetsoveralongperiodisconsidered
bytheGovernment asgivinganindividual oneofthemostimportant oppor­
tunitiesforachieving greaterindependence andbroaderdevelopment ,as
wellasbeingoneofthewaysinwhichamancanshowasenseofrespon­
sibility towardshimself,hisfamilyandhisneighbour#
Moreover ,theGovernment isoftheopinionthatasocietyinwhich
greatimportance isattachedtofreeenterprise ,privateproperty ,and
alsotomeansofproduction ,cannotachieveequilibrium orretainitin
thelongterm,unlessthesystemissupported bythemajority ofits
citizens#
Toachievethisaim,itisoffundamental importance toensurethat
broadsections ofthepopulation canbuilduppermanent personalassets,
andcamtakepartdirectly orindirectly inproductive investment ,and
shouldbecomeaccustomed ,throughpersonal experience ,tothevarious
aspectsofownership .
Assetformation policyenablesthosewhohavenotyet–orbarely–
managedtoacquireanypermanent assets,togradually achievethisaim;it
isalsointendedtocontribute toafairersharingoutofassetswithin
society.
Theaimsofassetformation policymusttherefore beregarded as
socialaims,asisshownintheintroduction .

-49-
Inthedraft lawof197° onworker participation inthecapital growth
oftheir ownundertaking ,theGovernment stresses cooperation between staff
andinvestors intheundertaking andthefact that both categories are
entitled toafair share ingrowth after reasonable remuneration# Further ,
the economic approach isimportant :under thesecond draft lawonworker
participation atnational level inthecapital growth ofundertakings –
through aninter-trade fund –theGovernment aims toensure that employees
benefit from auniform andmodest increase inincome# Lastly ,stress is
laid onthevalue ofthis policy instrument toencourage asset formation
byworkers asacomponent inanoverall policy designed gradually tobring
about amore acceptable distribution ofincome andassets#
j) Theencouragement ofpersonal savings isamajor objective ofthe
United Kingdom Government# The aim istoachieve conditions inwhich a
high proportion ofpersonal disposable income isdevoted tosavings soas
tohelp central Government inregulating demand andinadministering public
debt ,andinorder torelease resources forinvestment#
D–Position ofthevarious social categories ;proposals (l)
a) Inthedifferent countries discussions have taken place concerning
theappropriateness ofasset formation policy andtheeffectiveness ofthe
means provided toachieve it# They related ,mostly ,tothemeasures concern­
ingworkers since some traditional forms ofincentive given tothewhole
population (taxation benefits onincome from savings accounts ,housing
policy ,etc# )have nowbeen completely adopted ,atleast inmost countries#
Therefore ,weshould bear inmind that theideas expressed bydifferent
groups relate almost exclusively toincentives given totheacquisition
byworkers ofassets intheform ofdeposits andsecurities .
(l)Thetext relating totheopinions ofemployers' professional groups and
workers *unions hasbeen drawn upessentially according toinformation
given bythese organisations themselves#

-50-
b) Consequently ,awider range ofopinions canbeencountered in
countries where liquid asset formation byworkers hasbeen pursued ina
more complete andcontinuous fashion inrecent years .
IntheFederal Republic ofGermany ,allsocial groups have given
their approval inprinciple –butwith certain reservations -toapolicy
todistribute the increase inwealth more evenly .
On22February 1974 »theFederal Government adopted anasset forma­
tion programme .Under this programme ,undertakings with anannual profit
before taxofDM400000 (limited liability companies )andDM500000
(private companies )would have totransfer some equity capital orcash
(insome cases )toaclearing institute which distributes theresources to
specially created funds from which all employees andself–employed persons
whose income does not exceed acertain limit will receive participation
certificates which maynotbesold forseven years .Ifthebeneficiary
sells hiscertificates after this period ,however ,heloses hisentitlement
tofurther allocations until the12th year ,after which theparticipation
certificates canbeused freely without financial disadvantages .Theannual
income limits areEM36000forthebeneficiary andDM54000forhouseholds
where thewife isnotgainfully employed .For every dependent child these
amounts areincreased byEM9000,Theowners ofthese certificates will
have theright toparticipate inthemanagement ofthefunds through
elected delegates .Thefunds will beoperated onacompetitive basis and
will beintegrated into the existing financial system .Theallocations
provided forunder theDM624Laworunder anycompany agreements arenot
affected bythenewprovisions under this scheme .Aninterministerial
working party was setupattheMinistry ofFinance toexamine thoroughly
theprovisions ofthis draft law.However ,because oftheunfavourable
economic situation ,andalso because oflegal andpractical difficulties ,
theGovernment does not intend toimplement this scheme inthenear future .
TheGovernment isinfavour ofextending participation inprofits and
capital atundertaking andbranch level intheframework oftheDM624Law
and tothis endintends toabolish certain fiscal impediments .
TheCDU/C3Uhasaccepted theprinciple ofemployee participation in
company profits .Theprinciple should berealised either bypaying

-51-
investment wages sothat allemployees ,including those working inthe
public sector ,will getashare incapital growth or "byarran gingcompany –
"based profit schemes .Forthese formulas alegal framework hastobe
provided guaranteeing that theminimum amount paid forasset formation is
notlower than thesaid investment wage .With this supplementary income
theemployee will "beentitled toshare inthecapital according tohisfree
choice andcanfreely dispose oftherights acquired from this participation
after asix–year holding period .
TheCDU/CSUisoftheopinion that further agreements onprofit -
sharing including risk elements should bepossible andthat theparticipa­
tion schemes should eventually beextended tohousewives andpensioners .
In1978 ,theCDU/CSUsubmitted totheBundestag aproposal foralaw
toextend voluntary participation intheprofits andcapital ofanunder­
taking towage earners inagreater number ofcompanies .This proposal
also recommends anewinsurance system ,tobefinanced byundertakings ,
which inthecase ofbankruptcy would ensure payment of50$ofthesums
invested bytheworker intheundertaking .
TheSPDandFDPparties ,which form thepresent Government arein
favour ofnation-wide asset formation schemes forlarge sectors ofthe
population ,following thewidely publicised Government proposals .Themain
difference intheschemes isthat theSPDproposals tend more towards asset
formation byworkers which would strengthen thetrade union position in
regard totheadministration ofthefunds ,whereas theFDPscheme favours
other sectors ofthepopulation andwould fixthe income limits atahigher
level and soreduce trade union influence onthe administration ofthefunds .
TheConfederation ofGerman Trade Unions (DGB)demands energetic
steps against wealth concerntration andasmall majority within this
organisation isinfavour ofaprofit-sharing scheme forallworkers .By
this ,theDGBmeans ascheme which goes much further than thepromotion
ofsavings andthecollective agreements based ontheasset formation law
(DM624).TheDGBviews itsproposal notasameans toimprove theincome
situation oftheemployees butasaninstrument tocounter theconcentration

-52-
ofwealth .Inthis context theDGBdemands that regional investment funds
should "becreated which would hemanaged "bytheworkers themselves .The
resources forthese funds would derive from capital transfers (cash transfers
areexcluded )against which theemployees (uptoacertain income level )
obtain anequal share which they canfreely dispose ofafter acertain
holding period .Interest anddividends from participation incompanies
will nothedistributed "bythefunds butwould beinvested inprojects in
thepublic sector .
There aredifferent views among thevarious trade unions which are
members oftheDGB :while wealth concentration iscriticised byall ,some
disapprove ofthescheme putforward bytheDGBandadvocate aredistribution
programme based onfiscal measures andpublic expenditure .Thebiggest trade
union (theIG–Metall )gives absolute priority tomobilizing financial
resources forsocial reforms from higher taxes oncompany profits instead
ofasset formation ,which would reduce thetax–paying capacity oftheunder­
taking andcould therefore only play asubsidiary role .
Attheir annual Congress inMay ,theDGBtrade unions reiterated
their opposition toanysystem ofprofit-sharing atcompany level .They
preferred schemes involving prof it–sharing atinter-trade level under
agreement between thetwosides ofindustry .Furthermore ,thetrade
unions advocate agreater financial encouragement tosave than ispresently
thecase forpersons onlowincomes and ,inthis context ,theCongress
expressed awish that thelegislators should re–examine thepresent savings
promotion scheme .
TheConfederation ofGerman Employers' Unions (BDA)isinfavour of
extending thefacilities oftheexisting DM624Lawgiving workers incentives
forasset formation .According totheBDA ,this lawhasproven itsuseful­
ness andthere istherefore noneed todevelop newmodels ofasset formation
enforced bylaw.Instead theBDAasks thetrade unions andpolitical parties
tooptfortypes ofparticipation inthecapital andprofits ofundertakings ,
towhich both employers and employees adhere voluntarily andwhich result
inindividual asset formation byemployees .This iswhytheBDA isopposed

-53-
toanyform oflegal compulsion which would oblige undertakings topaypart
oftheir profit orcapital into intertrade orcollective funds controlled
bytrade union organisations ,which would allow these organisations togain
control ofahigh proportion ofproductive capital .
In1976 ,theBDAgave details regarding this concept andpresented
themain lines ofanasset formation policy that could benegotiated inthe
framework ofcollective agreements .This proposal advocates that wage-
earners invest apart oftheir earnings intheir ownundertaking ,preferably
intheform ofshares ,but also bonds orother securities .Wage–earners
would becovered byaninsurance scheme toprovide against both loss of
capital and jobiftheundertaking went into bankruptcy .
c) IntheNetherlands ,itisgenerally accepted that thesocial
objectives pursued intheasset formation policy areuseful andappropriate .
Opinions begin todiverge onthesubject ofhow effective isthecurrent
sharing>-out ofassets ,onwhat isanappropriate policy tomodify it,and
themethod tofollow with this aim inview ,particularly astowhether the
public authorities should intervene inthis field .
Theworkers 1organisations consider that under thepresent social
conditions the sharing>~out ofthebenefits ofcompany growth canbethe
object oflegitimate criticism .Workers receive their wages ,which are
the result ofthe interplay ofsupply anddemand onthe labour market .
However ,company owners receive notonly areturn onthecapital invested
inthecompany ,butalso theprofit added toitand ,asaresult ,benefit
from thecapital growth oftheundertaking .
Inmost cases this takes theform ofcompany auto-financing .The
return paid toowners should belimited toareasonable return onthe
capital invested inthecompany .This return should also beestablished
bythemarket ,atarate comparable totheincome from bonds .Here it
should betaken into consideration that income from bonds relates toa
nominal amount which does notchange with time ,whereas thenominal value
ofcapital invested intheundertaking follows changes inthevalue ofthe
currency .
Iftheprofits ofthecompany exceed salaries andareasonable
return oncapital ,theexcess should bedivided between thetwofactors

-54-
ofproduction .Giventhatthesesumsareusuallynecessary fornewinvest­
ment,theyshouldbefrozen,sothattheywillremainunvailable forconsuro-
ers.
IntheEconomic andSocialCouncil,agreement wasreachedregarding
thesimplification andimprovement ofsystemsforsavings premiums ,which
couldbeharmonized better.Amajority wasalsoinfavourofeliminating
obstacles inpresentlegislation sothatworkerscouldparticipate in
profit–sharingschemestoagreaterextent.Legislation hassincebeen
adoptedbyamending theCivilCode.
InMay1975»theGovernment submitted toParliament adocument on
incomespolicywhichincludes aprogramme forworkerparticipation in
company grovrth.Thisprogramme ,theessenceofwhichwasembodied ina
draftlawinJune1976,wasinspired bytheaimtoincreaseworkers' share
incapitalgrowth,andasaby-product ,theprogramme aimsatmoreuniform­
ityinthegrowthofsalaries andwagesamongthevariousbranches.This
slowdownintherateofincrease ofwagesandsalaries inthemoreprofit­
ableundertakings (whichbythewaymakesforhigherprofits)wouldnotbe
acceptable toworkersunlesstheseundertakings weretodistribute partof
theprofitstoworkersunderassetformation schemes.
In1978|thedraftIanofJune1976onworkerparticipation inthe
capital growthofundertakings wassubstantially amended bythenewGovern­
ment.Theoriginaldraftwassplitintotwoparts:thefirst,presented
inApril,relatestoindividual participation byworkersinthecapital
growthoftheirundertaking ,andthesecond,presented inOctober,concerns
theintroduction ,foranexperimental periodofthreeyears,ofanational
systemofcapitalgrowthsharingforworkers.Individual schemeswould
haveretroactive effectfrom1January 1977andthenational schemefrom
1January 1978®Theschemesapplytoallundertakings ontheregister of
companies withannualtaxableprofitsofmorethanHFL100000arisingin
theNetherlands ."Capitalgrowthofundertakings "isdefinedasnetprofits
arisingintheNetherlands ,lessasumrepresenting theyieldoncapital
employed ,calculated according toaformulabased011theinterestratefor
Government loans.Theschemeswouldbefinanced byacontribution

-55-
(deductible from taxable profits )from thecompany of12%ofitscapital
growth ,sodefined .Under theindividual schemes ,each worker would receive
thesame amount ,subject toaceiling ,paid toanaccount with abank or
savings bank andfrozen foraperiod ofseven years .Theundertaking can
paythis amount incash ,shares orother certificates .After the sevens -
year period ,theworker mayfreely dispose ofthese assets .Thesums
transferred (exclusively incash )under thenational plan would bepaid
into acentral fund administered byacouncil composed ofGovernment and
workers *representatives (thelatter inthemajority ).Receipts areestimar -
tedatbetween HFL150and200million peryear andwould beused tosup­
plement workers' pensions andfinance early retirement schemes .
While theemployers' organizations prefer existing savings premium
schemes andvoluntary participation incompany profits ,anddeplore the
negative effects likely toensue from theGovernment 'splans ,theSocialist
andCatholic trade union organizations aredemanding anintertrade fund for
participation ,intheform ofblocked holdings ,forworkers inthecapital
growth ofundertakings andemphasize theimportance ofsuch afund for
worker solidarity .Thecapital paid into thefund should beused toimprove
the lowest pensions rather than for individual asset formation .ThePro­
testant trade union organization ,ontheother hand ,isinfavour ofasset
formation both through theundertaking concerned andtheissue ofcertif­
icates byintertrade funds .
With respect toencouraging home ownership ,theDutch Government has
announced that itwishes toalter existing house purchase schemes under
which premiums vary depending onconstruction cost ,andreplace them bya
system ofdegressive premiums based onthebeneficiary 'sincome .
d) InFrance ,theGovernment has ,byitsorders onparticipation ,shown
that itisinfavour ofencouraging asset formation byworkers andof
linking such asset formation tothedevelopment ofprivate savings and
investments .

-56-
A"Study Group forthereform ofundertakings ",setupbytheGovern­
ment inJuly 1974 andwhose final report waspublished inFebruary 1975 »
hasrecommended that compulsory financial participation (19&7 Order )be
progressively extended toallundertakings andthat theprovisions ofthe
Order should befurther harmonised with those oftheOrder (1959 )covering
optional participation .Anumber oftexts areatpresent under study in
theGovernment tofollow upthelatter recommendation#
Further ,inOctober 1978 »"theGovernment gave practical form toa
plan announced bythePresident oftheRepublic atapress conference on
14June 1978 byadopting adraft lawproviding forcompulsory distribution
ofshares toemployees ofindustrial andcommercial undertakings quoted on
thestock exchange .Thescheme entails an"exceptional once–for^-all distrib­
ution "free ofcharge ,of3%ofthecompanies' registered capital uptoa
limit corresponding toFF5000peremployee ,provided that thecompanies
have paid atleast twodividends ineach ofthepast three financial years .
Individual amounts distributed canbevaried intheproportion of1:3
according toemployees *earnings andlength ofservice .Theshares maynot
besold foraperiod ,determined byeach company ,ofnotless than three
ormore than five years .
TheGeneral Confederation ofLabour (CGT)believes that systems of
incentives forasset formation byworkers should notbeconsidered asa
form ofpressure torestrain consumption and isnot infavour ofanysystem
ofwage investment orprofit sharing which results from compulsory savings .
TheCGTmaintains that anyincentive scheme forworkers *asset
formation must besubject tocertain prior conditions –increase ofwages ,
guaranteed bysliding scale indexing ,extension ofsupplementary retirement
schemes based onsharing out ,improvement intheoverall social security
system .
Similarly ,theincentive schemes must have social objectives :they
must principally relate tosaving forhome-ownership ,andalso encourage
workers toacquire durable consumer goods .

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Asforthe19&7 Order onparticipation ,theCGTconsiders that it
isanattempt bytheGovernment tofind afoothold foritswage pause
policy .Under this legislation workers will only receive asmall premium
which ,moreover ,will only bepaid after five years .
However ,notwishing itsworkers tosuffer even more hardship ,the
CGTrecommended itslocal organisations tosign participation agreements ,
choosing aninvestment inblocked current accounts providing forautomatic
payment attheendofthefive-year period ,andannual interest payments .
FortheDemocratic French Confederation ofLabour (CFDT ),thereal
problem isthat theincreased profits should belong totheoommunity asa
whole assuch profits ,created byauto–financing ,arecreated bythecompany ,
theworker andtheState ,allplaying' their part .
Moreover ,theinvestor remains free toinvest ornot ,whilst the
worker isrequired tomake savings ,from hiswages ,over which neither the
workers northeir representatives have anycontrol .
Force Ouvriere (FO)isopposed toanymeasure which might oblige
workers tosetupasavings fund snosystem ofincentives forasset forma­
tion canbeaccepted whilst theincome ofthemajority ofworkers is
insufficient .Forthese reasons ,this trade union hasshown itsdisapproval
oftheobjectives andmethods chosen inthe19^7 order onprofit–sharing ;
itconsiders further ,that theincentive forsaving intheform oftax
exemption orsupplementary employers *contributions accentuate thedispao >-
ities inincome ,tothedetriment ofthepoorest .Forthis reason ,FO
cannot approve thesystems forsavings schemes which give supplements in
proportion totheamounts deposited .
FOisopposed toanyattempts tomake workers shareholders inthe
company which employs them .Such schemes involve adouble risk forworkers :
ifthecompany fails ,they could lose ,atastroke ,their jobandtheir
savings .Moreover owning shares inthecompany inwhich oneworks isa
grave obstacle tooccupational andgeographical mobility ,which isencouraged
bythepublic authorities .

