WRITTEN QUESTION P-2384/98

by Giovanni Burtone (PPE) to the Commission

(17 July 1998)

Subject: Compatibility with the Treaty of measures to defer payment of tax and reduce the tax liabilities of Sicilian firms

Following the earthquake that struck eastern Sicily on 13 December 1990, the Italian Government allowed firms situated in the communes affected to suspend payment of, inter alia, social security contributions and VAT.

In the next few days, the firms in question must pay back the relevant instalments of their deferred tax bills for 1990, 1991 and 1992.

Immediate repayment of these deferred taxes would lead to the collapse of many firms as a result of the economic depression that has affected the Region from 1990 to 1998, as shown by a reduction in turnover which has had a drastic effect on Sicily's economic situation.

Whereas the INPS (the National Institute of Social Insurance) has provided for social security payments to be paid back within 10 years, the tax authorities envisage a much shorter time-scale. The impact on employment would be dramatic to say the least, given that this area is already characterized by a very high unemployment rate.

The EU regards combatting unemployment as one of its priorities. The Luxembourg European Council identified fiscal policy as one of the instruments to be used to reduce unemployment.

In particular, the Luxembourg European Council of 21 November 1997 confirmed the need to make the tax system more favourable to employment and reverse the tendency to increase the burden of taxes and social security charges on labour. The Member States undertook, therefore, to reduce the tax burden on labour.

In view of the foregoing, would the Commission state whether it would be compatible with the Treaty to apply to firms which had been allowed to defer payment, a measure which would

- defer payment of the tax due until 31 December 1998 and

- enable tax liabilities to be offset against investment, modernization and increasing the employment level?

Answer given by Mr Monti on behalf of the Commission

(2 October 1998)

In the tax field, value added tax (VAT) has been harmonised on the basis of the Sixth Council Directive of 17 May 1977(1), as last amended by Council Directive 96/95/EC of 20 December 1996(2).

In particular, where taxpayers' obligations are concerned, Article 22(5) of the Directive lays down the principle whereby every taxable person has to pay the amount of VAT when submitting his tax return. By way of derogation from that principle, the second sentence of Article 22(5) allows Member States to "fix a different date for the payment of the amount". However, this derogation may not have the effect of cancelling or reducing the tax debt.

Moreover, any extension of the payment date would constitute state aid which would have to be examined by the Commission in the light of Article 92 et seq. of the EC Treaty.

In accordance with Article 22(9)(c) of the Sixth Directive, Member States "may release taxable persons from payment of the tax due where the amount involved is insignificant". It follows that, except in cases where the amount payable by a taxable person as VAT to the tax authorities can be regarded as very small, a Member State is not authorised to reduce the tax debt payable by that person.

(1) Directive 77/388/EEC 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).

(2) OJ L 338, 28.12.1996.