WRITTEN QUESTION E-0984/96 by Luigi Moretti (ELDR) to the Commission (26 April 1996)

Subject: Transfers of undertakings

Favourable tax systems and Community cohesion measures are the main reasons that lead big industrial concerns to transfer their activities to 'free zones'.

In the province of Bergamo many firms, including Hewlett-Packard Italia di Stezzano, after submitting plans for new plants in Italy, are deciding to transfer their own production units to Ireland or Portugal. The inevitable consequences are unemployment, property speculation and the complete destruction of the secondary economy.

Is the Commission aware of such transfers?

How does the Commission intend to limit this phenomenon?

Since the activities of the majority of SMEs are linked to the big industrial groups, does the Commission not agree that the lack of a consistent industrial policy jeopardizes its own numerous efforts to promote SMEs?

Answer given by Mr Bangemann on behalf of the Commission (13 June 1996)

The Commission believes that Community cohesion measures and favourable tax systems are two separate issues. There are many complex factors which determine where companies, and in particular multinationals, locate and these depend more on the expected productivity of investment projects and the individual strategies of companies than on public subsidies. During an enquiry carried out for the Commission on this subject, it emerged that the factors which determine where companies choose to locate include, amongst others, the distance from the market, the quality and availability of labour and the existence of activity clusters within the sector. Consequently, as the Commission indicated in its answer to written question E-634/96 and to oral question H-86/96 posed by Mr Wolf at question time during the February 1996 session of Parliament, the Commission does not share the view of the Honourable Member, and considers that the transfers cannot be directly associated with Community cohesion measures.

As far as taxation is concerned, the March 1992 report by the Committee of independent experts on company taxation (the Ruding report) stated that tax systems can also play a role in a company's choice of location. In fact, the Commission considers that fair competition, including within the taxation field, is an essential component of the Single Market. The Commission has expressed its concerns in its discussion paper on taxation in the European Union ((SEC(96) 487 final. )) which was debated by Finance Ministers during the informal meeting in Verona on 13 April 1996.

Furthermore, the Commission would point out that, by virtue of its powers under the EC and ECSC Treaties, it monitors the granting of public subsidies to companies, including investment grants. In particular, it ensures that aid for regional purposes is limited to what is strictly necessary, so that it contributes to regional development without causing excessive distortions of competition.

The Commission agrees that many of the activities of small and medium-sized enterprises are linked to the big industrial groups. Therefore, Community industrial competitiveness policy, on the basis of social, tax, technical and environmental regulations, aims to prevent distortions of the functioning of the market and to make the economic framework competitive, in order to promote investment and industrial development.

As for the Honourable Member's other two questions, the Commission is not officially informed of companies' decisions concerning location or transfer, since these form part of their individual strategy, and it has no power to influence this type of decision. Nevertheless, the Community does intervene in areas of industrial decline by providing aid under the Structural Funds.