Proposal for a COUNCIL DECISION authorising Greece to apply a measure derogating from Articles 2 and 28a of the Sixth Directive 77/388/EEC on the harmonisation of the laws of the Member States relating to turnover taxes

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. By letter registered with the Secretariat-General of the Commission on 15 November 2001, the Greek Government requested authorisation - under Article 27 of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes: common system of value added tax, uniform basis for assessment [1] - to apply special measures to trade in used and waste materials.

[1] OJ L 145, 13.6.1977, p. 1. Directive last amended by Directive 2001/4/EC (OJ L 22, 24.01.2001, p. 17).

2. In accordance with Article 27(3) of the Sixth Directive, the other Member States were informed of the Greek request by letter dated 22 November 2001.

3. The Greek Government would like to introduce:

- an exemption for intra-Community acquisitions and supplies of recyclable waste, such as scrap iron, waste of iron and steel, glass, paper and board, by taxable persons with a turnover of less than EUR900,000. Turnover for non-ferrous metals can be disregarded when calculating this ceiling;

- an exemption for intra-Community acquisitions and supplies of non-ferrous metals, regardless of the taxable person's turnover;

- the possibility, subject to the administration's authorisation, of opting for taxation of acquisitions and supplies of the goods concerned.

4. In its request, the Greek government explains that the measure is aimed at countering tax evasion by operators in the sector, especially smaller dealers, who do not pay the VAT they owe. Collecting VAT in this sector is awkward because it is difficult to identify and supervise activities.

5. The first measure dispenses small traders dealing in recyclable waste other than non-ferrous metals from the obligation to pay and invoice VAT on sales of the goods concerned. The operators concerned are not entitled to deduct input VAT on these transactions.

6. The taxable persons concerned will not have to pay VAT on their intra-Community acquisitions, which means that the corresponding intra-Community supplies will have to be taxed in the country of origin.

7. The EUR900,000 ceiling is aimed at preventing larger traders from benefiting from the exemption.

8. The second measure allows dealers in non-ferrous metals to take advantage of the exemption even if their turnover exceeds EUR900,000. This is because non-ferrous metals generally sell at a far higher price than other materials and waste, meaning that the ceiling would be reached quite quickly.

9. Lastly, the third measure allows dealers in recyclable waste who would normally be exempt under the special measures to subject their transactions to VAT and so obtain the right to deduct. Making this exception to the derogation subject to authorisation will provide adequate assurance that taxable persons will discharge their tax obligations. Furthermore, the fact that being subject to tax supervision is "rewarded" by the right to deduct input tax should bring more traders into the tax system.

10. The Commission considers exempting intra-Community acquisitions and supplies by small businesses to be both a simplification and a fraud-prevention measure in that it removes from the VAT system a category of taxable person demanding a supervisory and collection effort disproportionate to the revenue generated.

11. The specific rules on intra-Community acquisitions and supplies of non-ferrous scrap metals are justified because they provide a secure basis for transactions involving a greater risk of fraud on account of the value of the materials in question.

12. Giving taxable persons the option of applying to the authorities in order to make normally exempt transactions subject to VAT ensures improved monitoring by the authorities.

13. Several other Member States, namely France, Spain, Italy and the Netherlands, have already obtained Council decisions authorising them to apply special tax measures in the sector concerned.

14. In its communication of 7 June 2000 to the Council and the European Parliament on a strategy to improve the operation of the VAT system within the context of the internal market [2], the Commission undertook to rationalise the large number of derogations currently in force. In some cases, however, this rationalisation could involve extending certain particularly effective derogations to all Member States.

[2] COM(2000) 348 final.

15. The Commission's recent contacts with certain national administrations and representatives of the sector suggest that special rules specifically adapted to the sector might be necessary to ensure fairer taxation of the traders concerned across the Community. Such rules require a firm and permanent legal basis far beyond the scope of a derogation under Article 27 of the Sixth VAT Directive.

16. The Commission accepts that, pending more permanent changes, this derogation significantly counters abuse of the VAT system. It therefore considers it appropriate to grant the derogation until 31 December 2003.

Proposal for a COUNCIL DECISION authorising Greece to apply a measure derogating from Articles 2 and 28a of the Sixth Directive 77/388/EEC on the harmonisation of the laws of the Member States relating to turnover taxes

(The Greek language text takes precedence over others)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, [3] and in particular Article 27 (1) thereof,

[3] OJ L 145, 13.6.1977, p. 1. Directive last amended by Directive 2001/4/EC (OJ L 22, 24.01.2001, p. 17).

Having regard to the proposal from the Commission, [4]

[4] OJ C No ...

Whereas:

(1) By letter registered with the Secretariat-General of the Commission on 15 November 2001, the Greek Government requested authorisation to apply special tax measures to the recyclable waste sector with the aim of countering tax evasion in that sector.

(2) The other Member States were informed of Greece's request on 22 November 2001.

(3) The derogation in question is to exempt intra-Community acquisitions and supplies of recyclable waste, such as scrap iron, waste of iron and steel, glass, paper and board, by taxable persons whose sales of such products in the previous year amounted to less than EUR900,000. In addition, it is intended to exempt intra-Community acquisitions and supplies of non-ferrous metal waste, regardless of the trader's gross turnover.

(4) Taxable persons whose transactions are covered by the above exemptions may, subject to the conditions laid down by Greece, be authorised not to apply the exemptions to their transactions.

(5) These arrangements constitute an effective fraud-prevention measure in a sector in which collecting VAT is rendered particularly awkward by the difficulty of identifying and supervising activities.

(6) These special arrangements therefore satisfy the conditions laid down in Article 27 of Directive 77/388/EEC.

(7) In its communication of 7 June 2000 to the European Parliament and the Council, the Commission published a strategy to improve the operation of the VAT system in the short term including a rationalisation of the large number of derogations currently in force. In some cases, however, this rationalisation could involve extending particularly effective derogations to all Member States.

(8) It therefore seems advisable to grant the derogation until 31 December 2003, thereby permitting an assessment of its compatibility with the overall approach to the system of VAT, and in particular the rationalisation of derogations.

(9) The derogation has no adverse impact on the Communities' own resources accruing from VAT,

HAS ADOPTED THIS DECISION:

Article 1

By way of derogation from Directive 77/388/EEC, Greece is hereby authorised to apply until 31 December 2003 special measures for the taxation of recyclable waste (hereafter called "the special regime") in accordance with this decision.

Article 2

By way of derogation from Article 2 of Directive 77/388/EEC, the following shall be exempt from VAT:

- a) supplies of recyclable waste, such as scrap iron, waste of iron and steel, glass, paper and board, by traders with a turnover of less than EUR900,000;

- b) supplies of non-ferrous metals.

Article 3

By way of derogation from Article 28a(1)(a) of Directive 77/388/EEC, the following shall be exempt from VAT:

- a) intra-Community acquisitions of recyclable waste, such as scrap iron, waste of iron and steel, glass, paper and board, by traders with a turnover of less than EUR900,000;

- b) intra-Community acquisitions of non-ferrous metals.

Article 4

In order to calculate the ceiling of EUR900,000 under Articles 2 and 3, the turnover for non ferrous metals may be disregarded.

Article 5

Greece shall allow those taxable persons who so request it, to be authorised not to apply the special regime to their supplies and intra-Community acquisitions, under such conditions as it may see fit to ensure that the VAT obligations of the taxable person are properly met.

Article 6

This Decision is addressed to the Hellenic Republic.

Done at Brussels,

For the Council

The President