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Incentives should begiven only tothose investments concerned with
home-ownership -such incentives would beparticularly important asthey
would benefit theunderprivileged social groups .
Inconclusion ,from theeconomic viewpoint ,before trying toincrease
savings toencourage growth ,allresources which arebadly employed should
bemobilized .
TheConfederation Generale desCadres (CGC)isinfavour ofany
measure which gives workers incentives towards asset formation .Itrecog­
nises thesoundness oflegislation designed todecrease tension between
capital andlabour ,create aninterest insaving ,andincrease investment .
Itis,ontheother hand ,opposed toanymeasure which fixes ceilings
which candiscriminate against itsmembers .
Itconsiders that there arenumerous possible solutions ,andthat
themethods employed should bevery varied sothat they canbeadapted to
theparticular case ofeach company .
TheNational Council ofFrench Employers (CNPP )isinfavour of
promoting workers' savings intheform ofdeposits andsecurities .Thus
ithasstrongly encouraged companies topropose participation schemes
setting upsavings funds ofdiversified securities (investment funds ).
This scheme avoids excessive risks toboth jobs andsavings .
e) InDenmark ,both theEmployers' Confederation (DA)andthat ofthe
Trade Unions (LO)areinfavour ofafairer redistribution ofwealth .
TheTrade Union Confederation proposed tosetupa"profit and
investment fund "tobethecommon property ofallwage-earners andbebuilt
upbyprogressive payments byallemployers (including thepublic author *-
ities ).Thefund would bemanaged byaCouncil whose members arerepresent­
atives ofthedifferent trade unions andanexecutive board offive persons ,
four elected bytheCouncil andoneappointed bytheGovernment .Inlimited
companies andcooperatives ,thetotal amount paid would beretained inthe
undertaking aswage-earners' capital .Incompanies under different legal

-59-
status part ofthecompulsory payments tothefund would ,byarrangement with
thefund ,remain deposited intheundertaking aswage-earners' capital .
Theright tovote acquired bythepayment ofshares tothefund would be
exercised bydelegates elected bythewage-earners ofeach undertaking and
notbythefund .After seven years ,every worker would beable torequest
liquidation ofhiscertificates relating tothefirst year andsoon.All
wage-earners would receive anequal number ofcertificates .Atpresent ,
trade union organisations tend tofavour using funds toimprove retirement
pensions ortofinance certain social expenditure .
IntheDanish Employers' Confederation (DA)scheme ,employees
would have thealternative either toinvest part oftheir savings in
their owncompany with thenormal chances andrisks involved ,ortobecome
amember ofa"wage–earners investment club "which makes use ofthe
administrative machinery ofthecommercial andsavings banks andwhich
spreads theinvestment over sectors and/orregions .There would bea
five year freeze which could beextended voluntarily andtaxbenefits on
thewage-earners savings would beintroduced .
TheDAthinks itsproposal will stimulate savings andinvestment while
leaving maximum freedom totheparticipants andwill increase co-ownership
andco-responsibility ofindividual employees .Referring totheproposal
putforward bytheConfederation ofTrade Unions (seeabove )andtothe
1973 draft law (seebelow ),theConfederation ofEmployers hasdeclared that
initsopinion asset formation byemployees andtheir economic participation
inthedevelopment ofundertakings would notbeencouraged ifpublic author -
itiesimpose asystem ofsuch anamplitude onenterprises andtheir staff .
TheConfederation ofEmployers considers that this goal canbemore easily
reached byallowing thesystem todevelop itself progressively andregularly ,
thanks toagreements freely entered upon atthelevel ofenterprises soas
tostrengthen theties that exist between workers andtheir enterprise .
Theproliferation of"workers *shares "isevidently asymptom ofthis trend .
With theaimofcreating amodern andefficient framework inwhich
theDanish economy candevelop ,theGovernment ,onJanuary 31,1973 »
submitted toParliament adraft bill which aimed atsetting upa"Central
Investment Fund "tobethecommon property ofallwage-earners andbuilt up

-60-
"byprogressive payments layemployers starting at0.50$ oftotal wages paid
andrising after 10years to5%ofthis sum.TheFund would bemanaged "by
aBoard ofDirectors ,three fifths ofwhom would beappointed bytheworkers
andtwofifths bytheGovernment .Limited companies employing more than
50persons would paytwothirds oftheir contribution intheform ofshares ,
while small undertakings would settle theamount incash .Theright tovote
acquired bythepayment ofshares totheFund would beexercised bythe
wage–earners ofeach undertaking andnotbytheFund .After seven years ,
every worker would beable torequest liquidation ofhis shares relating to
thefirst year and soon.Allwage-earners would receive anequal number
ofshares .Thepresent Government hasnotyettaken adecision onthis
question buthassubmitted theproblem toaCommittee onIncomes andAsset
formation which has just presented itsfirst report .
f) InBelgium .Governments have always been very much infavour of
giving incentives toindividual asset formation byworkers ,byusing the
taxation system .Budgetary reasons have sometimes ledtotherejection of
newproposals forlegislation .
Therepresentatives oftheFederation ofBelgian Employers (FEB)
believe that they should notputobstacles inthewayofincentives forasset
formation provided forinsectoral orcompany collective agreements ,ifthey
areaccepted byboth parties andcorrespond tothesystems' aims andfulfil
aneed .Asfar asthemeasures taken bypublic authorities toencourage
saving generally axeconcerned ,theFEBconsiders that anyGovernment
proposal must take into account theprobable repercussions onthecost of
labour ;moreover ,anyGovernment action must fitwithin theframework of
the economic policy approved bythetwosides ofindustry andmust nothave
anynegative effect onjoint negotiations atanylevel .
TheFGTB isopposed toanyform ofincomes policy ,and istherefore
opposed toanysystem ofasset formation policy which isinfact anincomes
policy orisintended tooblige workers tosave .Itisalso against any
form ofworker shareholding andanyincentive scheme which tends tointegrate

-61-
workers into thecapitalist system .Itconsiders that aninquiry must "be
made into thefactors determining attitudes tovoluntary saving andto
consumption :rather than encouraging workers tosave ,they should be
discouraged from consuming useless products ,especially those advertised
through mass media channels .
TheCSCconsiders that encouraging asset formation byworkers should
beamatter ofconstant concern .The Christian trade union however insists
onamore detailed analysis ofthepropensities tosave andtoconsume and
with these asabase itishoped todevise ways andmeans ofsatisfying the
needs andwishes ofworkers .
Thefollowing conditions must ,however ,befulfilled :
–noscheme must beimposed against theworkers *wishes ;
–themachinery forasset formation must remain complementary tonormal
remuneration andtothegeneration ofincome ;
–such machinery must notbeconsidered asameans ofobtaining aright to
participation inthemanagement ofundertakings ,asworkers claim by
virtue oftheir work alone ;
–theintroduction ofsuch machinery must contain enough elements of
solidarity toavoid compounding differences inremuneration which exist
between strong andweak undertakings ;
–preference must begiven toschemes under which theamounts available
forasset formation canfind aplace within thegeneral national plan
asfarasindustrial policy isconcerned .
g) InItaly ,allsocial groups areinfavour ofincentives tovoluntary
savings byfamilies .Theeconomic programme for1966–1970 made provision
forasalary-investment scheme .Thepreliminary report fortheeconomic
programme for1971-1975 (project 1980 )provides forare-examination ofthe
legislation inforce ,with theintention notonly ofpromoting rented

-62-
dwellings ,butalso encouraging acquisition ofreal property andsavings
made tothis end .Inthis context ,theintroduction ofahome ownership
saving scheme wasthesubject ofadraft lawin1974 »resubmitted inOctober
1978 »Thenewdraft lawisdesigned togive every Italian thepossibility
ofopening ahome ownership savings account ,theamount ofwhich will be
revalued by75$ofanychange intheconsumer price index ateach year-end .
Theinterest (capitalized attheyeai^end )will befree oftaxatsource .
When thebeneficiary hasaccumulated between LIT6andLIT8million ,he
will beentitled toabuilding loan ,also revalued ateach year-end ,upto
aceiling ofLIT36million ,repayable over 20years .
TheItalian Confederation ofworkers' trade unions (CISL )proposed a
draft law (which became invalid because thelegislative session ended )
intended topromote "savings byagreement "atnational level ,under which
workers would have made voluntary savings .This proposal hasnotbeen
resubmitted andnolonger appears inanyofficial CISL document .
TheCGIL isopposed toanyform ofincome policy ,and istherefore
opposed inprinciple toasset formation policy ,which forms part ofit.
Similarly ,this union isagainst schemes inwhich workers participate in
machinery foraccumulating capital which iscontrolled bymajor combines .
Itisoftheopinion that asset formation byworkers isnotthemost
important problem ,andthat instead attention should begiven totheproblem
ofhowtoshare outtheincrease innational wealth (examining howfar
workers arebenefiting from this )andtheproblem oftheincrease incon­
sumption ,notably thebalance between public andprivate consumption .Tax
reform –called forbyItalian unions -should facilitate apublic expend­
iture policy having theaims ofencouraging social investment andovercoming
thedifficulties oftheItalian economy .
Inrelation tohousing ,thetrade unions ,intheir discussions with
theGovernment onthemost urgent reforms ,expressed apreference forthe
construction ofrented dwellings .
TheLiberal Party introduced aBill designed topromote worker
participation .Itconcerns limited companies which have aregistered

-63-
capital ofmore than LIT10000million ,have "been quoted onthestock
exchange forfive years and ,during that period ,have distributed anannual
dividend ofatleast 6$.Ifoneofthose companies decided topayits
workers andemployees ,whose total annual earnings arebelow LIT2400000 ,
additional sums tohelp them purchase itsownshares ,such amounts would be
deductible from thecompany 1staxable profits .Shares purchased byworkers
andemployees could notbesold forthree years anddividends earned onthem
would beexempt from taxuptoaoeiling ofLIT480000.
ix) IntheUnited Kingdom ,successive Governments have repeatedly
emphasized theimportance they attached toabroad range ofinstruments to
channel savings .Thevarious parties (orworking groups within theparties )
have expressed varying degrees ofinterest inalternative forms ofparticipa­
tion bywage andsalary earners inundertakings *profits andcapital growth .
In1973 taLabour Party Study Group published apaper onCapital andEquality .
Thebasic idea isa"National Workers' Fund "towhich undertakings would
transfer 1%oftheir share capital annually ,byissuing newcapital sothat
theliquidity remains guaranteed .Forexample ,private companies would pay
%oftheir wage bill .Allemployees would receive anequal amount in
certificates issued bytheFund .Itwould notbepossible tocash these
certificates inthefirst 7(or5)years ,butafter that time those relating
tothefirst year could besold ,and soon.
TheFund would bemanaged byaboard composed ofemployees' represent­
atives (majority ),special advisers appointed bytheGovernment andrepresent­
atives oftheGovernment itself .Incompanies ,voting rights would beex­
ercised bytheFund ,andnotbyindividual employees participating inthe
Fund .
TheLiberal Party haslong advocated anactive asset formation policy
and isinfavour ofaflexible anddecentralized system ofparticipation by
workers intheprofits oftheir ownundertaking ,inageneral framework in
which employees also participate indecisions atmanagement level .

Initspaper"Therightapproach",published in1977»theConservative
Partycameoutinfavouroftaxexemptions (foruptofiveyears)forthe
purchase ofsharesbyworkersintheundertaking concerned .Undertakings
coulddistribute totheirworkersupto10$oftheirprofitsbeforetax,the
sumsthususedbeingdeductible fromcorporation tax.
TheCBIhasemphasized thatallformsoffinancial participation
shouldbeoptional#
TheTUCrejectsplansforworkerparticipation inprofitsatunder­
takinglevel,butencourages participation insavingsschemesopentothe
population atlarge.
i)InIreland,schemesforworkerparticipation inprofitsarestillat
thepreliminary discussion stage.Inthiscontext,otherformsofasset
formation ,suchas"wages–investment ",arealsounderstudy.
Thetradeunionorganizations ,theIrishTransport andGeneralWorker
Unionforexample,areshowingincreasing interestinparticipation incompany
profits.Thisunionisconsidering makingaclaimtothiseffectduringthe
negotiations oncollective agreements .
j)InLuxembourg ,adraftlawreforming individual Stateaidsforthe
construction orpurchase ofhousing,neworold,isunderdiscussion inthe
ChamberofDeputies.ThedraftprovidesforaStateguarantee whentheloan
istakenoutforthefirstdwelling.Theamountoftheloancouldbeas
muchasSOfoofthetotalprice,insteadofthepresent80$.Further,
construction premiums woulddependonthebeneficiary 'sincomeandnumber
.ofdependent children.

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I.INCENTIVES OFFERED TOTHE POPULATION ASAWHOLE
A.Incentives for savings intheform ofdeposits and securities
1,Fiscal benefits
1.1,Giving taxexemption onincome from savings accounts isatraditional
wayofencouraging savings .Asopposed tomore recent schemes ,taxbenefits
arenotmade subject toatime limit ondeposits ,even ifsuch alimit may
beagreed upon between theinvestor andthefinancial institution .This
kind ofexemption exists inBelgium tLuxemburg ,Netherlands ,France ,Italy ,
theUnited Kingdom andIreland andsince thebeginning of1975 inthe
Federal Republic ofGermany .InBelgium (llJuly 1972 Lawasamended ),the
first BFR 15000ofannual interest from savings accounts with theCaisse
Generale d'Epargne etdeRetraite ,other public savings banks andprivate
savings banks orother financial institutions ,isexempt from personal
income tax.This applies tosight deposits ,proven bypossession ofa
savings book orcertificate .
InLuxemburg ,theLawof20July 1973 ,which came into force retro­
actively on1July 1973 »hasthesame scope .Theceiling fixed forthe
exemption isLFR15000andthesavings account maybeopened with any
banking institution –including theState Savings Bank –under theauthority
oftheCommissioner forBanking Control .Thedeposit ,whether oncall or
atnotice ,must beinscribed inasavings book ,anditsaimmust beto
invest oraccumulate capital .
IntheNetherlands ,income ofuptoHFL200from savings deposits
andbonds isexempt from income tax.
1.2.IntheUnited Kingdom ,toencourage investment inNational Savings
Bank Ordinary Accounts andTrustee Savings Bank Ordinary Accounts ,income
taxexemption isgranted onthefirst UKLJOofinterest onsums soinvested .
Themaximum holding inthesavings banks *ordinary accounts isUKL
10000.Savers mayoperate these accounts onashort –term basis ,i.e. with

-66-
withdrawal ondemand ,andinterest ispayable onoutstanding balances .
Building societies also offer savings facilities .
InIreland texemption from income tax isgranted atpresent in
respect ofthefirst IRLJOofinterest onordinary deposits received byan
individual from thePost Office Savings Bank ,theTrustee Savings Banks or
from the"Commercial banks "listed inthegoverning legislation (Section
344oftheIncome TaxAct ,1967 asamended ).Foramarried couple ,exemption
uptoIRL70applies separately tothedeposit interest ofeach spouse ,
1.3,InFrance ,theinterest onamounts entered inclass "A"savings books
issued bysavings banks arefree ofincome tax.Noceiling issetonthis
exemption ,butdeposits areatpresent limited toFF41000,Above this
ceiling ,anadditional book (book "B")must beissued stheinterest
produced bytheamounts deposited aretaxed normally ,oratastandard
rate indischarge ofliability ,atthetaxpayer *schoice .Toencourage
long-term saving ,asavings book "C"hasbeen introduced .Sums invested
inthis wayaxesubject toathree-year holding period }however they carry
ahigher rate ofinterest ,paid free oftax.
Interest andpremiums onhome ownership-saving schemes arealso free
ofincome tax.Theamount which maybedeposited inthese savings books
orsaved intheframework ofthese schemes islimited toFF100000,
Persons who receive interest onshort –ormedium-term investments
canopttobetaxed atastandard rate of40^(33l/3%forTreasury bonds
andcertain cash certificates )onthis income ,indischarge ofliability ,
1.4,Aspecial taxsystem applies totheinterest from bonds .There are
several options :
–thenormal rate oftaxation isapplied ,with aflat–rate deduction of
FF3000 (Art,158-3 Annex IV6(b)General TaxCode ),onannual income
uptoFF180000,Inassessing thebasis forpersonal income tax ,a
deduction ofFF3000 isapplied perannum onthetotal taxable income
V

-67-
deriving from fixed-interest securities issued inPrance andquoted ona
French stock exchange .These provisions donotapply tosecurities which
have anindexation clause ;
–thestandard rate of25$isapplied totheinterest indischarge ofincome
taxliability .Forthis rate tobeapplied toincome from "bonds theloan
must beissued under conditions approved bytheMinistry ofEconomy and
Finance ,These provisions donotapply tobonds with anindexation clause ,
–FF1000maybededucted from thebasis ofassessment for interest ona
loan taken outin1977 »orastandard rate of25$maybeapplied in
discharge oftaxliability ;
–thededuction ofFF3000canalso beapplied todividends from shares .
Uptoaceiling ofFF5000 (plus FF500foreach ofthefirst two
dependents andFF1000 foreach subsequent ,dependent ),theamount invested
inshares maybededucted from taxable income until theendof1981 ,This
provision cannot becombined with those given above .
Provision isalso made fortax exemption oninterest from loams in
Italy ,Asystem ofwithholding tax (indischarge ofliability )isapplied
tointerest onbonds andsimilar certificates which arenot exempt from
income tax ,
1,5,InIreland ,interest onfive-year savings certificates atarate of
8,5$ p,a,ispaid free oftax.This rate corresponds toareturn of13$
forholders whopayincome tax a,tthestandard rate .Themaximum holding
perperson isIRL 7500andrepayments canbemade atshort notice .
Anindividual who isresident inIreland and holds shares orsecur­
ities inanIrish resident manufacturing ornon-manufacturing company which
complies with certain conditions ,mayclaim arebate ofonefifth ofthe
tax ontherelated inoome .
IntheUnited Kingdom ,notax ischarged ontheinterest onNational
Savings Certificates ,Themaximum holding atthepresent time isUKL 2000,
Interest onthecertificates iscapitalized andrepaid with thecapital on
redemption .

