WRITTEN QUESTION E-2456/01

by Camilo Nogueira Román (Verts/ALE) to the Commission

(11 September 2001)

Subject: Statements by the Spanish Finance Minister on the tax raison powers of the Spanish Autonomous communities

On 27 July 2001, the Spanish central government and the governments of the Autonomous Communities (AC) signed an agreement on autonomous funding, which renews and amends the agreement covering the last five years. The new agreement extends the granting of a certain proportion of the tax revenue raised in each Community to new state taxes. Specifically and principally, the level of income tax of physical persons rises from 30 % to 33 %, and 35 % of VAT and percentages ranging from 40 % (fuel, tobacco and alcohol) to 100 % (electricity and restrictions of documents) for special taxes. The Agreement can be legitimately criticised for objectively privileging and particularly benefiting Spain's richest Autonomous Communities, giving them a proportionately larger revenue increase and giving them much greater financial self-sufficiency, with the richest Communities enjoying double the level of self-sufficiency of the least developed.

The Agreement has also been criticised for preventing the Autonomous Communities from enjoying a certain degree of tax-raising powers in establishing the base-rate of the newly ceded taxes, particularly VAT and the special tax on fuel. In response to this latter criticism, Christóbal Montoro, the Spanish Government Minister of Finance, has said that the central government cannot grant greater tax-raising powers to the Autonomous Communities, because that runs counter to European Union law and is forbidden by the Commission. The Minister's statements appear to be deliberately unaware of that fact that according to the Treaties, it is true that the EU is responsible for upholding competition rules in the common market, and therefore for preventing situations of tax privilege from arising, but it is no less true that the Union's institutions are not responsible contrary to what the Minister claims for deciding which government bodies, whether those of the central state government or the autonomous governments, enjoy tax-raising powers, since this is a matter to be decided by each Member State on its own. Could the Commission throw any light on this major issue, so that the Spanish Autonomous Communities, particularly Galicia, which I represent, can operate in accordance with their constitutional autonomy within the bounds of EU law?

Answer given by Mr Bolkestein on behalf of the Commission

(31 October 2001)

Under the reform of the funding of the Communidades Autonomas (Autonomous Communities), the Spanish authorities have adopted a number of measures in the field of taxation.

One such measure concerns the transfer to the autonomous communities of part of the revenue from value-added tax (VAT) and the special tax on fuel. Here, Community rules do not pose any restrictions: Member States may use and redistribute their tax revenue according to their needs.

Most of the fiscal components of these different taxes are harmonised. A real transfer of regulatory capacities to the autonomous communities would involve giving them the possibility of laying down laws changing the tax rate. However, current EU rules on VAT do not allow autonomous communities to fix different VAT rates. Article 12(3)(a) of the Sixth Directive(1) provides that a single standard rate shall be fixed by each Member State. Member States can also apply either one or two reduced rates. Moreover, VAT is subject to the principle of a single rate, namely, that identical goods or services cannot be taxed at different rates within the same Member State. The only exceptions to these principles are the specific and transitory derogations approved unanimously by the Council, contained in Article 28 of the Sixth Directive(2).

The directives on excise goods and the case-law of the Court of Justice lay down that for each product subject to a harmonised excise structure at EU level, Member States must apply a single national rate of taxation which must be higher than the minimum rate stipulated by the directive concerned. The Council may authorise a Member State to introduce additional exemptions or reductions(3) if they are justified by social, environment or transport policy considerations.

On a more general note, it should be pointed out that under the case-law of the Court of Justice(4), Member States are solely responsible, under Community law, for the measures adopted by their territorial entities. It is therefore for the individual Member States to set up a framework within which legislative power is exercised in this field, in order to ensure compliance with Community law and, in particular, with Community rules on state aids.

(1) 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 OJ L 145, 13.6.1977, as last amended by Council Directive 2001/4/EC of 19 January 2001, with regard to the length of time during which the minimum standard rate is to be applied OJ L 22, 24.1.2001, and corrigendum in OJ L 26, 27.1.2001.

(2) Council Directive 92/77/EEC of 19 October 1992 supplementing the common system of value added tax and amending Directive 77/388/EEC (approximation of VAT rates) OJ L 316, 31.10.1992.

(3) See Article 8(4) of Council Directive 92/81/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on mineral oils OJ L 316, 31.10.1992, as last amended by Council Directive 94/74/EEC of 22 December 1994 amending Directive 92/12/EEC on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products, Directive 92/81/EEC on the harmonisation of the structures of excise duties on mineral oils and Directive 92/82/EEC on the approximation of the rates of excise duties on mineral oils OJ L 365, 31.12.1994.

(4) Judgment of 14 October 1987, C-248/84, Germany v Commission, ECR page 4013 and judgment of 8 March 1988, joined cases C-62/87 and 72/87, Exécutif régional wallon and SA Glaverbel v Commission, ECR page 1573.