WRITTEN QUESTION E-0945/96 by Cristiana Muscardini (NI) to the Commission (26 April 1996)

Subject: Tax harmonization

The tables in the Commission communication on taxation clearly show that the tax pressure brought to bear on all Italians, be they employed or self-employed, increased between 1980 and 1993.

Furthermore, the tax burden varies from one country to another, there is no consistency in the rates applied, and salaried employees and the self-employed have to pay different amounts of tax.

1. Does the Commission not believe that superfluous distinctions in taxation prevent the internal market from operating and indirectly distort competition?

2. Would it not be desirable to lay down ceilings, along the lines of the minimum VAT limits, for the purpose of taxing small firms and craft businesses?

3. Does the Commission not consider that the heavy, highly variable tax burden and the plethora of attendant red tape imposed on SMUs and craft businesses in Italy pose a great obstacle to recruitment and job creation?

4. If so, what will it do to move more rapidly towards harmonization and hence completion of the internal market?

Answer given by Mr Monti on behalf of the Commission (4 June 1996)

The tables on the structure of taxes and social charges in the Community drawn up by the Commission show that the burden of taxation falling on labour (employed) increased between 1980 and 1993. However, using the available data, it is not possible to draw the same conclusion for the taxation of the self-employed, at least in the current stage of the analysis.

It is precisely when the differences in the national tax and social security systems of Member States represent obstacles to the smooth functioning of the single market or a distortion of competition that the Commission has most reason to propose that those differences should be reduced. However, differences in tax rules do not necessarily in themselves produce such effects, in particular when one takes into account not only all taxes and social charges but also their counterpart such as the quality of infrastructure or education.

Tax or social security barriers within the single market do exist in specific areas, such as in the treatment of cross-border workers and in the cross-border income flows of businesses. These barriers, and the need to eliminate them, were highlighted in the document on taxation in the Community presented by the Commission to the informal meeting of economic and finance ministers in Verona on 12 and 13 April.

In its communication of 25 May 1994 on the improvement of the tax environment of small and medium sized enterprises (SMEs) ((COM(94) 206. )), the Commission stated that, in accordance with the principle of subsidiarity, it had no intention of harmonising the tax regimes of SMEs. It would not therefore be appropriate for the Commission to propose a maximum rate for the taxation of SMEs or enterprises in the craft sector. The level of taxation of such enterprises is entirely a matter for Member States. However, the Commission has made recommendations to Member States to encourage specific improvements in the tax environment of SMEs ((OJ 177, 9.7.1994. )).

From the point of view of job creation, the increasing taxation of labour appears to be more damaging than the taxation of businesses. However, a bureaucratic and complex tax system, in any Member State, is particularly damaging for SMEs. That is why, in its report to the Madrid European Council on SMEs ((CSE(95) 2087. )), the Commission recommended that Member States should develop a bold strategy of administrative and regulatory simplification, including a simplified VAT system. Furthermore, recognising that relatively high taxes and social security contributions hit SMEs hardest, the Commission takes the view that Member States should vigorously pursue the reduction of non-wage labour costs to promote employment in SMEs.

Finally, the Commission underlines the importance of taking forward the work on taxation set out in the document on taxation in the Community discussed by Economic and Finance ministers in Verona. The document proposes a new global approach to taxation and social security issues which takes into account the objectives of the single market, economic and monetary union and the fight against unemployment. A high level group of personal representatives of Economic and Finance ministers headed by the Commission will pursue the consideration of taxation along the broad lines of that document.

The Commission has recently announced, in an appearance of one of its members at the Committee for economic and monetary affairs and Industrial policy, the wish to have regular exchanges of views on this topic with the Parliament.