-68-
1,6.IntheFederal Republic ofGermany «anew income taxexemption to
encourage savings wasintroduced on1January 1975 *Annually this amounts
toDM300forunmarried persons andEM600formarried persons .Furthermore
thestandard amount forbusiness expenses hasbeen fixed atH-I100 (DM200
formarried people ).This means that DM800annually ofinterest onsavings
andother investment income isexempt from tax.Interest oncertain certif­
icates andbonds issued bytheState and local authorities arealso exempt
from income tax .
1.7# Besides the "unfrozen "forms ofsavings mentioned above ,there is
another saving incentive inFrench legislation .This concerns long-term
savings plans (Law65.997 of29November 1965 ).These plans ,which involve
regular deposits ,areintended tocreate capital ;this –andtheincome on
it–must beinvested insecurities (shares orbonds ),ofwhich 50$must be
French securities .
Inthis case taxalready paid totheTreasury (taxcredit )stemming
from income onlong-term saving accounts will berefunded tothetaxpayer
andcredited tohislong-term saving account under thefollowing conditions :
–regular annual deposits (oneorseveral ),
–minimum duration ,5years (Decree of28December 1967 ),
–annual deposits must not exceed onequarter ofaverage taxable personal
income forthe 3years preceding thesavings agreement .
From 1June 1978 such savings agreements cannot becontracted or
extended formore than five years .After 31December 1981 ,noother agree­
ments maybecontracted orextended .
Long-term savings agreements aremade bywritten contract between
theinstitution holding thesavings account andtheinvestor (l).
(l)Decree 66–348,of3June 1966,contains alist ofauthorised
institutions .

-69-
These savings agreements may "beextended foroneorseveral years
more ,oncondition that theextension wasmade intheyear before expira­
tion ofthe time limit .
Ifthe "freezing "period isnotrespected ,theexempt income becomes
subject totax.Exceptions aremade incase offorce majeure ,death ,or
total incapacity forwork oftheinvestor .
1.8.Another form ofsaving isfound inthose insurance contracts which
provide foracapital sumtobepaid upon death orupon theassuree reaching
acertain age.Theconclusion ofsuch contracts isencouraged bysix
Community countries through concessions :thepremiums maybededucted in
full ,orpartially ,from taxable income .Theconditions fordeduction
differ from country tocountry .Thecontract must specify aminimum length
oftime inBelgium ,Luxemburg ,Ireland ,United Kingdom andFrance (10years )
andintheFederal Republic ofGermany (12years ).Inallsixcountries ,
premiums aredeductible uptoamaximum annual amount ,fixed either in
absolute terms ,orasapercentage oftaxable income ,orusing both these
criteria together .
1.9.InDenmark ,employees candeduct uptoDKR 3000from their income
taxbase inorder tofinance acapital insurance notrelated toaprofess­
ional activity .Theinsured amount ispaid netoftaxes .Thesame deduc­
tion canbeapplied toform adeposit with banks andsavings banks ,tobe
used bythesame person after being pensioned ortoestablish achild 's
account .Ihiring the "freeze "theamounts deposited arenotcounted as
assets fortaxpurposes andthe interest onthesums credited inthesame
period arenotliable toincome tax.
1.10 .IntheFederal Republic ofGermany ,asset formation incentives are
also provided intheform oftaxrelief onsupplementary income (Neeneii>-
nahmen ).Taxexemption uptoM800perannum isapplied tosupplementary
income ifitarises from certain investments defined bylaw.Foremployees ,
supplementary income isusually produced bysavings accounts ,securities ,
rent oragriculture .

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1.11 •InIreland ,exemption from income tax isgranted inrespect of
premiums payable onnon–interest bearing Government securities issued under
theCentral Fund Act ,1965(National Bonds 1966–67 )except where thepremium
isalready deducted from taxable profits .
1,12 .IntheUnited Kingdom ,unit andinvestment trusts paytaxoncapital
gains athalf thestandard rate ofincome tax ,andunit holders orshare­
holders receive acredit equal tohalf thestandard rate ;those whopay
taxatthestandard rate will normally have nothing more topayonany
capital gain they mayrealise onthesale oftheir holdings .
Retirement annuity contracts :annual premiums ofapproved deferred
annuity contracts taken outbyself-employed ornon-pensionable persons axe
free oftax .
2.Savings premiums ;index –linked savings
2.1 . Inthe Federal Republic ofGermany ,under the law onsavings premiums
(version of20December 1977 )» "theState pays premiums free oftaxfor
deposits made byanyperson fully subject toincome taxwho ,within thesame
fiscal year ,hasnotapplied forahome-building premium orfortaxexemption
ondeposits made under ahome-ownership savings contract .
Five kinds ofsavings areprovided for s
–savings contracts which areintended tocreate assets :theinvestor
undertakes ,with acredit institution ,todeposit thesums heissaving
under the "EM624"Law (See15.1 .)j
–asingle deposit under anordinary savings contract ;theinvestor undei >-
takes ,with acredit institution ,nottowithdraw theamount deposited
until theendofa6year holding period ;
–savings contract with deposits byinstalments ;theinvestor undertakes ,
with acredit institution ,tomake regular deposits over 6years ofa

fixed sum ,andnottowithdraw them until theendoftheholding period
(6years ofdeposits andoneextra year fortheholding period );
-purchase ofsecurities :theinvestor undertakes nottoresell until
expiration oftheholding period .Thesecurities must beissued by
companies having their registered office andmanagement onFederal terr­
itory orinWest Berlin ;
-loans totheemployer :theemployee agrees tolend theemployer the
amounts received under asset formation schemes (notforming part of
wages )andtofreeze these amounts for6or7years .
Savings must amount toatleast EM60ayear .Themaximum isEM800
forunmarried persons andEM1600forallother investors .Income ceilings
have been set :annual taxable income ofDM24000forunmarried persons
andDM48000formarried persons ,plus IM1800foreach child under 18.
Money ondeposit under the "EM624"Law isnottaken into account incalcular -
ting this ceiling .
Forentitlement tothepremium ,theamounts saved must notbe
directly orindirectly linked toaloan ,andmust notbewithdrawn before
theendoftheholding period .Ifthey arewithdrawn earlier ,thepremiums
will beannulled .Therepayment ,transfer orpremature commitment ofthe
savings will notlead toloss ofpremiums iftheinvestor orhisspouse
(notbeing legally separated )dieorbecome incapable ofworking .Thesame
applies iftheinvestor gets married ,after twoyears' deposits have accrued .
Inthecase ofasavings contract with deposits byinstalments ,ifthepay­
ments areinterrupted (e.g. ,return ofamigrant worker tohishome country ),
thepremium will bepayable inrespect ofthepayments made prior tothe
interruption butwill bepaid only after theholding period .
Since 19^9 »ithasbeen possible toswitch cash savings into secur­
ities orhome-ownership schemes ;theamounts saved mayalso beconverted to
funds forhome building ortoinvestment inhisownundertaking byaself-
employed worker with noloss ofpremium .

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Thepremium amounts to14/6forsingle persons andchildless married
persons ,and isincreased "by2pforeach child .
2.2.InIreland tinvestment bonds areoffered ataninterest rate of7*5$
plus a%premium after 5years .Interest ispaid –netoftax -»but
isliable toincome taxinthehands ofrecipients ;premiums aretaxfree .
Under theNational Instalment Saving Scheme ,which covers asix–year
period ,investors agree tosave afixed monthly instalment (IRL1–IRL50)
for 12consecutive months .Thetotal sosaved isleft ondeposit fora
further twoyears ,attheendofwhich ataxfree premium ispayable onthe
total saved .Ifthesavings aredeposited forfive years ,anadditional
premium of5%oftheamount saved ispaid .Minimum yields (premium plus
interest )areguaranteed (30$after twoyears andupto10?oafter five years )
incases where they arehigher than they would beifthey were index–linked .
Inthecase ofpersons aged 65orover ,ascheme forthepurchase of
savings bonds (uptoamaximum ofIRL750)hasbeen introduced .Thecapital
value ofthebonds islinked totheconsumer price index .After oneyear ,
thepremium –also index»-link:ed –ispayable ,andifthebond isheld for
three years anadditional premium of5%ofthepurchase price ispaid .All
premiums arefree oftax .
2.3.IntheUnited Kingdom ,British Savings Bonds were introduced in1968 ,
asthesuccessor totheDefence Bonds (introduced in1939 )»andtheNational
Development Bonds (introduced in1964 )*They aresold inmultiples ofUKL5»
with amaximum holding ofUKL10000andalife of5years .Attheendof
this period ,a3%tax-free premium ispayable ,butthehalf–yearly interest
issubject totax.TheUlster Development Bond (sold only inNorthern
Ireland )issimilar interms andconditions totheBritish Savings Bond .
Another premium scheme toencourage savings istheSave-As –Your-Earn
system (SAYE).Itoffers atype ofsavings contract whereby ,inreturn for

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regular monthly payments ofafixed amount over 5years ,abonus equal to
14monthly payments isgranted when thetotal sum iswithdrawn attheend
ofthat period .Alternatively ,andwithout making anyfurther payments ,
ifthesavings areleft invested forafurther twoyears (making 1years
inall)fapremium equal to28monthly payments ispayable .Thepremiums
orinterest payable under thesavings contract arefree oftax.
Twonew index-linked schemes introduced bytheGovernment constituted
asignificant innovation .Thefirst ,which came into effect on2June 1975t
provides foranewtype ofnational savings certificate available only to
those ofstatutory retirement age.Theminimum unit isUKL10(maximum
holding UKL500).Provided thecertificates areheld foratleast oneyear
they will berevalued inline with themovement oftheretail price index .
Ifheld forfive years ,anadditional premium of4%ofthepurchase price
will also bepayable .Under thesecond scheme ,which came into effect on
1July 1975 ,savings certificates areissued inexchange forearnings with­
held atsource (replacing theabovementioned SAYE scheme );allsavers aged
16orover areeligible .Theminimum monthly contribution isUKL4(maximum
UKL20).When thesaver hasmade payments under thescheme ,hemaywithdraw
hissavings ,which will berevalued inline with themovement oftheretail
price index .Alternatively ,andwithout making anyfurther payment ,the
investor mayleave hissavings forafurther twoyears attheendofwhich
heisentitled toapremium equal totwomonthly payments inaddition toany
further index –linked bonus .
Theproceeds from both schemes arefree ofincome taxandcapital
gains tax# Innocircumstances will aninvestor receive less inmoney terms
than his original investment .These schemes areonly available through the
Department ofNational Savings .
2.4.InDecember 1976 theGovernment ofLuxemburg ,incollaboration with
theCaisse d'Epargne del'Bfcat (State Savings Bank ),launched anindex-linked
savings scheme .Interest onsavings deposits ,with monthly payments frozen
forsome years ,will correspond totheaverage rate ofinflation inthe

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currentfiscalyearplus0.5%,withupperandlowerlimitsofTfoand9$
respectively .Inthefollowing year,theprivatebanksdecidedtooffer
theirclientsasimilarsavingsschemeonslightly morefavourable terms,
2.5.Thebasiccharacteristics ofthesesavingspremiums schemesaxealso
tobefoundintheDutchlawonyouthsavings.Youngpeopleaged15to20
maymakea"youthsavingscontract"withabank.Aftersavingforaminimum
of6andamaximumof9years,theyareentitledtoatax–free premium,equal
to10$ofthesumsavedtogetherwiththeaccruedinterest.UptoHFL480
peryearcanbesaved.Thepremium maybeobtainedearlierifthesavergets
married,orimmediately ifhedies.
3.Varioustypes
3.1.InLuxemburg ,thereisawholeseriesofspecialschemes(school
savings,youthsavings,occupational savings)opentoyoungpeopleatthe
Statesavingsbank,differing asregardstheagelimitsandholdingperiods
applied.Theyofferadvantageous interestrates,andinthecaseofoccupar-
tionalschemes(opentoyoungpeoplebetween21and30),carryapriority
entitlement toloanstocoverthecostofvocational training ,housepurchase ,
etc.Thisrightmaybeexercised uptotheageof36.
On31December 19771649^6peopleweretakingpartinyouthsavings
schemes (LFR1057million)and11283inoccupational savingsschemes
(LFR1767million).

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B,Incentives forsaving intheform ofreal property
4«Fiscal advantages
4*1*AllEECcountries provide tax "benefits asanincentive tosavings
destined toacquire real property .
IntheNetherlands ,Denmark ,Italy andLuxemburg ,mortgage interest payments
can "bededucted infull from taxable income® InBelgium ,these payments can
bededucted from thetaxable base uptoanamount notexceeding declared
income from real property andsecurities ,
4.2,InFrance ,interest onloans contracted forthepurchase ,construction
ormajor repair oftheprincipal dwelling (when thetaxpayer istheowner of
thesaid dwelling )canbededucted from taxable income uptoalimit of
FF7000 (plus FF1000perdependent ).Thepurchase ofbuilding land is
liable toVATataneffective rate of5•2-8%instead oftheregistration duty
of16,6$ ,whilst thesale ofdwellings isliable toregistration duty atthe
reduced rate of4«8$ ,
4.3,IntheFederal Republic ofGermany ,acertain percentage ofthecost
ofdwellings foroneortwofamilies andflats (5$peryear inthefirst 8
years ,2,5$ thereafter )maybededucted from taxable income bytheperson
whoordered itsbuilding orwasthefirst purchaser ,soastoaccelerate its
amortization .Thebuilding orpurchase price cannot betaken into account ,
unless itisbelowM150000 (EM200000forhouses tobeinhabited bytwo
families )less theprice oftheland (l).Also ,ifland earmarked forthe
construction ofsubsidized housing orqualifying fortaxconcessions is
purchased (inprinciple ,notmore than 156sq,m ,)titwill beexempt from
thetaxontransfers ofreal property .This applies also tothepurchase
ofnewhouses ordwellings .Thepurchase price ofaone–family house or
apartment isexempt from this taxuptoM250000 (HI300000inthecase of
atwo–family house ).
(l)Art,7boftheIncome TaxLaw,

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4.4# InIreland ,income taxrelief isgranted oninterest onhome-ownership
loans .All newsubsidized houses areexempt from stamp duty .Ifthepur­
chaser does notmeet theconditions toqualify forasubsidy ,heisnever­
theless exempt provided thebuilder hasreceived acertificate from the
Ministry oftheEnvironment totheeffect that construction costs are
reasonable .
4.5 .IntheUnited Kingdom ,the 1977 Finance Act provides fortaxrelief
oninterest paid onloans taken outforthepurchase orimprovement of
property .Oneofthemain conditions isthat theproperty must betheonly
ormain residence oftheborrower (orthat ofadependent relative orformer
orseparated spouse ).Where theloan isforthepurchase ofproperty it
generally takes theform ofamortgage andthere isnolimit ontheperiod
during which taxrelief isgranted onloans notexceeding UKL25000 .House
purchasers may link their mortgage toalife insurance contract –thereby
getting some taxrelief both inrespect ofthecapital borrowed andonthe
interest paid .
5.Saving forhome–ownership andpremiums (l)
5.1.Another kind ofincentive tosavings intheform ofreal property is
saving forhome–ownership .IntheFederal Republic ofGermany ,this form
ofsaving istheonly oneofthefour types benefiting from premiums (2)
intended toencourage house building tohave become atallwidespread .
(1)Inthis report ,theword premium ("prime "),inrelation tosavings in
theform ofreal property ,refers both tolump sums paid atthetime of
purchase orconstruction andtosums paid out ov^er several years .
(2)Lawof28August 1974 (version of20December 1977)*Theother three
forms are :
a)acquisition ofshares inhouse building cooperatives ;
b)contributions paid under savings contracts forhouse building made
with banks ,savings banks ,orcertain agencies authorized forhouse
building ;
c)contributions paid under capitalization contracts taken outwith
bodies responsible forhousing construction#

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Anyperson whopays income taxand isearning under HI24000inthe
case ofsingle persons andDM48000plus EM1800foreach dependent child
inthecase ofmarried persons ,mayparticipate inthis kind ofsavings
scheme ,provided that hehasnotalready applied forpremiums under thelaw
onsavings premiums (See2.1.)andthat hedoes notclaim relief from special
charges under thehome–owner ship savings scheme .
Themaximum annual amount ofsavings needed toobtain thehighest
premium isEM800forsingle persons andHI1600fortheothers .Contribu­
tions made under the"M624"Lawarenottaken into account incomputing
this maximum .Aminimum 1year holding period isfixed bylawbutthe
amount saved canbedrawn ,before theendoftheholding period ,without
loss ofpremium entitlement inthecase ofdeath ordisability forwork
oftheinvestor orforimmediate useforhousing construction onGerman
territory .Iftheholding period isnotrespected ,theright tothepremium
islost andpremiums already received must berefunded .
Thepremium amounts to18$forsingle persons andchildless married
persons ,increased by2$foreach child .Half thecost ofthepremium is
borne bytheFederal Government andtheother half bytheLander .
Subject toaceiling andunder certain conditions -10-years holding
period ,50i°increase indeposits from thefifth year ,non–utilization ,in
thesame taxyear ,ofsome other types ofprivileged savings –contributions
tosavings forhome–ownership maybededucted asspecial expenses from
taxable income .Inthis case ,entitlement tothepremium islost .
5.2.InBelgium ,ahome–ownership saving scheme hasbeen setupbythe
Caisse Generale d'Epargne etdeRetraite (CGER )andother organizations .
Thelength ofthesavings contract isfive years jattheendofthis time ,
theinvestor mayobtain credit uptoamaximum of5times theamount
invested (uptoacertain ceiling )}healso qualifies forpriority in
obtaining anormal mortgage loan .Theright tocredit isnotlost ifthe
amounts deposited arewithdrawn before thespecified time limit tobuild
orpurchase adwelling .

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5«3«Bythelawof27July 1971 ,Luxemburg setupahome-ownership savings
scheme ,which provides thefollowing advantages after aholding period of
three years :
-asavings premium equal totheinterest credited onthehome-ownership
saving account isgranted uptoamaximum ofLFR40000,This premium is
tax-free ;
-aloan equal to150% oftheamount saved maybegranted ;
-aState guarantee forupto25%oftheloan ;
-aninterest rate subsidy calculated onthebasis ofaloan ofLFR1200000 ,
reducing therate from thecurrent 6.5% to5%forahousehold without
children ,4»5% forahousehold with onechild ,4%forahousehold with
twochildren ,3.5% forahousehold with three children ,and3%fora
household with four children ,
5»4«Ahome-ownership savings scheme exists inFrance (Law 554of10
July 1965 ,andDecree 1044 of2December 1965 ,amended byDecrees 1230 and
1231 of24December 1969)# This combines theadvantages ofthepremium
(paid bytheState andequal totheinterest received ontheaccount ),tax
exemption (theinterest received onthesavings account isnotsubject to
income tax)andthegrant ofaloan atareduced interest rate .

