EN Official Journal of the European Union CE 88/360

(2004/C 88 E/0366)

WRITTEN QUESTION E-1640/03

by Erik Meijer (GUE/NGL) to the Commission

(16 May 2003)

Subject: Lack of money for maintaining infrastructure and for cofinancing projects in Member States which use tax cuts to gain a competitive advantage

1. Is the Commission aware of a trend in one or more of the countries due to become new Member States of the EU in 2004 or 2007 to lower taxes, particularly taxes on high income and company profits?

2. Is this reduction being made in the expectation that a combination of low taxes and assistance to be provided from EU funds will deliver a significant competitive advantage favouring the relocation of companies from the current Member states to the future Member states?

3. Does this trend go hand in hand with abolition of the minimum wage, abolition of maximum working hours for employees, removal of protection against dismissal and a reduction in rights in the area of social security, pensions and reimbursement of medical expenses?

4. In which of the future new Member States is this trend most pronounced?

5. Which new Member States have chosen not to follow this trend?

6. Is it already becoming apparent that Member States which lower taxes will in future not have sufficient resources to maintain and modernise their infrastructure and to cofinance projects funded partly with assistance from EU funds, with the result that they will be increasingly dependent on large long-term loans?

7. What steps is the Commission taking to try to avoid a situation in which Member States, in anticipation of the receipt of money from EU funds, create new problems that will have a negative impact in terms of the level of financial resources required and the possibility of actually being able to use such money for cofinancing?

Answer given by Mr Verheugen on behalf of the Commission

(27 June 2003)

Concerning the respect of Community policy in general, the Commission points out that the Candidate Countries made commitments in the Accession Negotiations to modify their legislation and procedures to bring them into line with all fields of the Community ‘acquis’ by 1 May 2004, except for areas where transitional arrangements have been granted. In this context the Commission monitors the state of implementation of these commitments and informs the Council on a regular basis. A comprehensive Monitoring Report is in preparation which will be submitted to the Council and the Parliament on 5 November 2003.

On the specific question of tax levels, the lowering of statutory tax rates on corporate and personal income since the late 1990s is not only a trend in the acceding States but also in the current Member States. In most cases the lowering of the statutory tax rate is accompanied by a broadening of the taxable base, thus compensating for a possible loss to the budget. In some situations increasing the rates of the VAT or other indirect taxes (notably ‘green’ taxes) further compensates the lower tax rates.

Since the early 1970s, there has in fact been a persistent and largely unbroken trend for the ratio of actual tax revenue to gross domestic product (GDP) to increase across most of the Organisation for Economic Co-operation and Development (OECD) area. Provisional revenue figures for 2001 now tend to show a decline in a number of OECD countries (both in current Member States and in some acceding States), which suggests that this trend may be coming to an end. However, it should be noted that this partly reflects recent cyclical developments and deteriorating stock market performance.

Concerning the features of social policy referred to in the Honourable Member's question, it is recalled that Community labour law is an essential part of the European social ‘acquis’. It includes 15 Directives in various fields such as information and consultation of employees, working time or protection of workers with part-time or fixed-term relationships. Most of these Directives establish minimum requirements, i.e. on working hours, rest periods or annual leave, which have to be transposed by acceding countries and the Commission thoroughly monitors the process of implementation. The objective of labour law Directives is not the harmonisation of labour law within the Community. In all Directives there is a balance between protection of workers rights and flexibility. As regards individual dismissals, minimum wages and collective rights, there are no comprehensive labour law Directives at European level in these areas. It is up to Member States, both present and future, to define these issues in line with their own traditions and within their specific employment context.

Finally, concerning Community funds, the Commission notes that in the course of negotiations with the Member States, present and future, on the programming documents for the Structural and Cohesion Funds, the Commission thoroughly examines the respect of Community legislation, e.g. competition rules, relevant to the implementation of the Funds as well as the soundness and conformity of the administrative and financial arrangements proposed for adoption by the competent national or regional authorities. After approval of the programming documents in a Commission Decision, the Commission monitors and evaluates their implementation.