WRITTEN QUESTION E-3844/02

by Theodorus Bouwman (Verts/ALE) to the Commission

(9 January 2003)

Subject: Hampering of trans-frontier employment and mobility of labour by tax convention between the Netherlands and Belgium

A new double taxation convention has recently been concluded between the Netherlands and Belgium which does not make any special provision for frontier workers. The rules governing taxation of wages and salaries are more or less the same as those which determine the statutory social security system applicable (Article 13 of Regulation No 1408/71(1)). However, in a number of situations, including where workers are posted for longer than 183 days and for workers in international road haulage, this is still not the case.

In concluding the new double taxation convention, have the Netherlands and Belgium violated Article 10 (former Article 5) of the EC Treaty?

Does the Commission agree that the solution opted for, which creates difficulties for EU residents who choose to work in a neighbouring country but continue to live in their own country, or vice versa, will discourage mobility of labour, the promotion of which is an important element in the Lisbon strategy?

Will the Commission publish a communication about the differences between the fiscal allocation rules as laid down in a number of bilateral tax conventions or the OECD Model Convention and the allocation rules laid down in Regulation No 1408/71 (restricted to wage-earners)?

(1) OJ L 149, 5.7.1971, p. 2.

Answer given by Mr Bolkestein on behalf of the Commission

(13 February 2003)

Under current Community law, direct taxation still falls essentially within the competence of Member States. In the absence of harmonisation, the conclusion of agreements with a view to avoiding double taxation and, in doing so, allocating tax jurisdiction between themselves falls within that competence. The legitimacy of this practice has been recognised by the Court of Justice (Case C-336/96 Gilly [1998] ECR 2793; see in particular paragraph 30). In the exercise of this competence, Member States, however, have to respect their obligations under the EC Treaty. Member States are not allowed to discriminate on the basis of nationality or install or maintain discriminations of nationals of other Member States which exercise their right of free movement, or to apply unjustified restrictions to their freedom of movement. Member States should also refrain from restricting the free movement of their own citizens. Furthermore, Member States have to ensure that national measures are compatible with the freedom of establishment under Article 43 of the EC Treaty and the freedom to provide services under Article 49 of the EC treaty, including in the context of the posting of workers for the provision of cross-border services.

Community law does not, therefore, prohibit Member States from allocating and modifying their taxing rights in their bilateral tax treaties with regard to their residents by distinguishing between certain categories of workers. Therefore, it is the Commission's opinion that there is no violation of Article 10 of the EC Treaty. In particular, the fact that, for some categories of frontier workers, such as workers posted for longer than 183 days and for workers in international road haulage, the tax allocation rules laid down in the new Netherlands/Belgium double tax Agreement differ from the allocation rules laid down in Regulation (EEC) No 1408/71 with regard to social security, cannot in itself be considered as being in breach with the EC Treaty. In addition, apart from this difference, the system chosen by the two Member States would appear broadly to follow the Resolution from the Parliament on the situation of frontier workers in the Union(1).

It is the Commission's understanding that the change in allocation of taxing rights between Belgium and the Netherlands for frontier workers was based on the fact that paying taxes in one Member State and paying the social security contributions in the other Member State created uncertainties and difficulties for this category of persons.

It is not the intention of the Commission to publish a communication about the differences between the fiscal allocation rules and the allocation rules laid down in Regulation (EEC) No 1408/71.

(1) OJ C 195, 22.6.1998.