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Itisofnote that the1969reform setupasystem forsavings with
aholding period ,known asthe "plan d'epargne-logement ",which ismore
advantageous than the"free "system known asthe "compte d'epargne –logement"(l ).
Thesums deposited under these "schemes "amounted in1975 "toPP44920
million ;inthesame year PP12180million were invested inthe"accounts ".
1
LENGTH OPSAVINGS PERIODCompte
d'épargne –logement
(Home-ownership
savings account )Plan
d'épargne –logement
(Home–ownership
savings scheme )
A.-Deposit
–minimum period lbmonths 4years
–maximum amount PP100 000 PP100 000
B.-Payment
-interest rate 3.25% 4%
–savings premium 3.25% 4%
–ceiling forthis
premium PP 7500 PP 10000
C,–Availability of "free " –blocked forthedura-I
amounts deposited (compulsory deposit of tion ofthesavings I
atleast PP750) scheme I
–incase ofearly I
withdrawal ,deposits I
may "betransferred I
with retroactive I
LENGTH OPTHE LOAN effect tothehome– I
ownership savings I
account IA.–Amount andlength
ofthe loan
-multiplying
coefficient 1.5 2.5
–maximum amount pp150000 PP150000
–maximum length 15years 15years
B.-Interest rate for 3.25/o(+1.5% for 4%(+1,5$ formai*- I
loan management costs ) agement costs )

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5.5.InDenmark ,home ownership savings areencouraged "bytheLawofMay
1970 (amended inJune 1974 )providing forapremium of4$perannum .Savings
canonly bemade bypersons over 18under ahome–ownership savings contract
with a "bank orcredit institution .Thesaving period must bebetween 3and
5years ,whereafter themoney canbeused .Themonthly payments mayfluc­
tuate between DKR100and500.Premiums will only bereceived ifthemoney
saved isused forbuilding orimproving ahome inDenmark where thesaver
spends most oftheyear .
5.6.IntheUnited Kin,?dom ,theGovernment presented ascheme ,adopted by
Parliament ,tofacilitate access tohome–ownership forfirst buyers .This
scheme combines thegrant (under certain conditions )ofaninterest-free loan
ofUKL600toberepaid from thesixth year andthepayment ofapremium for
persons whohave saved atleast UKL300fortwoyears before theyear of
purchase .Thetax-free premium ranges from UKL40toUKL110forsavings
ofUKL 1000 .
5.7.IntheNetherlands ,decreasing subsidies arepaid bytheState toany
person whobuilds orbuys anewdwelling intheNetherlands ,These subsidies
maybegranted foramaximum of10years .They vary according tothesize
ofthedwelling ,thetownship where itislocated ,andthebuilding costs .
Thetotal cost ofthedwelling ,including land ,must notexceed HFL115000.
Iftheperson receiving thesubsidy waspreviously theownei^-occupier ofa
slum-dwelling ,theState subsidy isincreased by5
Itisalso possible toobtain aguarantee from thelocal authorities
foramortgage loan ofuptoHFL200000.
6.Home-building loans
6.1,InFrance ,incertain cases ,home-building loans aregranted bythe
Credit Foncier deFrance andtheCredit Agricole ,andgive rights toa
rebate oninterest attheexpense oftheState ,Theaidgranted bythe

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Credit Poncier dePrance isbased onthe1950 lawunder which premiums are
given forhome "building loans fornewhomes subject tothecondition that
thepublic authorities' regulations areobserved .
There are two schemes :
–toreceive aspecial direct loan (pret special immediat )(PSl).the
potential owner must prove that hisincome does notexceed agiven ceiling .
Alump sumloan covering approximately 60%ofthecost price ofahome
will begranted directly bytheCredit Poncier deFrance .These loans
benefit from rebates paid totheCredit Poncier dePrance bytheState
toreduce the interest rate charged totheborrower .Theinterest rates
onthese loans are7»4$ during thefirst 10years and10$forthe10
following years .Intheframework ofthe1977 housing aidreform (see
13.2 ),thespecial direct loan will begradually replaced byaided home-
ownership loans (prets aides al'accession klapropriete )(PAP).Housing
financed byaPAPmust beoccupied astheprincipal residence .PAP loans
aregranted only tohouseholds with anincome below acertain ceiling ,
which isreviewed each year andvaries according tothecomposition of
thehousehold ,thespouse 'sactivity andthelocation ofthedwelling .
Theamount ofaPAPloan varies aooording towhether itfalls under the
"individual "sector -thebeneficiary himself isresponsible forthe
construction –orthe "grouped "sector ,where theunit purchased isone
ofacomplex .PAP loans cambeamortized attheborrower 'schoice in
15,18or20years .Atpresent ,interest rates are8.10$ fornine years
and10.75$ insubsequent years#
–inthecase ofspecial home-ownership loans (pret immobilier conventionne )
(PIC)tthere isnoceiling onincome .butonly onthemaximum purchase
price .These loans cover 80$oftheprice andaregranted directly by
banks ,which canrefinance part ofthesums involved atafavourable rate
with theCredit Poncier dePrance ,which inturn receive asubsidy from
theState .Theloans areatpresent granted under thefollowing condi­
tions :interest of9*25$from thefirst tothefifth year ,10.50$ from
thesixth tothetenth year ,and12.50$ fortheeleventh tothetwentieth
year .ByDecree of22November 1977 anewspecial loan ("prets

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conventionnes ")scheme wasinstituted toreplace thePICscheme .These
loans aremainly intended forthebuilding orimprovement ofdwellings
andaregranted under conditions similar tothose appliying tothePIC
scheme# Dwellings financed through theloans must conform tominimum
conditions asregards price andarea# Asinthecase ofPICloans ,this
scheme allows for80%financing oftheoperation#
6#2# InIreland ,theGovernment helps persons toowntheir ownhome "bya
direct assistance scheme# Since 26May1977 tanypurchaser ofafirst home
mayreceive anon-refundable subsidy ofIRL 1000# This subsidy isalso
granted topersons building their first house ,provided work onlaying the
foundations ofthedwelling didnotbegin until after this date#
Inthecase ofprivate individuals receiving aloan from alocal
authority toacquire their ,first home ,inNovember 1976 theGovernment
introduced anewincentive# Inthefirst nine years ,theTreasury will pay
theborrower asubsidy (forexample ,IRL4#50perweek onaloan ofIRL5600
ormore )decreasing byone-ninth peryear# Thus theborrower does notpay
thefull amount oftherefund until thetenth year# Itshould benoted that
depending onthefamily circumstances ofthepurchaser ,theloan mayequal
upto100$ ofthevalue ofthedwelling ,butingeneral themaximum is
IRL9000or$8%ofthevalue ofthehouse#

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II.TYPES OFINCENTIVE OFFERED TOLOW-INCOME GROUPS
A.Incentives for savings inthe form ofdeposits and securities
7.Fiscal advantages
7.1.IntheNetherlands ,theLawof27June 1963 isintended toremove tax
obstacles likely todeter small investors from acquiring assets .
These legislative measures aredirected towards theissue of"savings
certificates "byinvestment funds .These certificates canonly beacquired
andheld bysmall investors .Thepresent regulations laydown :
–theinvestment income onthese certificates isnotsubject toawith­
holding dividend tax.Taxonthe investment income oftheinvestment fund
will berefunded ;
–noincome tax isliable onthe difference inthe amount that isreceived
when selling thesaving certificate totheinvestment fund which has
issued itandtheamount paid forthesavings certificate ;
–no"capital tax"ischarged ontheissue ofsavings certificates ;
–nostamp duty will becharged onsales ofsavings certificates tothe
investment fund which issued them .
Special "savings certificates "arecurrently issued byonly two
institutions ,"TheInvestment Fund forsmall investors "oftheFederation
ofDutch savings banks ,andthe "WEBEFO "(investment fund oftheworkers
belonging tothe "Dutch Catholic Union "NKV).
Under the law onthe "Fund for asset formation "which came into force
on1July 1971 jpurchasers of"savings certificates "(with anincome below
thetaxthreshold )canreceive apremium of35$ (uptoHFL500)ofthetotal
amount purchased ,provided they have remained unencumbered intheholder 's
possession forsixcalendar years .

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8.Savings premiums
8.1.Also intheNetherlands ,until 1January 1974 »thegeneral lawon
savings premiums (Lawof1October 1965 )applied toresidents aged between
21and60whose income didnotexceed HFL18000ayear .Themaximum amount
forsavings wasHFL250peryear ,andtheamount ofthepremium was20^of
thesavings made .This premium ,exempt from taxandsocial contributions ,
wasgiven oncash payments made tocertain savings institutions ,oronthe
purchase ofsecurities ,thepayment oflife insurance premiums ,anddeposits
insavings banks .Theright tothepremium became effective after possession
ofthe suns unencumbered for4calendar years .Atend1972 ,alawwaspassed
repealing thegeneral lawonsavings premiums from 1January 1974# This
reform ispart ofaGovernment agreement under which itwasdecided tointro­
duce a"savings-earnings "scheme (see14.6 and15.7 )*
9.Popularizing investment insecurities
9.1.IntheFederal Republic ofGermany ,toencourage lowincome groups to
invest insecurities ,theGovernment denationalised part oftheFederal
industrial assets ,bymaking anissue of"people 'sshares ",sold insmall
units ,tolowincome groups .
Inthefirst denationalization operation relating toPHEUSSISCHE
B2RGWERXS undHOTTEN AG(Preussag ),only German citizens with annual income
below DM16000could purchase thestock .Noincome ceiling wasfixed for
company employees .Each purchaser could receive amaximum offour shares ,
five foremployees .Theissue price -EM145forashare ofnominal value
DM100 ,wasatthetime (1959 )atthebottom endofthemarket price range
andcould beconsidered a"social "price .
EM81l/2million worth ofshares were sold inthis operation .
In1961 ,"theVolkswagen company wasdenationalised .Oftheinitial
capital ofDM600million ,360million were sold as"people 'sshares ".The

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priceoftheissuewasDM350foraDM100share.A"social"discount ,
varyingfrom10to25ioaccording toincomeandnumberofchildren ,wasmade
onthisprice.
Purchase waslimitedtoresidents oftheFederalRepublic withqwrmal
incomeofDM16000orunder(forahousehold )orDK8000(singlepeople).
Allpurchasers received twoshares,athirdbeingdistributed afterbeing
chosenbylot.Employees couldacquire 10shares.
In1965,thelastdenationalization operation concerning VEREINIGTE
ELEKTRIZITATS UNDBERGWERKS AG(VEBA),tookplace.OverDM524millionof
shareswere.sold.Theissueprice-DK210foraDK100share-wasfixed
atthelowerendofthemarketpricerange.
Theincomeceilings-whichwerethesameasthoseintheVolkswagen
denationalization –didnotapplytoemployees .Purchasers hadtobeGerman
nationals orhavetheirdomicile orhabitual residence ontheterritory of
theFederalRepublic.Eachpurchaser received twoshares,employees having
therighttofive.

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B#Incentives for savings inthe form ofreal property
10,Fiscal advantages
10.1 ,Aconsiderable body oflegislation provides forexemption orreduc­
tion inrates laid down forindirect taxation relating todeeds ofpurchase
ofdwellings orbuilding land :this issoinBelgium where theregistration
duty isreduced from 12,5% to1.5$ inthecase ofsale topersons receiving
astate subsidy (see12.1.),ofproperty belonging tothepublic authority
companies concerned with real property aswell astoadministrative and
public institutions .This duty isreduced to6%forpurchase ofanylow-
cost dwelling andtheland earmarked forbuilding thesaid dwellings .
10.2 ,InLuxemburg ,registration duty canbereduced to1.7i°(normal rate
7/0(lawof29Kay1906 )forworkers ,craft workers ,persons having small
holdings ,oremployees wholive essentially ontheir earnings ,whose income
isnotover LFR200000peryear (index-100 ;present index :296)(this
figure maybeincreased totake family circumstances into account )and .whose
taxable assets donotexceed LFR750000 (index-100 )onacquisition ofa
low-cost dwelling ,orbuilding land intended fortheconstruction ofsuch a
dwelling .Thesame advantages areavailable forpurchasers of"allottments "
whocanmeet theabove conditions .Allottments must notbelarger than 10
ares (12forlarge families ),
10.3 ,IntheFederal Republic ofGermany ,subsidized dwellings areexempt'
for10years from land tax (levied onthevalue oftheland without buildings ).
InBelgium ,thewithholding taxisrefunded for10years fornewdwellings ,
flats included ,provided nopremium isreceived forpurchase orconstruction ,
andthecadastral income does notexceed acertain ceiling (l).
InItaly ,thelawprovides forconsiderable reductions intheregistra­
tion duty ondeeds ofsale relating toland anddwellings ,andonmortgage
taxes .There are also facilities with respect tolocal income taxes .
(l)Varying from BFR6000intowns with less than 5000inhabitants to
BFR 12000 intowns with 30000 inhabitants ormore .

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10.4 .Belgian legislation provides fortaxexemption fortax–payers whohave
taken outamortgage forthepurchase ,construction ortransformation of
low-cost orsimilar housing ,orforamediuifr-cost dwelling .Oncondition
that alife-insurance contract has "been signed ,guaranteeing payment ofthe
capital borrowed ,theamounts used toamortize ortoreconstitute these
loans maybededucted from taxable income (income TaxCode ,Art.56).
10.5 .InBelgium ,provision ismade forreductions innotaries *fees ,in
particular forthesale of "building "byprivate contract bythe "National
Housing Society ",the "National Landowning Society "ortheir accredited
companies ,aswell asbycredit institutions approved bythe "General
Savings andRetirement Fund ".Inthecase ofsales agreed tobythesaid
agencies thenotaries' fees arereduced byhalf .Thesame istrue for
loans agreed tobythesame agencies orbythe "Housing Fund ofthe
Association oflarge Belgian Families ".
11.Loans atreduced rates ,interest rate subsidies .State guarantees ,'
rental-sale
11.1 .InFrance ,aconsiderable proportion -fixed bytheFinance Law each
year -oftheexpenses incurred bytheHLM (moderate rent housing )organiza­
tions isintended tofacilitate home-ownership forlowincome groups .Two
ofthefour HLMorganizations actexclusively inthis field :they arethe
mortgage lending institutions andtheHLMcooperatives ,formed bygroups of
people whowish tobuild dwellings fortheir ownuse .These programmes
arefinanced ,basically ,bylong-term loans from theloans office (caisse
desprets )totheHLMorganizations atvery lowinterest andloans from
savings banks ,inparticular ,which receive aninterest rate subsidy from
the State .
Tobenefit from theHLMloans ,completed homes have tomeet specific
area standards andcost–price ceilings .Persons eligible forthescheme
must have anincome below agiven statutory ceiling .

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TheState pays anannual subsidy totheHLMloan office sothat it
canmaintain a "balance "between reimbursement "bythevarious HLMorganizations
anditsownrepayments tothe "Caisse desDepSts ",which provides itwith
thenecessary finance from itsownresources#
Atpresent theinterest rates forHLMloans areasfollows :4,10%
from the1sttothe 5"thyear ,6.50^from the6thtothe10th year ,and
10.105cfrom the11th tothe 25"th year# Thesubsidized loan amounts to
approximately IQffoofthetotal cost price ofthehome .
Persons whose income is "below acertain ceiling mayobtain loans
from mortgage lending institutions .Theloans maybeforamaximum of25
years .
Subject tothesame conditions asregards income ,theHLMcooperatives
offer a"location-attribution "(rental –sale )scheme ,under which thefuture
oxvner becomes amember ofthecooperative bypurchasing shares forasum
equal tothebuilding costs ,Apart ofthis sum–maximum 8ofo–iscovered
byaState loan and ,insome cases ,asupplementary "family loan ",whose
total varies according tothekind ofdwelling andtheregion ;thebalance
ispaid intheform ofrent ,sofixed astoallow repayment ofthedebt
within 25years maximum .
Persons whomeet theconditions required toqualify forthegrant of
abuilding premium ,andwhose income isunder acertain ceiling ,mayobtain
20-year loans fortheconstruction ofadwelling ,forwhich inprinciple
thegrant ofapremium hasbeen agreed .Inthis case thepremium iscon­
verted into interest rate subsidy .
Supplementary "family loans "(corresponding toabout 30%ofthe
principal loan )arealso provided .They aregiven oncondition that the
housing chosen must correspond tothefamily situation oftheborrower®
These HLMloans ,like thespecial direct loan (PSl),will bereplaced
bythenewsubsidized home–ownership loans (PAP)(see6,1,),

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11.2 .InItaly ,thebasic provisions on"low-cost people 'shousing ",areset
outinRoyal Decree N°1165 of28April 1938 ,which hasbeen amended several
times .Itprovides forthepayment ,over 35years ,ofState subsidies "
-corresponding to4$ofthebuilding costs -tohousing cooperatives ,
companies andpublic bodies whose activities relate tobuilding ;these ,in
their turn ,let ,ortransfer ownership in,thedwellings built (inthe
proportion of2/3tol/3).Thedwellings financed must have certain
technical characteristics anddimensions .ThePresidential Decree of17
January 1959 (N°2)andtheLawof27April 1962 (N°23)contain provisions
onthetransfer ofownership inthese dwellings topersons whoarealready
tenants .Substantial facilities aregiven tothem inrespect ofprice and
methods ofpayment .
11.3 .LawN°715of10August 1950 setupasystem offinancing forbuilding
dwellings not inthe "deluxe "category ,notably intowns where housing is
poor orinshort supply .Persons orcooperatives wishing tobuild adwell­
ingmust askfortheapproval oftheMinistry ofPublic Works ;when aproject
hasbeen approved ,thecorresponding amount isputatthedisposal ofreal
estate loan institutions which have made an"adhoc"agreement with the
State .Thefunds areused togrant loans forupto15%ofthetotal cost .
Theloans areforamaximum of35years andinterest isat
11.4#Asimilar system ,although ofwider scope ,hasbeen setupbyDecree -
lawN°1022 of6September 19^5 |andLawN°1179 of1November 1965 *They
provide forreduced interest loans ,guaranteed bytheState ,torpersons
who ,individually orgrouped incooperatives ,wish tobuild adwelling ,so
long asthey arenotalready owners ofanother dwelling inthetown where
they wish tobuild andthat their taxable income –notincluding earnings
from work –isnotmore than LIT 1200000ayear .Thesame facilities
canbegranted toinstitutions andcompanies which areconcerned with
building low-cost housing ,andalso toprivate undertakings which build
dwellings forpeaople whofulfil theabove conditions .

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These loans aregranted forupto25years andtheamount isequiv­
alent toamaximum of15%ofthevalue ofthe "building (including theland);
themaximum rate ofinterest is5»50$i thedifference "between this andthe
real cost oftheoperation being "borne "bytheState#
Special provisions –which for themost part donotcome within the
scope ofthis report –exist incertain regions with aspecial status .
11.5•IntheFederal Republic ofGermany ,public funds –intheform of
loans atreduced interest ,repayable over long periods ,orsubsidies to
lessen thecost ofloans from thecapital market -areused toenable persons
with anannual income belowM18000tobuild dwellings .This ceiling may
beraised byDM9000forthespouse andHI4200forevery other family
member (second lawonhome building of1September 19^5 »last amended by
theLawof1September 1976 ).
11.6 .Under thesubsidized home-ownership policy ,theLawof23March 1976
isdesigned toencourage lon£*-term tenancies byarental-purchase type of '
contract which enables lower income groups toacquire dwellings bypaying
anamount ofDM40to "JO(depending onthetaxconcessions they areallowed )
inaddition totheir usual monthly rent .Thescheme isthus anintermediate
stage betiireen rental proper andhome ownership ,because thepurchaser isnot
himself theowner butobtains occupier 'srights byhisparticipation inthe
real estate company which isthelegal owner ofthebuilding .This does
notpreclude thetenant from acquiring hishome outright atalater stage ,
however ,
11.7 .InBelgium ,loarss ataspecial interest rate (9ft)maybeobtained
from theSociete nationalc terrienne (National Land-ovmng Company )
(formerly theSociete nationalc dolapetite propriety terrienne )forthe
construction orpurchase ofasmall dwelling from thecompany itself .The
State contributes amajor share oftheinterest ontheloans which the
company contracts toobtain itscapital .
ThePonds dulogeuent delaLigue desfamilies deEelgique (Housing
fund oftheBelgian league oflarge families )gives building loans ata

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very favourable rate ofinterest totheheads oflarge families ,whose
taxable income does notexceed acertain ceiling .Theinterest rate on
these loans varies from 6,25% to1,75$ »depending onthenumber ofchildren
dependent ontheborrower andthesize ofhis income ,
11.8 ,InLuxemburg ,thenormal rate forbuilding loans bytheState Savings
Bank is7*75$ »This rate isreduced to6,25$ forthose receiving apremium
forhomebuilding orpurchase .Families with 3dependant children receive
aninterest rate subsidy from theState ,reducing therate from 6,25$ to
3,25 /»,Thesubsidy relates toamaximum capital sumofLFR600000,
11.9 ,InBelgium ,persons buying orbuilding low-cost or"similar "housing
andpossessing noother dwelling ,mayobtain aState guarantee foramortgage
loan from certain credit institutions .Maximum amounts are fixed for the
rate ofinterest andforthecapital borrowed .
Iftheamount needed isparticularly high ,asupplementary guaranteed
loan maybegranted provided theborrower isinreceipt ofaState premium
(which isthen paid over 10years andisknown asa"prime fractionnee "
(premium paid ininstalments )),hasalready obtained aguaranteed loan
with afirst priority andthat theinterest rate forthesupplementary loan
does notexceed 8,75$ »
11.10 ,InIreland ,local authorities advance house purchase loans ofupto
IRL9000forthepurchase ofnewhouses .Purchasers' total incomes must
notexceed IRL3500and ,inthecase offarmers ,therateable value must
notexceed IRL60,These loans areattheprevailing interest rate andare
repayable over amaximum of35years ,
11.11 ,IntheUnited Kingdom ttheDepartment oftheEnvironment operates
anoption mortgage subsidy scheme under theHousing Subsidies Act1967 *
Theborrower mayelect tohave theinterest onahouse loan sub-
sidised under theAct ,instead ofclaiming taxrelief oninterest payable

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onthemortgage ,Notionally ,thelender receives from the "borrower the
full amount ofinterest due ;infact ,however ,agiven proportion only is
paid ,the "balance "being financed laytheDepartment oftheEnvironment .
This scheme isdesigned especially forpeople with incomes "below
theminimum taxable level .Through it,they obtain asubsidy "broadly
equivalent tothetaxrelief onmortgage interest towhich they would "be
entitled ifthey paid tax.
Thescheme canonly beoperated when anoption notice hasbeen
given tothelenders ,whomust berecognised bodies such asbuilding
societies .Theperiod ofthesubsidy depends ontheduration oftheloan ,
butceases ,indefault ofother arrangements ,30years from thedate on
which theoption notice takes effect .
11.12 .Topromote home ownership itisthepolicy oftheIrish Government
that tenants orprospective tenants oflocal authority houses whoaspire to
home ownership should begiven every facility .There arethree types of
schemes (operated bylocal authorities )toencourage home–ownership among
tenants :
(a)asales scheme which provides forthesale orlease ofhouses totenants
atthemarket orreplacement value ofthehouse ,subject toadiscount ,
based onthelength oftenancy ,ofupto30/oforhouses inbuilt –upareas
or inrural areas ;
(b)ascheme introduced in1572 ,whereby tenants aregiven theoption ,when
being notified oftheallocation oftheir house ,ofeither renting or
buying thehouse onatenant –purchase basis with alltheaids available
toprivate house purchasers j
(c)local authorities build houses forsale asdistinct from letting .These
houses areprovided atreasonable cost andareintended ,bymeans of
housing grants andother State aids available ,forprivate house pm>-
chasers .

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11,13 ,Aspecial system isused inLuxemburg bytheNational Society for
lou-cost duellings .Thefuture owner rents thedwelling hewishes to "buy ;
hisrent isfixed ata,sumvarying betxreen 3and 2,5' /!-oftheprice ofthe
dwelling ,according tothenumber ofdependent children .Aswell aspaying
therent ,thetenant must undertake todeposit each month acertain sum in
asavings account ,which hasbeen calculated sothat in10years theminimum
capital required forthepurchase ofthesaid dwelling will have been amassed ,
thedifference being covered byaloan from theState Savings Bank ,Interest
of%ispaid onthis savings account ,
12,Premiums
12,1 ,Thegrant ofapremium fortheconstruction orpurchase ofadwelling
isprovided forinthelegislation ofseveral countries .InBelgium (Royal
Decrees of10August 19&7 i4February 1968 ,22November 1968 ,7July 1969 ,
28October 1971 ,17April 1972 ,3April 1973 ,2July 1973 ,27July 1973 and
28December 1973 ),ahome-building premium canbegranted topersons who
have noother dwelling when they build ahouse orbecome owners bycontract
with aprivate owner ,this contract being thefirst entered into andthe
building never having been occupied .Thehabitable area ofthedwelling
maynotbemore than 85square metres inasingle family house or65square
metres foranapartment .These figures maybeincreased by10square metres
perchild orparent living with theapplicant .Thepremiums aregranted
only topersons whose taxable income does notexceed certain ceilings .
Four income ceilings aretaken into account indetermining four
different amounts forthepremiums (inversely proportional ).Thebasic
ceiling ofBFR180000canbeincreased byBFR10000 ,20000or30000,
andagain byBFR12000foreach dependent child .Theamounts ofBFR180000
andBFR12000arelinked totheconsumer price index of108,87 (1971 B100),
Theamount ofthehome-building premium varies ,according toincome ,
from BFR60000to11000,andisincreased by20foforeach dependent child .

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Inthefield ofprivate housing construction ,legislation isinforce
toprotect future owners ofdwellings "before orduring construction incases
where payments arerequired "before completion oftheworks .This isdealt
with intheLawof9July 1971j which regulates theconstruction andsale
ofdwellings to "bebuilt orunder construction andintheimplementing
decree of21October 1971 *This lawisapplicable toallbuildings for
dwelling purposes with orwithout apremium and/orlow-cost loanbeing
granted .
Under thesame conditions astoincome ,andsubject tohaving no
other dwelling ,apremium forhome purchase isgiven tothepurchaser of
housing from thepublic sector when this dwelling canbeconsidered tobe
subsidized orsimilar housing ,orasmall holding .Theamount ofthehome
purchase premium varies according toincome from EFR60000to11000 ,
increased by20foforeach dependent child .
12.2 .InIreland ,aspecial State aid ispaid fornewhousing tocertain
purchasers living inrural areas who :
(a)wish toobtain houses inriral areas ,provided they derive their live-
hood solely ormainly from agriculture andtherateable value ofthe
property does notexceed acertain level ;
(b)live inovercrowded houses orhouses unfit forhuman habitation and
whose circumstances aresuch that they cannot obtain ahouse fortheir
ownoccupation without this special aid.
Supplementary State grants ofuptoIQQffo oftheordinary grants are
paid tohouse purchaser where thehouse hasalready qualified fora
State grant andwhere theapplicant 'sincome does notexceed agiven ceiling
(increased iftheapplicant hasfour dependents ).

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12.3 .Twodifferent premium schemes exist inLuxemburg ,oneforpurchase
andtheother forconstruction (Ministerial Decree of25May1973)•Ahome­
building premium isgiven topersons whoarenottheowners ofanother
dwelling ,whose taxable assets donotexceed LFR600000andwhose annual
netincome does notexceed LFR140000 (atindex 100).This amount is
increased byLFR10000forone ,LFR25000fortwo ,andLFR45000for
three dependent children .Theamount ofthepremium isLFR40000increased
byLFR15000foronechild andLFR30000fortwochildren .From thethird
child onwards thefamily supplement isincreased byLFR30000foreach
further child .
Thesame conditions applying ,apremium forthesame amount is
allocated tothepurchaser ofadwelling whohasatleast 3children (2in
thecase ofawidow whohasnotremarried )oris50/6disabled .
Itmaybenoted that theceilings for income andassets areindex -
linked ,
12.4 ,Theamount ofthehomebuilding premium isalso increased byLFR
30000 iftheannual income ofthebeneficiary isbelow LFR 90000
(index =100).orbyLFR20000ifhisincome isbetween LFR90000and
125000 ,
Together with thebuilding orpurchasing premium ,theState pays the
beneficiaries ofthese premiums another premium asapartial refund onthe
value added taxorother fiscal charges applying tothebuilding orpurchase
ofahome .This compensating premium ,ineffect from 1December 1974 »
amounts toLFR60000fornewbuildings andLFR30000forexisting dwellings ,
12,5 ,IntheNetherlands ,thebenefits described tinder 5«7«arealso given
topurchasers ofdwellings built within theframework ofthe "Woningwet "
(low–cost housing )scheme .Thedwelling must notbenew ,andmust already
beoccupied ,astenant ,bytheaspiring owner .Thesale price isbased on
thetotal construction cost ,adjusted onthebasis ofanofficial index .
Thepurchaser 'staxable income must notexceed acertain annual ceiling .

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12.6.Basedonthelav;onthe"AssetFormation Fund",personswhoseincome
is"belowthetaxthreshold canobtainaninterest-free loanofHFL2400to
purchase aneworalreadyoccupied dwelling.Thisloanmust "berepaidin
eightequalannualinstalments .
Purchasers of"savingscertificates "arealsoentitledtothesavings
premiummentioned under7*1*iftheycashthesecertificates tobuyadwell­
ing;thecertificates musthavebeenheldforatleasttwoyears.
13.Varioustypes
13.1.InFrance,housingallowances aregiventofamilies toenablethemto
liveinconditions whichareneither overcrowed norinsalubrious .Both
tenantsandov.-nersmaybenefit.Theamountdepends onfamilyincome,number
ofdependents ,rentpaidandthemonthlyinstalments paidontheloan
contracted topurchasethehome.Since1972,theallowances arealsogiven
tooldpersons andyoungworkers.
13.2.Tocontribute tothesatisfaction ofhousingneeds,facilitate hom^
ownership ,providebetterhoiisingandimproveexisting dwellings ,French
housingaidpolicyvrasreformed bytheLawof3January 1977*Underthis
Law,persons whoforlackofmeanscannottodayaspiretohome–ownership ,
canbegrantedaidtoenablethemtotakeonthefinancial burdenentailed.
Personal home–ownership ,notregarded asincomefortaxorsocialsecurity
purposes ,constitutes themainfeatureofthereform.Aidisgrantedto
persons whooccupy,astheirprincipal residence ,thedwelling ofwhich
theyareownersortenants.Theaidis"personalized "inthatitis
adjustedtochangesinhousehold income,therelativecostofthedwelling
andfamilycircumstances .Paymentofrent(ormonthlyrepayments )exceeding
the"minimum"rentfixedbylawgivesentitlement to"personalized "aid.
Thefieldofapplication istoallintentsandpurposes limitedtorented
low-costdwellings andhousingforwhichStateaidhasbeengranted(PAPf
home–ownership loans(see6.1.)orspecialhome–ownership loans(seealso
6.1.)forhousingconstruction orimprovement )."Personalized "aidcannot

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"becombined with thehousing allowance referred toatthe "beginning ofthis
paragraph ,Tautthelatter continues tohepaid under therelevant conditions
ifpersonalized aid isnotgranted .
13.3 .IntheFederal Republic ofGermany thousing aid isgranted under the
"Wohngeldgesetz ",theamount ofwhich depends mainly onbeneficiaries *
income andnumber ofdependents ,thesize ofthehouse ,andtherent .Both
tenants andowners ofhouses orapartments maybenefit .-On31December
1975 ,approximately 1.67 million households were receiving allowances under
this law.
χ
X X

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III.TYPES OFINCENTIVES OFFERED ONLY TOWAGE AND SALARY EARNERS
Wage andsalary earners "benefit from statutory systems forincentives
toasset formation which differ widely from those already examined ,which
areopen tothepopulation asawhole ortopersons inlow-income groups .
Intheacquisition ofassets intheform ofsecurities ,theincentive
tosaving plays arelatively second role }ontheother hand ,great import­
ance isgiven tospecific types which provide fortaxadvantages and/or
exemptions from social security contributions foremployers who setaside
fortheir employees sums unconnected with earnings fortheformation of
durable assets .Inonecase ,itiscompulsory tosetupascheme ofthis
type .
Thetwotypes (workers *savings ,employers *contributions )can
sometimes befound inasingle system ;this type will betermed a"mixed "
system .
Theamounts setaside forworkers under these systems aresubject
toaholding period ofvarying length unless they areintended for
intrinsically lon^-term investments (insurance premiums ,investments in
real property );very often they arenotconsidered aspart ofincome for
taxandsocial security purposes .
Besides thestatutory measures ,similar measures have been taken
byseveral companies ;they areintended toencourage individual savings by
workers ,orprovide foremployers *contributions which help towards asset
formation .They will beexamined atthesame time asthestatutory systems
which resemble them most closely .
Inview oftheimportance ofemployers' contributions andgovernment
measures inrelation tosavings byworkers themselves ,itseemed appropriate
inthis third pg,rt tospeak of"incentives toasset formation ",rather than
"saving incentives "!this should underline thefact that thespecific
methods intended tocreate worker asset formation basically donotconsist
inindividual saving ,particularly since measures aiding theacquisition

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ofassets intheform ofreal property ,andrelating only toworkers
-measures inwhich onthecontrary individual saving retains allits
usual importance -arerelatively rare ,
A,Incentives totheformation ofassets intheform ofdeposits
and securities
Inthis part thefollowing will "beexamined inturn :
-incentives toindividual saving "byworkers }
-"mixed "types ,which involve individual saving "byworkers andsupplement­
arycontributions "byemployers :doubts concerning howcertain types
should "beclassified have been resolved onthe "basis ofthe relative
proportion constituted byworkers' savings andemployers' contributions .
Thetypes inwhich theworkers' savings element isregarded asthemost
important have been included inthefirst category ,theother inthe
second ;
-types including only employers' contributions ;
-finally ,various types which could noteasily beclassified inthe
above categories ,
14,Savings incentives
14,1 ,Themost important provisions inthefield ofincentives forworkers
tomake savings intheform ofdeposits andsecurities aretobefound in
theFederal Republic ofGermany ,Ilention should again bemade oftheHI624
Law (l)granting premiums andsavings bonuses onthesums saved byworkers ,
andinvested incertain ways ,theemployer acting asintermediary .This law
will bediscussed indetail under 15,1 ,;only those provisions giving
incentives for individual savings aredescribed here .
Workers mayrequest that part oftheir wages (orother component of
earnings ,Christmas bonus ,yearly bonus ,etc,)beinvested bytheir employer .
This reqticst ,which must bemade inwriting ,need notbecomplied with by
theemployer ,unless theworker intends toinvest atleast III10amonth ,
ormake asingle annual payment ofDM60,
(l)Third lawgiving workers incentives forasset formation (Lav;of27 «Tune
1970 )replacing theLawof1July 1965 itself replacing alav;of1961 ,
/

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Workers domiciled intheFederal Republic ofGermany "butemployed
abroad cannot inprinciple invest part oftheir earnings under this law,
because theemployment contract isnotbased onGerman law.Certain
exceptions are ,however ,made bythetaxauthorities .
Workers employed byanational employer anddomiciled abroad may
benefit from theprovisions ofthethird lawonasset formation inthesame
wayasworkers employed anddomiciled inthecountry ,
14.2 ,Also intheFederal Republic ofGermany ,ifajoint–stock company
orlimited partnership sells itsownshares toitsworkers ("workers *shares ")
ataprice lower than themarket value ,thegains realized bytheworker
(maximum DM500peryear ),which form part ofhisincome from work ,arenot
subject toincome taxortithes (Lawof10October 1967)# Nordoes the
worker paytherelated social security contributions .These benefits are
granted provided thedifference inprice isnotmore than half thevalue of
theshare ,andprovided aholding period of5years before resale ofthe
shares purchased hadbeen agreed upon .
Uptonow ,afewcompanies have made several issues ofworkers' shares
ofthis kind .Ingeneral ,theshares were offered toworkers atafavourable
price ,butpurchase isalways optional :only inonecase didtheworkers
receive thegift ofoneshare each .Generally ,theshares acquired aremade
subject toaholding period before resale ,offrom 2to5years .Given that
itmaybedangerous tocombine thenormal risk oflosing one'sjobwith the
risk oflosing one'ssavings ,which could happen ifaworker holds shares
intheemployer company ,some companies recently decided toreplace the
issue ofworkers' shares byfacilities forthepurchase ofinvestment
certificates ,
14.3 ,InItaly ,there arelegal provisions intended tofacilitate the issue
ofshares reserved foremployees ,Adecree (DICPS of20August 1947 »N°920)
provided foraderogation from theoption rights reserved toshareholders
within theterms ofpara ,1,Art,2441 oftheCivil Code ,upon issue ofnew
ordinary shares .Theshareholders' assembly maydecide ,byaqualified
majority ,toexclude from theoption rights uptoonequarter ofanewshare

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issue "when "theshares areissued forsubscription "bythecompany 's
employees ",oraneven higher proportion ifthemajority present includes
shareholders whorepresent more than half thecompany 'scapital .These
provisions have been applied inonecase only ,
14,4 ,InFrance ,aLaw of31December 1970 andaDecree of7June 1971
introduced anoptional system ofshare options infavour ofthepersonnel
ofcompanies intheprivate sector .According tothis law ,amending the
Lawof24July 1966 oncommercial companies ,these companies canoffer all
their employees anoption onshares deriving from certain financial operar -
tions (increase incash holdings ,increase incapital byincorporation of
reserves ,etc,). These options canbeexercised within five years from the
daythey aretaken outataprice fixed ontheopening day.
Thelawfixes themaximum amount ofcapital allocated totheoption
scheme andthemaximum number ofshares that canbeoffered tooneemployee .
Thefirst ceiling isdetermined asapercentage oftheshare capital (from
5i»forthefraction oftheshare capital below FF10million to1%forthe
fraction above FF50million ).Thetotal amount oftheoptions available
tooneemployee must notexceed twice hisannual salary nortentimes the
ceiling onsocial security contributions .
Taxexemption ongains realised bytheemployee (difference between
theprice oftheshares when theoption wasopened andtheprice when the
option isexercised )maybegranted iftheshares areregistered andwill
beheld forfive years .Thelawprovides ,however ,forfour possible cases
inwhich theshares maybeliquidated inadvance :i»e,,thedismissal ,
death ,retirement ortotal disability oftheshareholder ,
14,5 *In "theNetherlands ,premiums arepaid bytheState ,initsrole as
employer ,tostimulate savings byitsownemployees –both civil andmili­
tary –andalso bylocal police andthestaff ofteaching institutions ,

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solongasearningsdonotexceedacertainceiling(l)#
TheannualmaximumforsavingsisHFL504andthepremiumis25%;it
isexemptfromtaxationandsocialsecuritycharges(Lawof1July1968,
Stb#1968–263replacing alawof1960)#
Twoformsofsavingareprovidedfor(2):
–cashsavings }
–paymentofpremiums underlifeinsurance contracts ,andonaccounts with
savingstanks(3)#
Thegrantofthepremiumissubject,inthecaseofcashsavings,to
aholdingperiodof4years;inothercasestherighttothepremiumbecomes
operative intheyearfollowing theoneinwhichthepremiums werepaid#'
Localandprovincial authorities havesetupsimilarsavingschemes *
14#6#AlsointheNetherlands «theorderonsavingsschemesinundertakings
providedforthepossibility ofsavings–earnings paymentstobeheldfora
certaintime(4)#Thisschemeiscollective insofarasallworkersorall
ofthoseinthesamecategory employed bythesameemployerparticipate#
Theannualmaximumwhichcanbesavedunderthisschemeamountsto2%of
thewageceilingusedtocalculate workers *socialsecurity andunemployment
contributions .Thesavings–earnings paymentswillbewithheld bythe
employeratsource.Theemployerisexemptfromsocialsecurity contribur-
tionswithrespecttotheamountsavedbutpaysaflatratetaxof15%}the
workerisexemptoftaxandsocialsecurity chargesonthisincome#
(1)Corresponding toGrade103onthesalaryscale#
(2)Athirdform–payingonmortgages –isreservedforsaverswhowere
alreadyusingitonthebasisofprovisions replaced bytheLawof1968.
(3)Inthiscase,itisakindofinsurance#
(4)Beforethislaw,asimilarsavingsschemehadbeenandstillisapplied
insomesections ofindustry#

-103-
Payments under thesavings –earnings scheme canbeconverted into
shares orbonds oftheemployer company (upto20$ofthetotal savings )
orinto participation certificates ofthefunds administering savings raised
under this scheme .
Savings under this scheme have tobeheld forseven years .Inthe
case ofdeath ,emigration ,disablement ,etc.,savings canbemade available .
Thesame holds true when themoney saved under this scheme isspent forthe
purchase ofamain dwelling .
14.7•Over andabove their legal obligations ,asmall number ofGerman
companies give asavings premium orsupplementary interest ontheamounts
saved bytheir workers .Thesame applies inLuxemburg where certain
companies give their employees theopportunity toinvest funds insight
savings accounts onwhich higher than current interest rates arepaid .The
taxexemption referred tounder 1,1,isapplied toindustrial ,commercial
ormining companies setupasjoint –stock companies }they must accept
savings funds exclusively from their employees ,either currently employed
orretired ,orfrom thesurviving spouse ofanex–employee .TheMinistry
ofFinance must give itsapproval ,
15,"Mixed "types
This section covers asset formation systems which comprise ,aswas
thecase forcertain types discussed inthelast section ,individual savings
bytheworker andsupplementary contributions bytheemployer .But ,unlike
thetypes already described ,thelaws examined here offer employers benefits
intheform ofexemption from taxandsocial security charges toencourage
them tomake contributions for their workers tostimulate asset formation .
These contributions thus assume very great importance inthestructure of
thesystem and itsapplication .
This section only concerns measures forwhich legal provision ismade ,
even ifthey arecovered bycollective agreements .

-104-
15»1 «The "DM624"Lawineffect intheFederal Republic ofGermany is
fundamental to,andingeneral very important for ,asset formation policy .
Theincentives itprovides ,aswehave already seen ,relate toindividual
savings ,"mixed "types ,thesubject ofthis section ,and (asdescribed
below insections 16.12 and16.13 )cases where theemployers' contribution
istheonly onemade ,theworker making noindividual savings .Moreover ,
theamounts earmarked forasset formation ,whatever their origin ,maybe
invested assavings intheform ofsecurities orreal property .
Thepoints common tothese different aspects ofthe "EM624"Law
will bediscussed here asthesame time asthose relating to"mixed "types .
13*2 .The "EM624"Lawapplies toallworkers inthepublic andprivate
sectors ,civil servants ,judges ,career servicemen andconscripts .Its
basic principles areasfollows :
–employers *contributions intended forasset formation maybeprovided
for incollective agreements ,company agreements orindividual contracts
concluded between theemployer andtheworker (thelast twopossibilities
must beoffered toallemployees ).Thecontributions maybecombined
with sums withheld from earnings (individual saving bytheworker )or
maybethesole contribution towards asset formation (l).
–theworker must have afree choice between thefollowing investment
possibilities ,sothat theamounts inquestion maybe :
–invested under thelawonsavings premiums ;
–invested according totheprovisions onhomebuilding premiums (2);
–setaside forthepurchase orconstruction ofadwelling (2)s
(1)Totake account asfaraspossible ofthesituation ofunemployed
workers ,thelegal provisions have been amended toallow personal
payments into savings schemes towhich theemployer contributes to
becontinued .
(2)Onthese twopoints ,see19«1 «

-105-
–used tobuycompany shares ataspecial price ;
–paid aspremiums forlife-insirance contracts ofaminimum length of
12years ,notincluding anysupplementary contributions foraccident ,
disablement orsickness ,
–regardless ofsource ,themaximum amount qualifying fortheadvantages
offered isM624 ;
–under these conditions ,benefits aregranted both toworkers (l)and ,in
certain cases ,toemployers :theformer receive apremium equal to30%
ofthesuminvested according tothe law.Forworkers whohave more than
2children andarereceiving family allowances foreach ofthem ,the
premium is40%.Ifboth spouses work ,each ofthem mayinvest EM624*
Ifthey have more than 2children ,each ofthem hasaright toapremium
of40%.Thesavings premium isnotgiven tosingle workers whose taxable
income isover DM24000 (HI48000inthecase ofthejoint taxable
income oftwospouses ,plus HI1800foreach dependent child ).The
premium ispaid incash totheworker bytheemployer .Theemployer
deducts theamount thus paid from hispayroll tax.Thepremium for
employees isgranted inaddition tothepremiums paid under thelawon
savings premiums andthelawonhome-ownership savings premiums ,sothat
themaximum aid (excluding interest onpremiums )amounts to44%–58%,
depending onthefamily situation ,2%being added forevery child .
–anemployer whohasupto50employees maydeduct 30%oftheasset
formation contributions which areadded toearnings ,from theamount to
bepaid asincome taxortaxoncompany profits .This deduction must
notbemore than DM6000ayear .
15.3 .Thetotal amount invested byallsavers under thelawrose from
DM1600million in19^9 toHI9600million in1976 .Attheendof1976 ,
thevolume ofsavings ,including interest andpremiums ,amounted to
(l)Workers whohave been unemployed foroneyear ormore maydraw on
savings held insavings schemes before theendoftheholding period
without losing thefinancial advantages offered bytheGovernment .

-106-
approximately M11000million.Theaverageamountinvestedperheadin
1976wasIM615,ofwhichaboutEM410wascontributed bytheemployers.
In1975»almosthalfthecontracts signed(49$)relatedtotypesofinvest­
mentprovidedfortinderthegenarallawonsavingspremiums;28$weredrawn
upunderthelawonbuilding premiums ;lifeinsurance contracts represented
21$ofthetotal,whiletheremainder wasinvestedinworkers'sharesand
loanstotheemployer,
15.4.Over1000collective agreements andcompanyagreements wereconcluded
underthetermsofthislaw.Thenumberofworkersreceiving employers *
contributions hasrisenfromonemillionin1969toover16millionin1978,
Although personal savings maybeaddedtoemployers *contributions established
tindercollective agreement ,thelatterarenot,apartfromafewexceptions ,
conditional onpriorsavingsbyworkers.In1978|92$ofallworkerscovered
bycollective agreements receivedanassetformation supplement.About18$
ofbeneficiaries receivedthemaximumamount,IM624,andthisfigureis
expectedtoriseto48$inI960,
15.5.InPrance,apartlysimilarsystemhasbeenintroduced inadditionto
theindividual long-term savingscontracts :Order67-694of17August
1967(l)setuptheframeworkforcompanysavingschemesforwageandsalary
earners.Itsaimistopromote,bymeansoftaxbenefits,thesettingup
ofcollective savingsschemesgivingworkersthepossibility ofinvesting in
securities withthecompany'shelp(2).
(l)Theconditions foritsapplication ,andvariousamendments ,aresetout
intheDecrees68–528of30May1968and6^-507of31May1969*
(2)ReporttothePresident oftheRepublic ontheOrder,

-107-
This scheme may "befunded from three sources :
–workers *deposits (aminimum ofFF250ayear may "befixed under the
savings schemes );
–theemployers' contributions ,calculated asapercentage oftheamount
saved (rate ofemployers *supplementary contributions ).Thesupplementary
contributions aregeared todifferent factors (family situation ofthe
person concerned ,saving capability ,etc,). These contributions –which
maynot ,inanyyear ,bemore than 10$ofearnings ,normore than FF3000
perworker –must beprovided forinthesavings scheme ;
–amounts assigned totheworkers byvirtue ofparticipation inthegrowth
oftheundertaking .
These amounts must beused toacquire shares ininvestment companies with
variable capital (SICAV )orinajoint investment fund .An"adhoc"fund
mayalso besetupwithin thecompany .
Theundertakings –which manage these funds themselves –orthe
companies which have been entrusted with their management (l)–each year
prepare areport ontheir operations which contains all information necessa­
ryfortheworkers participating inthescheme .Thereport isdistributed
tothose concerned .
Provisions arelaid down concerning themanagement oftheshares
bought aspart ofasavings scheme (themanagement must beentrusted to
specially empowered bodies ortoabody setupwithin thecompany in
accordance with theterms ofthescheme ).
The joint investment funds setupwithin undertakings mayhold only
French securities orsecurities issued byinvestment companies (SICAV )which
themselves must hold atleast 50%ofFrench securities orcurrent liquid
assets invested forashort term oratsight .Forfirms with notmore than
100employees ,only shares ininvestment companies with variable capital
maybeheld ;forfirms with more than 100workers ,awider choice ispossible .
(l)Therelated provisions arecontained intheDecree of10June 1^68 of
theMinistry oftheEconomy andFinance ,

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Therules governing thefunds must provide forasupervisory council .
This consists ofrepresentatives oftheworkers taking part inthescheme ,
chosen either "byelection ,theworks council ortheunions affiliated tothe
most representative organisations inthesector concerned .Employees
representatives mayalso "beincluded .
Theamounts invested under asavings scheme aresubject toafiv& -
year holding period .They maybewithdrawn inadvance inthecase of
marriage ,dismissal ,retirement ,death oragiven degree ofdisability of
thebeneficiary orhisspouse .
15.6 .Under these conditions ,taxconcessions aregranted toboth workers
andemployers stheformer areexempt from income taxontheamounts paid
bytheemployers ontheir behalf .Furthermore they areexempt from taxon
theincome from theamounts paid bythemselves andsupplemented bythe
employers .
Thetaxalready paid totheTreasury (taxcredit )relating tothe
income from company savings schemes isrefunded bytheTreasury .
Firms maydeduct theamounts paid from their profits when calculating
thetaxbase forthepurposes ofcorporation orpersonal income tax
These amounts arenottaken into consideration intheapplication
oflabour lawandsocial legislation .
15.7 .Asavings premiums scheme ,combined with taxadvantages forsums paid
byemployers ,wassetupintheNetherlands byadecree of19^2 ,amended in
1965 (Stb.1965-261 )andagain byanorder of21December 1972 (Stb.1972-
719)•This order isknown astheorder oncompany savings schemes .To
obtain exemption from taxation andsocial security charges ontheamounts
paid aspremiums or"frozen "shares inprofits totheworkers ,employers
must meet certain conditions .Therules governing savings schemes must be
inwriting .Theamounts workers undertake tosave under thesavings premiums
scheme arewithheld from their wages andmust beentered inaspecial savings

-îoq-
account ,managed either bytheemployer ,oraninstitution chosen forthis
purpose (Banks ,Savings Banks ,home–loan institutions ,savings fund ,etc.).
These amounts may "beinvested insecurities .Purchase andsale of
thesecurities must becarried outbyaninstitution specified inthescheme .
Thesecurities must bekept insafe custody with this institution orwith
theemployer .Thesales proceeds have tobecredited immediately tothe
savings account uptotheamount oftheoriginal purchase price .Interest
anddividend yields canbedisposed offreely .
Maximum amounts arefixed forthesavings premiums –HFL750per
year –andthelength oftheagreed holding period .They range from a
minimum of50%oftheamount invested foraholding period ofatleast
4years ,to100% forthose held foratleast 7years ,andamaximum of
200%forthose held foratleast 10years .
Entitlement tothepremium isnot lost when employment isterminated
following theworker 'sdeath oremigration ,theclosure orreorganisation
oftheundertaking .
Inother cases where employment isterminated ,part ofthepremium
maybegranted ,calculated prorata onthebasis ofthenumber ofyears for
which theamounts have been deposited inthe savings account .
Workers arealso entitled toapremium onsums deposited insavings
accounts tocover 1if^-insurance premiums ,regular payments under asavings
agreement combined with life insurance ,ormarriage expenses (l).
Ifthesavings account ismanaged bytheemployer ,itmust clearly
show thesums saved byeach worker ,andthepremiums paid .
Thebenefits provided under these deorees donotapply toschemes
under which participation isrestricted –exclusively oralmost exclusively –
toworkers whose yearly income exceeds thetaxable minimum (income tax),
except inundertakings where these workers account forallormost ofthe
employees (Art.33oftheDecree ).
(l)Savings intheform ofreal property arealso provided for :see19*2 .

-110-I
AtendDecember 1974»2429undertakings offeringsavingschemeswith
premiums hadbeenregistered.About205000employees wereactuallytaking
part.Theaverageamountsavedin1974wasHFL5^7*
16.Employers *contributions
Thissectioncontains anaccountofincentives forworkers *asset
formation whichinvolveonly"employers "contributions .
16.1.Since1956,fiscalprovisions havebeeninforceinDenmarkrelating
to"workers 1shares"and"workers 1bonds"."Workers *shares"meanshares
issuedbyalimitedcompanyunderaprofit–sharingschemeortoconstitute
abonustosupplement theremuneration ofpersonsemployed bythecompany.
"Workers *bonds"areclaimsagainsttheemployer;suchbondsareissuedto
hisemployees withintheframework ofaprofit–sharingscheme,ortosup­
plementearnings.
Thesesharesandbondsarenotincluded inthetaxable incomeofthe
beneficiary ,whiletheemployerpaysataxof50$onthatpartofthevalue
ofthesecurity overDKR200.Theemployer candeductthistaxfromhis
owntaxable income.
Thisschemeissubjecttotheauthorisation oftheMinister of
Finance.
Authorisation maybegrantedprovided oneorseveralpersonsdonot
receiveasumoutofproportion totheirsalaryorlengthofserviceand,
generally ,oncondition thatthebeneficiaries mayneithersellnortransfer
thesecurities inquestioninanyotherwayforaperiodof5years.
Danishlimitedcompanies canalso,byamajority ofshareholders as
laiddowninthearticles ofassociation ,decidetosellsharestotheir
staffataspecially advantageous price.Thedifference betweenthisspecial
priceandthemarketpriceismadeupbythecompanybutisnotincludedin
employees *incomefortaxpurposes.Application ofthissystementailsa

-111 -
5–year freeze onthese shares .These systems must also beauthorised bythe
Minister ofFinance .
16.2 .InFrance ,profit-sharing andworker participation inundertakings
hasbeen thesubject oftwoOrders ,onein1959 »"theother in1967 ,which
have certain features incommon (notably taxconcessions toemployers on
amounts granted toworkers ),butthere areconsiderable differences .
Thefirst order (5^-12 6of7January 1959 )setupanoptional scheme
under which workers could share incompany profits ,capital growth ,auto-
financing operations orincreased productivity .Itapplies tocommercial
andindustrial companies ,excluding allcompanies inthepublic sector .
Acompany agreement must laydown theway inwhich theprofit-sharing will
beorganized ;itmust beconcluded between theemployer andtherepresentar -
tives ,company employees ,oftheunions affiliated tothose organisations
which are themost representative inthebranch concerned .The employer
mayalso propose that his employees should ratify amodel contract drawn up
inaccordance with theprocedure adopted forcollective agreements .
Theagreements must also make provision astohowthebenefits shall
beshared outindividually .
Undertakings areentitled todeduct theamounts ofshares attributed
toworkers inthepreceding financial year from thetaxable basis for
corporation orpersonal income tax .
Similarly ,theamounts granted toworkers aresubject toincome tax
butnotconsidered aswages fortheapplication oflabour lawandsocial
legislation .Noceiling isfixed bythis order .
Atend1977 »about 344contracts hadbeen signed covering 349under *-
takings and125392wage andsalary earners .

112-
16.3 .Order 67-693 of17August 1967 »aiming toassociate workers inthe
growing wealth oftheir companies ,while encouraging theinvestment neces­
sary forthat growth ,setupacompulsory participation scheme forcompanies
inany "branch ,andofevery type oflegal status ,employing more than 100
workers (also open toother companies ).
Limitations onthis principle have been introduced inregard to
public sector undertakings :theDecree 69-255 of21March 1969 setupa
provisional list –toberevised andcompleted inthelight ofinformation
gained from application ofthesystem tothepublic sector –ofcompanies
towhich theprovisions oftheorder apply# Acertain number ofcompanies
which hold commercial ortaxmonopolies have been excluded from this list ,
ashave been those suffering from such serious conversion problems that
there islittle hope oftheir becoming profitable forseveral years .
Tosumup,anundertaking must meet thefollowing criteria :
–itmust beaneconomic entity distinct from theState }
–itmust beofanindustrial orcommercial nature ;
–itmust earn substantial profits from itsactual growth ,
Aspecial system hasbeen developed (Decree n°6^-107 of1February
1969 )forworkers *cooperative production societies ,forwhose benefit
modifications have been made totherules relating tothemethods of
calculating profits andcapital fortaxation purposes ,andalso tothe
method ofprofit –sharing ,which canbecalculated prorata onthebasis of
hours worked byeach beneficiary during thefinancial year (under common
law ,profit-sharing iscalculated prorata onthebasis ofearnings ),
16.4 ,Under the1967 order ,theworker *sshare isassessed onthebasis
oftaxable profits anda"special participation fund "issetup,calculated
inthefollowing way :

113
a)attheendofeach financial year ,theundertaking calculates itstaxable
profits arising inPrance andtheOverseas Departments ;
To)thecorresponding amount oftaxisdeducted from these profits ;
c)tothenetfigure thus obtained isadded the"provision forinvestment "
(towhich further reference will bemade )arising from theprevious
financial year ;
d)from theamount thus obtained issubtracted theshare regarded asreturn
onthecompany *scapital ,fixed ataflat rate of5f°ofthis capital ;
e)tothebalance ,acoefficient isapplied ,obtained bydividing thetotal
wage bill forthefinancial year under consideration bythevalue added
during thesame financial year .This coefficient ,which ofnecessity
varies according totheundertaking involved ,isintended tocushion the
differences between those employing alarge labour force andlittle
capital ,andthose which onthecontrary useasmall work force but
large amounts ofcapital# Since this coefficient isgreater thelarger
thework force (numerator )andthesmaller thevalue added (denominator ),
toacertain extent itcorrects these inequalities .Profits being equal ,
aspecial participation fund maybebuilt up,which will bethelarger
inproportion tothenumber ofcontributing parties ;
f)thespecial workers *participation fund corresponds tohalf thetotal sum
obtained from these calculations .
Under thelawreferred toftheformula foritscalculation isas
follows :
inwhich :
RSP mSpecial participation fund
£ Profit after taxes (taxdeducted )
C mOwncapital
S mWage bill
VA mValue added

114-
Thesharing outbetween workers oftheamount ofthespecial fund is
calculated inproportion tothewages reoeived byeach "beneficiary during
thefinancial year under consideration ,itbeing taken forgranted that
alltheworkers must benefit from thescheme ,subject totheonecondition
that they have worked intheundertaking foratleast three months during
thefinancial year inquestion *
However ,wishing tobefair ,itseemed desirable toimpose two
ceilings onindividual participation *
/•
Ontheonehand theearnings used asthebasis forcalculating
individual shares isonly taken into consideration uptoastunequal to
four times theannual ceiling used fordeciding themaximum amount for
social security contributions andfamily allowances *
Ontheother hand ,theamount oftheshare which maybegranted to
anyoneworker inthecourse ofanyonefinancial year maynotbemore than
anamount equal tohalf ofthesame ceiling *
16.5 *TheOrder of17August 19^7 isbased ontheprinciple that participa­
tion schemes ,farfrom harming investments ,would onthecontrary encourage
them *
Forthis reason thetext provides that ,apart from certain exceptional
cases (marriage ,retirement ,early retirement ,dismissal ,disablement or
death ofthebeneficiary orhisspouse ),theamounts duetoworkers under
theparticipation scheme shall besubject toaholding period of5years *
Withdrawals before the endoftheholding period canbemade toform or
supplement theassets needed toacquire aprincipal dwelling orsubscribe
totheshares ofaworkers' production cooperative *
Thenature oftherights granted totheworkers –andtherelated
administrative details –must befixed byagreement between theparties
involved .They have achoice between thethree following forms :
–companies orundertakings candistribute totheir workers shares or
fractions ofshares intheir owncapital ,either byincorporating reserve
funds into their capital ,orbythecompany buying itsownshares onthe

115
stock exchange (l).This form ,however ,does notalways apply inthe
case ofpublio sector undertakings ;
–theamounts deposited inthespecial participation fund aresetaside in
anaccount which theemployer must useonly forinvestments *Inthis
case ,theworkers have aclaim against thecompany ,which cantake the
form ofbonds ,participating bonds ,orcurrent acoounts subject toa
holding period ;
–theamounts axedeposited either with investment agencies outside the
company ,named inadecree (2),orinaccounts opened inthename ofthe
beneficiaries aspart ofcompanies' savings schemes •
16.6 .Thepublic authorities were concerned with encouraging thecreation
ofnewrelationships between workers andemployers ,leaving ittothetwo
parties tosetuptheparticipation schemes provided forbytheorder by
joint agreement .Such agreements maybeconcluded :
–aspart ofacollective labour agreement ;
–between management andemployee representatives oftheunions affiliated
tothemost representative organisations inthebranch concerned ;
–with the works council •
These agreements mayeither adhere strictly totherules for
calculation andadministration ofparticipation rights defined inthe
order ("common law"agreements ),ormaysetupaparticipation scheme with
different financial andadministrative rules ("accords derogatoires ")
provided ,however ,that such schemes areinaccordance with theprinciples
oftheorder andgive theworkers benefits which areatleast equivalent .
However ,tobevalid ,these special agreements must beratified byajoint
(1)This last procedure created aneed forenabling legislation (order
67–695of17August 1967 )since companies arenormally forbidden by
lawtopurchase their ownshares .
(2)Art.9ofDecree 67–1112 of19December 1967 ,amended byDecree 69-507
of31May1969 .

-116 -
decree oftheMinistry ofFinance anatheMinistry ofLabour ,issued in
accordance with theopinion ofthe Centre for Studies onIncome and Costs
(CERC ).
Since theparticipation scheme iscompulsory ,analternative solution
hadto "befound forundertakings which ,although subject tothelaw ,could
reach noagreement .
Thefollowing system waschosen :
Atime limit ofoneyear isallowed theparties concerned tosign
aparticipation agreement ,running from theendofthefinancial year which
gives rise totheworkers' rights .
If,attheendofthis time limit ,noagreement hasbeen sent tothe
Departmental Director ofLabour andtheLabour Force ,hewill take note of
this omission andtheparties thereupon lose their right tochoose between
thethree forms ofparticipation laid down bytheorder .
Inpractice thesecond form (allocation ofamounts representing the
workers *participation toaninvestment fund belonging totheundertaking
itself )isthen applied compulsorily .Theamounts granted totheworkers
arethen deposited incurrent accounts ,subject toaholding period .
Toencourage theparties toendeavour toreach agreement ,adouble
penalty applies inthecase ofnoi>-agreement :
–apenalty applying toworkers ,whose claims aresubject toaholding
period of8years instead of5J
–apenalty applying tothecompany ,whose taxexemption onfunds set
aside forinvestment ,which inthecase ofvoluntary agreement isequal
totheamount oftheparticipation fund ,isreduced byhalf .
16.7 .Themethods bywhich staff axeinformed oftheresults ofthe
participation schemes areleft open .Inthis matter ,theparties arefree
toinclude anyprovisions they wish intheparticipation agreements .
However ,intheabsence ofanagreement orwhere noprovision ismade
onthis point ,employees are informed bynotices putupontrade union
notice-boards .Thepurpose istoinform them ofthetype ofscheme chosen ,

-117 -
toenable them toexercise their right toparticipate incompany growth .
Each year ,inthesixmonths following theendofthefinancial year ,
itistheemployers' duty tomake areport explaining howtheamount ofthe
special workers' participation fund hasbeen calculated forthepast
financial year ,andcontaining precise information onthemanagement and
use oftheamounts setaside inthis fund .This report must bepresented
totheworks council or,initsabsence ,tothestaff representatives .
Inanycase ,anysharing outbetween the employees must entail the
distribution toeach beneficiary ofanindividual report which includes
certain information such that each person concerned will beable tounder­
stand thetotal results ofthescheme andalso his ownindividual rights
under it.
When participation takes theform ofagrant ofshares orbonds to
workers ,they areentitled toalltherights associated with these sectu >-
ities .Inparticular ,they mayattend ,speak andvote atgeneral meetings
ofshare-holders orbond–holders (l).
Theadministration oftheparticipation funds maybeentrusted to
bodies outside thecompany :these maybeeither investment companies with
variable capital (SIGAV )orother bodies ,which must invest thefunds in
shares inaSICAV orsetupajoint investment fund .Thus theworkers
become shareholders inaSICAV –andmay exercise alltheassociated rights -
orco-owners inajoint fund .Inthis case ,thefund rules must provide for
thesetting upofasupervisory council composed ofrepresentatives ofthe
workers participating inthescheme andchosen byelection ,bytheworks
council orbytheunions affiliated tothemost representative organisations
inthat sector .Each year thecouncil examines thereport onthefunds *
(l)Acircular of19October 1970 (Official Journal of21October 1970 )sets
upthemethods fortransferring theparticipation rights offoreign
workers .

-118-
activities andtheresults obtained ;itexercises thevoting rights associated
with theshares inthe joint investment fund byproxy#
Funds setupinaparticular waycanbeadministered bythecompany
itself orbyacompany setupasacooperative bytheemployees intheunder­
taking .Inthelatter case ,theprovisions relating tothesupervisory
council donotapply# TheCFDT andtheCGT–FOareamongst thefounders of
11INTJS-EXPANSION ",amanagement company for joint investment funds and
savings schemes setupin19^9 "toimplement the1967 orders#
16.8 .Theschemes forworkers *participation incompany growth also give
certain taxation advantages :theamounts earmarked forthespecial participar *
tion reserve fund from aspecific operation aredeductible from thebase for
calculating company andpersonal income tax inthecorresponding financial
year .
They arenot ,similarly ,subject tothose charges which normally are
levied onwages andsalaries ,andnottaken into consideration forthe
purposes oflabour lawandsocial security legislation# They aretherefore
excluded from ,inparticular ,social security contributions ,family allow­
ances ,taxes onapprenticeships ,etc#
Article 62VIofLawN°68-1172 of27December 1968 (Article 163a AA
General TaxCode )provides forthepossibility that theincome from the
amounts assigned totheworkers under theparticipation scheme arefree of
income tax ifthey areallocated forthesame purpose astheamounts them­
selves .
Inapplication ofthis provision ,Art# 3ofDecree N°69-507 of31
May1969 (Art# 8laAppendix IIGTC)provides fortherefund oftaxalready
transferred totheTreasury (taxcredit )relating tothis income .This
refund isgranted inthename oftheagency entrusted with thesafe­
keeping ofthesecurities assigned totheworkers oracquired fortheir
account .
Undertakings arealso authorised tosetup,taxfree ,attheendof
each financial year ,aninvestment reserve inanamount equal tothat

-119-
deposited mtheworkersspecialparticipation fundduringthesamefinancial
year.However,thissummustbeusedwithinoneyearforthepurchase or
creation ofcapitalassets,otherwiseitwillagainbeconsidered astaxable
profits.
Companies whichdonotmakethisprovision forinvestment carryhalf
theburdenofthespecialparticipation fundsincecompanyprofitsaretaxed
at50$.Ontheotherhand,companies whichdecidetosetupaninvestment
fund,whichistaxfree,canrecovernearlyalltheirpayments underthe
profit-sharing schemethroughthetaxfacilities offered.Thereis,however,
anaccountancy delayofoneyear.
ThisschemewasamendedbyArt.11ofthe1974FinanceAct(Law
N°73-1150of27December 1573).Forfinancial yearsclosedbetween1
October1973and30September 1974»only80$oftheamountsdepositedfor
investment intheworkers *specialparticipation fundarefreeoftaxinthe
yearconcerned .
Thisproportion wasreducedtoSjfoforfinancial yearsclosedbetween
1October1974and30September 1975»and50$forfinancial yearsclosed
afterthatdate.
Thismeansthatatpresentcompanies whichmakeprovision forthis
investment schemecanrecover75$atthemostoftherelatedpayments.
16.9.According toavailable information ,9936participation agreements had
beenregistered on31December 1977?"theycovered11195undertakings
employing 4773600wageandsalaryearners.Thetotalamountdistributed
over8years(1968–1975)wasoverFF13600million.In1975(themost
recentyearforwhichthefinancialresultsareavailable),atotalof
FF2418millionwasdistributed to2713108beneficiaries ,inotherwords,
anaverageannualpercapitashareofFF89IasagainstFF353in1968.

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Forthefive financial years 1971-1975 ,theaverage wasasfollows s
Special participation fund ,_ Profits ._ ^'CU ALU1U fif rrouxs -_rtr>PÎSHtï -15^ c^ïtlï "12»98i°
Wages andSalaries A\\ Special participation fund 7Value added •^ Wages andsalaries •™ **
16.10 .Anewlawcame into force on27December 1973 (N°731197 )harmonising
theoptional investment scheme introduced bytheOrder of7January 1959
(see16.2.)andtheworkers' profit–sharing scheme introduced bytheOrder
of17August 1967 (see16.3.).
Infuture ,both types ofschemes canbeimplemented bythetwosides
ofindustry ,inparticular bytheworks council .Theprocedures for
examining participation andprofit–sharing agreements will beharmonised
and itwill beeasier toconclude "mixed "agreements simultaneously applying
theprovisions ofthetwoorders of1959 and19^7 •Undertakings coming
under the1967 order which fail toconclude anyagreements will beprohibi­
tedfrom making provision forinvestment .TheLawreminds employers of
their duty tosupply information ontheresults ofparticipation schemes .
16.11 .IntheNetherlands tthedecrees discussed inconnection with savings
premiums (see15»7«)also provide forexemption from taxation andsocial
charges foremployers ontheamounts paid toworkers as"profit-sharing in
theform ofsavings ".These amounts aresubject toholding periods and
correspond toagiven proportion ofprofits ortotheproportion ofthe
company 'sprofits payable tothird parties .
Participation maytake theform ofashare inprofits asdefined by
thelaw (theamount paid toworkers being linked totheoperating or
distributed profits ),oritmaytake theform ofparticipation intheloose
sense oftheword ,inwhich case there isnosuch link .Workers then
receive ashare ifandtothe extent that profits allow .

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Therules governing saving must bedrawn upinwriting andprovide
forthepossibility ofvoluntary participation .Theemployee candecide
from year toyear whether hewants tocontinue thesavings contract .
Theamounts thus allotted -which maynotexceed HFL750peryear –
must beadministered bytheemployer oraninstitution (savings bank ,etc.),
named intherules .Asavings account isopened foreach worker ;hemay
keep acash balance ormayinvest itinsecurities jineach case aholding
period of^years isprovided for ,which does notapply ,however ,tothe
yield onsums invested .
Under savings premium schemes aworker maywithdraw money during the
holding period ,although hewill lose thepremium ,whereas under participar -
tion schemes thesums setaside maynotbeused before theendoftheholding
period ,except incases where thedecree authorises withdrawal inadvance .
Atend1974 »438undertakings hadoffered their employees this
possibility and 107000workers were taking part .Theaverage amount saved
percapita in1974 under this system wasHFL452.
16.12 .IntheFederal Republic ofGermany ,the"1624"Lawapplies when
contributions forasset formation aremade byemployers toensure
participation byworkers inthebenefits ofimproved productivity achieved
with their collaboration .Therelevant agreements –individual contracts
orcompany agreements –must beinwriting ;they must setouttheprovisions
governing profit –sharing ,thebasis andmethods ofcalculation andthe
reference period .Inindividual contracts ,theform ofinvestment must
also beindicated ,andthecompany orestablishment with which theinvestment
istobemade .
Unless there isaprovision tothecontrary inthecontract or
company agreement ,iftheemployment relationship isterminated during the
period used asabasis forcalculation ,theworker keeps hisrights ifhe
hasworked formore than half thereference period .

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Theemployer must show theworkers concerned that thecalculations
areaccurate .Hemaypresent acertificate from anauditor ,orrequest the
workers toelect three representatives tocarry outacheck .Different
rules maybedecided onbyagreement .
These legislative provisions have been applied very rarely in
practice .
16.13# Asalready indicated (N°15.1.),theemployers' contributions –other
than those mentioned intheprevious paragraph -maybethesole contribution
made ,under the"M624"Law ,toworkers *asset formation .Collective agree­
ments made under thelawmake increasing useofthis possibility .Currently ,
themajority ofthem provide only foremployers *contributions .
Seniority inthecompany sometimes plays arole ,inrelation both to
theright totheemployers' contribution andinthecalculation ofthe
amount .
16.14 .Some German undertakings have introduced profit –sharing schemes for
their employees under which the sums involved areatfirst invested inthe
form ofloans totheundertaking itself ;thefunds canlater betransformed
into shares ,however (co-ownership ).
16.15 .IntheUnited Kingdom ,various types ofprofit-sharing schemes exist ,
particularly inthebanking sector where aproportion oftheprofits before
taxes axeallocated totheemployees .
17.Various types
This sector covers measures ,which ,fordifferent reasons ,could not
beclassified inany ofthegroups already examined .
17.1 .TheFrench lawinstituting workers' shares intheRegie nationale des
nsines Renault (Law70-H of2January 1970 ),covers several systems on

123-
which theplan forthis report wasbased .Thehanding over ofownership
totheworkers ofpart ofthecompany 'scapital –which could notinany
case exceed 25$since 75$wasreserved fortheState –would beachieved
byafree distribution ofshares ,orthrough workers participation inthe
benefits ofcompany growth (employers *contributions )orunder acompany
savings scheme (mixed type)#
Thefree issue ofshares isgoverned byDecree N°652of8July 1970 ,
Ittakes into account theseniority oftheworkers andtheir responsibilities
inthecompany .
Issues ofshares under participation schemes should not ,onthe
contrary ,take such factors into consideration .Itshould benoted that
this lawisinderogation from theprovisions ofOrder 67-693 of17August
1967 »under which public sector undertakings maynotissue shares totheir
workers inthecontext ofprofit –sharing schemes (seeN°16,2 ,),
Theshares thus issued axeregistered .Inprinciple ,they should be
held forfive years butthey maybetransf erred tocompany employees ,to
theRegie itself ,toaspecial fund setupbytheundertaking forthis
purpose ,ortotheState ,Themaximum number ofshares anyoneperson may
hold isfixed at500bytheabove decree .
Theworker share –holders arerepresented ontheBoard ofDirectors
oftheundertaking ,taking into account their share inthecapital .
Theworker maykeep hisshares ontermination oftheemployment
relationship .Theshares mayalso beheld bythespouse oradirect
descendant whohas inherited them .All other persons must give uptheir
shares ,otherwise they will lose their rights .
Thetaxprovisions already examined apply toshare issues under a
profit –sharing orcompany savings schemes notax islevied onfree issues .

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17.2 .Twoother laws of4January 1973 introduced workers' shares inthe
nationalized banks andinsurance companies ,theSNIAS (National aerospace
company )andtheSNECMA (National company forthestudy andconstruction of
aircraft engines ).
Twoimplementing decrees were issued on4July 1973 forthenat­
ionalized banks andinsurance companies .Theprovisions are ,onthewhole ,
very similar tothose implemented attheRenault factories .Thestaff will
"beable toenjoy thebenefit ofafree issue ofshares ofupto25%ofthe
capital .Together with certain institutions ,companies orbodies ,the
staff also hasthe right topurchase more shares subject topayment .These
shares canbedisposed offreely after 5years .Themaximum number of
shares which canbeheld byoneemployee isfixed at500 inthebanking
sector and 250 inthe insurance sector .When shares aredistributed free
ofcharge ,seniority andthelevel ofresponsibility oftheemployee inthe
company aretaken into account .
17.3 .LawN°73–1196 of27December 1973 aims atextending totheprivate
sector theshare-holding system inforce inthepublic sector under the
above-mentioned legislation .Companies ,whether quoted onthestock exchange
orunlisted ,will beable tocarry outcapital increases reserved fortheir
employees andthelatter mayalso beoffered theright toacquire shares in
theundertaking through themarket .Twomillion wage–earners working in
about 1500undertakings will therefore beable toobtain shares onadvanta­
geous terms ,buttheoptional nature ofthis scheme should benoted .
Wage–earners canbecome ashare-holder ifthefollowing requirements
are met :
1)wage–earners subscribing will beallowed three years atthemost topay
fortheir shares ;
2)thesums devoted totheacquisition ofshares will bededucted from the
basis ofassessment forincome taxuptoamaximum ofFP3000peryear
(temporarily raised toFF5000):

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3)deductions from wages fortheacquisition ofshares can "besupplemented
"bythecompany uptoamaximum ofFF3000.Thepayments arenotsubject
tocorporation taxorpayroll taxandwill not lietaken into consideration
when applying labour andsocial security legislation .
They arealso exempt from income taxduebythewage-earner .Inprinciple ,
shares acquired inthis wayarenottransferable for 5years .Wage-
earners cantake part ingeneral share –holders 'meetings andcanulti­
mately beelected toEoards ofDirectors andsupervisory committees ,
17,4 *In "theUnited Kingdom ,the1978 finance Actprovides that from April
1979 undertakings who sowish mayissue shares totheir employees under a
profit-sharing scheme approved bythetaxauthorities .Theamounts allocar *
tedbytheundertaking tothis scheme will beused tobuyshares inthe
undertaking ,which will bedistributed tothebeneficiaries butplaced in
thecare ofatrust .Themaximum anybeneficiary mayreceive isUKL500
peryear .These shares receive preferential treatment fortaxpurposes ,
asliability will gradually bereduced over theholding period ,which is
normally five years (shorter inthecase ofinvalidity ,dismissal or
retirement ).Attheendofthis period ,only half theoriginal value of
theshares (orthesales value ifitislower )will besubject totax
while after 10years ofholding noincome taxwill bedue.Beneficiaries
sirenevertheless still subject tonormal taxation oncapital gains and
dividends .With respect toundertakings ,theamounts disbursed under
schemes ofthis type canbededucted from thebasis ofassessment for
corporation tax,
17,5 ,InItal.Y tprovision ismade fortaxconcessions inrespect ofthe
seniority allowance tcalculated inrelation toearnings andlength of
service ,which must bepaid toworkers ontermination oftheemployment
relationship .Taxrelief of50$isgranted forseniority allowances up
toLIT10million ,30$forallowances ofLIT10million toLIT20million ,
and20$forLIT20toLIT50million ;inallcases ,LIT100000peryear ,
orpart thereof ,istaken asthebasis ofcalculation .Norebate isapplied
toallowances ofover LIT 50million .

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B,Incentives for asset formation in "theform ofreal property
There arefewmeasures giving incentives toworkers toacquire assets
intheform ofreal property .Here again thetypes ofincentives are
similar tothose examined inthefirst twoparts ofthis report (reduced
interest loans ,interest rate subsidies ,etc.)andalso typical forms ,
similar tothose examined inconnection with workers 1asset formation inthe
form ofsecurities ,where taxation benefits andexemption from social
security charges sireoffered toworkers ontheamounts they save ,andto
employers ontheamounts they pay ,inpursuit ofanasset formation policy .
Moreover ,many varying types have been setupwithin companies ,over
andabove those specified inlegislation ,
18,Homebuilding ,reduced interest loans and interest rate subsidies
18,1 ,InItaly ,asubstantial homebuilding programme exists forworkers ,
financed inthefirst place bytheState ,andimplemented byGESCAL (Law
N°60of14February 1963 ),This lawmodified previous legislation with the
aim offacilitating home-ownership .Thefinancing ofthis ten–year programme
isassured byaState contribution andbya1.05$ taxonearnings (0.70$ to
bepaid bytheemployer and0,35$ bytheworker ;anexception ismade for
agricultural workers ),Aminimum qualifying period ofsocial security
contributions isrequired forentitlement tothebenefits under this law ,
goldcertain negative conditions arealso applied (onemust notbetheowner
ofsubsidized housing ,orofanykind ofdwelling situated inthesame
locality where onewishes tobuy ,orofadwelling providing income above
acertain ceiling }anapplicant maynothave ahigh taxable income ).
Thelawalso specifies certain characteristics andlimits on
dimensions ,number ofrooms ,aswell astherelationship between dimensions /
number ofrooms (5rooms which canbelived ingiven aliving surface of
112sq.m.).
Dwellings built under this lawmaybeintended foreither workers in
general oremployees ofcompanies orpublic orprivate organizations :they

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axeallotted tothose requesting ownership onaguaranteed mortgage with
payment spread over 20years .They maynot "beresold for10years ,^he
worker purchases ataspecially favourable price .Infact ,this price is
fixed atbetween 60and^Ofoofthenominal cost ofthedwelling ,which
itself islower than thetrue construction cost .Thetrue cost ,inits
turn ,isreduced bythepossibilities provided fortheexpropriation of
building land .Theprovision ofArt.3ofthelawshould benoted here ;
itallows forpayment inadvance oftheamount ofthecost still outstanding
which isreduced by5$peryear ofduration ofthedebt .
Home-building loans canalso beobtained ,directly orthrough co­
operatives .Articles 15and16ofthelawsetupafund forthegranting
ofloans toworkers whowish tobuty orbuild dwellings fortheir own
occupation .
There areawhole series oftaxexemptions (from registration duty ,
taxonbuildings ,taxonbuilding materials ,etc.)which also help the
implementation ofthe law.
Industrial undertakings themselves maybeauthorized tobuild homes
for their workers .
Abuilding programme fordwellings foragricultural employees was
approved byLawN°l6^6 of2February I960 .
18.2 .The "Cassa perilMezzogiorno "mayalso take action inthefield as
provided forinArt.4ofLawN°1462 of29September 1962 .The "Cassa "
isauthorised togrant subsidies tocompanies fortheconstruction ofworkers'
houses inindustrial zones .Themethods forachieving this must bedefined
bytheMinisterial Committee forthe "Cassa ".
18.3 .Also inItaly there arespecial provisions (LawN°408of2July 1949 »
andLawN°715of10August 1950 )aimed atfacilitating home-ownership for
civil servants .They canmake useoftheprovisions examined under 18.1 .
andalso become purchasers ofadwelling belonging toINCIS (istituto nazio–
nale case impiegati dello Stato ).This institute maysell "iOfoofthe
dwellings itowns .Thesale price is30%below market value .Thedwellings
purchased inthis waymaynotbesold for10years .

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18.4 .InFrance ,theState asemployer takes action topromote home-
ownership among civil servants ,employees ofpublic institutions (which
arenotofanindustrial orcommercial nature judges ,military personnel
paid "bythemonth ,government employees andemployees oflocal authorities
anddepartments (l).
Under these provisions ,aloam maybeobtained only after approval
hasbeen obtained inprinciple forahousing premium andaloan from the
Credit Poncier dePrance .Thesums arefixed ataflat rate }they represent
about 40$to50$ofthespecial loan .
Three-year loans areaccorded bythe "Comptoir desEntrepreneurs ",
andarefunded bytheCredit Poncier dePrance foraperiod ofupto12
years .
Employees ofnational companies andnationalised undertakings may
also obtain loans onfavourable terms .
18.5 .InBelgium ,alawof3July 1967 authorized theNational Housing
Society andtheNational Landowning Society tobuild low-cost housing ,
primarily intended fortheemployees ofneworexpanding companies .Some
ofthese dwellings maybereserved forworkers whodonotmeet theconditions
giving entitlement tolow-cost housing (mainly their income isabove the
permitted maximum ).Therent isthen setatarate of7*5$ ofthecost
price ofthedwelling ,land included (forworkers whose income islower
than themaximum ,therent isfixed between 3.5$ and4»6$ofthecost price
ofthedwelling ,land included )andthesale price isequal tothecost
price increased bythevalue ofthebenefits granted bytheState .
Also inBelgium aspecial system hasbeen setupbyadecree-law of
14April 1945 forminers .When they borrow –with theintention ofpurchasing
orbuilding adwelling –from agencies accredited bytheNational Savings
andRetirement Fund ,from National Landowning Societies ,orfrom Provident
Funds under theMinistry ofState Insurance ,they payaninterest rate that
(l)Decree 62–976 of13August 1962 andCirculars 62–58 of29September
1962 and69-86of31July 1969.

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varies according tolength ofservice inthemines ,from 5to20years or
more .
Thedifference between thereduced rate andthereal rate ispaid
"bytheState .
18.6 .InFrance ,adecree of1953 (replaced byDecree 66–826of7November
1966 )gave alegal frame toascheme forthecompulsory payment ofasum
forbuilding tobededucted from theoperating accounts ofcompanies with
more than 10employees .Theemployers (with theexception ofundertakings
classified asagricultural forsocial security purposes ,State undertakings ,
orlocal authority 'sundertakings not ofanindustrial orcommercial nature
andpublic oradministrative institutions )must invest inhousing 0.9$of
thewages andsalaries paid during thelast calendar year ,ofwhich 0.1$
isformigrant workers .Half theamount istobeused forrented dwellings
andhalf forfacilitating home-ownership .
This contribution maytake different forms :
–payment tointer-trade organisations which invest these sums inbuilding
operations ,reserving them ,ifthecase should arise ,forcompany employees ;
–loans orsubsidies tobuilding organisations !
–direct loans tocompany employees .
Among these different types ofaid ,those which areimportant for
this report aretheloans andsubsidies granted bythecompany toits
workers .They maynotbeabove certain ceilings andvary depending onthe
type ofdwelling andtheregion ,andarefixed insuch awaythat the
employers *contribution cannot totally finance thedwelling .Thedwellings
financed must ,moreover ,beinaccordance with thelimits astodimensions
andprice established fordwellings that qualify forpremiums .
Theloans must notbemade atarate higher than theminimum
length must befor5years ,andtheannual repayments maynotbemore than
onequarter oftheloan .Ifrepayment ismade before 20years ,theamounts
concerned must bereinvested inhousing .

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Thesubsidy isconsidered asearned income forpurposes ofsocial
security payments .Provision ismade forarebate (varying according to
number ofdependents )forincome taxpurposes .
Company directors axenotentitled toloans orsubsidies .
Theworks council must beconsulted ontheuseofthemoney ;ifthe
employer does notwish tofollow itsadvice ,hemust state hisreasons *
Loans toworkers mayalso bemade bythe "Inter-trade Housing
Committees ",formed voluntary byagreement between employers ,orwith the
workers *participation ,toadminister thefunds which theemployers do
notwish toadminister directly .Inthis case ,theloan hasnominimum
duration andtheannual repayment maybemore than onequarter ofthe
loan (l),
19,Premiums andfiscal advantages
19.1 ,Ashasalready been noted (see15,2 ,),inthecase oftheFederal
Republic ofGermany the "JM624"Lawprovides twopossibilities for
savings intheform ofreal property .Under thefist ,premiums aregranted
totheworker onthesums setaside forthepurchase orconstruction ofa
dwelling orforthepurchase ofbuilding land ortopayoffdebts contracted
forthis purpose .Thedwelling ortheland maybelong totheworker himself ,
hisspouse orhischildren aged under 18years .Thedwelling must besitua­
ted inGermany ,
Thesecond possibility under the lav*isinvestment under theprovi­
sions onhomebuilding premiums .Iftheform chosen isbuilding savings ,a
taxabatement maybechosen ,
19.2 ,TheDutch system ofsavings premiums setupunder the1962 Law
(see15,7.)provides also forsavings intheform ofreal property .Entitle­
ment tothepremium isoperative immediately –without awaiting period –
(l)Loans atfavourable interest rate maybeobtained from theFamily
Allowances Fund ,thePublic Servants Retirement Fund andthe
Supplementary Retirement Fund ,

131-
ontheamounts setaside bytheworker orhisspouse fortheacquisition of
real property ,orforpaying offamortgage .Theamount ofthepremium is
fixed atamaximum of50$ofthesums saved jitmaygoupto200$ifitis
also partly setaside forinvestment inreal property .These maximum
percentages arerarely achieved inpractice .
Thedwelling inquestion may "besituated inanycountry ,
19,3 ,InBelgium ,company profits ,which areinfact used forthegrant of
loans tothepersonnel ,axeonly taxable uptohalf during thetwelve
months following theendoftheaccounting operation .These must beloans
which aresupplementary toaprincipal loan obtained from certain credit
agencies fortheconstruction orpurchase ofadwelling intended forthe
personal use oftheborrower .Theconditions onsuch loans must beat
least asfavourable asthose ontheprincipal loan ,
20,Non–statutory types
20,1 ,Finally ,incentives have been offered ,without State advantages ,by
employers tinder collective agreements orcompany agreements oronthe
unilateral initiative oftheemployers .
InBelgium ,thecollective agreement made on23April 1970 forthe
building industry provides that asuraequal to1%ofgross earnings shall
bepaid bytheemployers into a"Building Industry Social andEconomic Fund "
and itshould beused tofacilitate home–ownership bytheworkers concerned
andtoincrease theactivities ofthebuilding industry .Attheendof
1976 ,theFund administered bytrade union organizations ,amounted toabout
BFR3000million ,butwasliquidated in1978 ,Thenewcollective agreement
provides fortheaward ofasupplementary annual allowance toconstruction
workers whoarepensioned offon1April 1978 ,
InDenmark ,quite alarge number ofcompanies have setupbodies to
administer theinvestments oftheir workers andofficials .Thebodies often
include asavings department andinsome cases aloans unit forconstruction
ingeneral .Theloans aretaken outatalowornilinterest rate .

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IntheFederal Republic ofGermany «many employers ,although no
statistical survey hasbeen made ,give their workers many different forms
ofaidforthepurchase orconstruction ofdwellings .Thegrant ofcredit
without interest oronspecial conditions isasimportant here asthefree
use of "building machines ,orthesale of "building land atspecial rates .
InItaly ,several undertakings inwhich theState participates have
adopted different measures ,ontheir owninitiative ,such asloans ,payment
ofland costs oroftaxes ,premiums ,which aimtomake iteasier fortheir
workers tobecome home–owners .
Various facilities ("building land ,building materials )aregiven to
their workers andemployees byLuxemburg companies .
Prom 1May1968 ,thelargest Luxemburg employer introduced new
proposals onhome–ownership saving forhisworkers occupying company –owned
dwellings .Toencourage people enjoying this advantage nottolose interest
inpurchasing adwelling ,they areobliged each month todeposit ina
savings account anamount equal toanominal rent .
Thedeposits thus made receive thesame benefits asother savings
accounts (see14«7 »)butaresubject toawaiting period until theworker
leaves thecompany dwelling andhasnomore obligations resulting from it
towards hisemployer .
However ,earlier withdrawals maybeauthorized from these accounts ,
ifthere arevery serious grounds –e,g.purchase ofbuilding land ,build­
ingofahouse ,etc ,,,
IntheNetherlands ,companies frequently grant mortgage loans on
special terms totheir employees .There isnoexact information onhow
widespread this practice is.
IntheUnited Kingdom ,some informal schemes exist whereby employers
maymake loans totheir employees atnil ,orvery low ,interest rates for
thepurchase ofreal property (generally intheform ofadwelling forthe
employee andhisfamily ).Inparticular ,commercial banks runthese schemes .