Resolution of the Council and the Representatives of the Governments of the Member States, meeting within the Council of 1 December 1997 on a code of conduct for business taxation
Date: 1997-12-01
Institutions: Council of the European Union, Representatives of the Governments of the Member States
Subjects: business management, code of conduct, tax avoidance, tax law

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6.  1.  98

years,  as  a  general  rule,  should  be  sufficient  for
rollback.  As  from  1  January  1998  the  actual
rollback  will  have  to  take  place  within  five  years
although  a 
in
longer  period  may  be 
particular  circumstances  following  an  assessment
by  the  Council.

justified 

The  German  delegation,  like  other  delegations,
understands  point  B  (3)  as  including,  inter alia, the
targeted  granting  of  advantages  for  international
mobile  activities,  where  they  are  not  granted  for
non(cid:220)mobile  activities.

for 

the  arrangements 

The  Commission  points  out  that  the  authorization
granted  in  1987  and  extended  most  recently  in
1994 
international
financial  services  centres  in  Dublin  expires  in  2005
and  that,  under  that  authorization,  no  new  insti(cid:220)
tutions  may  benefit  from  those  arrangements  after
2000.

for 

2.(cid:217)re  Annex  2  (taxation  of  savings)

The  Member  States  state  that,  if  they  were  to
change  their  legislation,  they  should  be  guided  by
the  points  set  out  in  Annex  2  to  these  conclusions.

The  United  Kingdom  delegation  considers  that
such  a  Directive  should  not  apply  to  Eurobonds
and  similar  instruments.

The  French  delegation  considers  that  the  Directive
on  the  taxation  of  savings  should  not  lay  down  a
rate  of  withholding  tax  of  less  than  25(cid:216)%.

The  Netherlands  delegation  notes  that 
it  will
assess  the  proposals  in  the  light  of  the  principle  of
taxation  of  savings  in  the  country  of  residence.

The  Luxembourg  delegation  considers 
that  a
Directive  on  taxation  of  savings  should  be  accom(cid:220)
taxation
panied  by  a  Directive  on  business 
business
for 
general 
covering 
taxation  in  the  Member  States.

arrangements 

The  Belgian,  Italian  and  Portuguese  delegations
state  that  they  will  not  agree  to  the  Directive  on
interest  and  royalty  payments  between  companies
before  the  Directive  on  the  taxation  of  savings  is
adopted.

3.(cid:217)The  Commission 

the  Netherlands
notes 
delegation’s  request  concerning  problems  relating
in  particular  to  taxation  of  pensions  and  insurance
benefits;  it  undertakes  to  consider  the  matter  with
the  assistance  of  the  Taxation  Policy  Group  with  a
view  to  possibly  drawing  up  a  proposal  for  a
Directive.

4.(cid:217)The  Commission  notes  the  Belgian  delegation’s
request  concerning  VAT  treatment  of  cross(cid:220)border
motor  vehicle  leasing  and  undertakes  to  look  into
it  with  an  open  mind.  It  will  in  particular  consider
to  what  extent  the  proposals  already  planned  to
modernize  and 
the  present  VAT
arrangements  can  provide  a  suitable  solution.

streamline 

ANNEX  1

RESOLUTION  OF  THE  COUNCIL  AND  THE  REPRESENTATIVES  OF  THE  GOVERNMENTS
OF  THE  MEMBER  STATES,  MEETING  WITHIN  THE  COUNCIL

of  1  December  1997

on  a  code  of  conduct  for  business  taxation

THE  COUNCIL  OF  THE  EUROPEAN  UNION  AND  THE  REPRESENTATIVES  OF  THE
GOVERNMENTS  OF  THE  MEMBER  STATES,  MEETING  WITHIN  THE  COUNCIL,

RECALLING  that  a  comprehensive  approach  to  taxation  policy  was  launched,  at  the  Commission’s  insti(cid:220)
gation,  at  the  informal  meeting  of  the  Ministers  for  Economic  Affairs  and  Finance  held  in  Verona  in  April
1996  and  confirmed  at  the  meeting 
light  of  the
consideration  that  coordinated  action  at  European  level  is  needed  in  order  to  reduce  continuing  distortions

in  Mondorf(cid:220)les(cid:220)Bains 

in  September  1997 

in  the 

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in  the  single  market,  prevent  significant  losses  of  tax  revenue  and  help  tax  structures  develop  in  a  more
employment(cid:220)friendly  way,

ACKNOWLEDGING  the  major  contribution  made  by  the  Taxation  Policy  Group  to  the  preparation  of
this  Resolution,

NOTING  the  Commission  communication  to  the  Council  and  the  European  Parliament  of  5  November
1997,

ACKNOWLEDGING  the  positive  effects  of  fair  competition  and  the  need  to  consolidate  the  competi(cid:220)
tiveness  of  the  European  Union  and  the  Member  States  at  international  level,  whilst  noting  that  tax
competition  may  also  lead  to  tax  measures  with  harmful  effects,

ACKNOWLEDGING,  therefore,  the  need  for  a  code  of  conduct  for  business  taxation  designed  to  curb
harmful  tax  measures,

EMPHASIZING  that  the  code  of  conduct  is  a  political  commitment  and  does  not  affect  the  Member
States’  rights  and  obligations  or  the  respective  spheres  of  competence  of  the  Member  States  and  the
Community  resulting  from  the  Treaty,

HEREBY  ADOPT  THE  FOLLOWING  CODE  OF  CONDUCT:

Code  of  conduct  for  business  taxation
tax  measures  covered

A. Without  prejudice  to  the  respective  spheres  of  competence  of  the  Member  States  and  the  Community,
this  code  of  conduct,  which  covers  business  taxation,  concerns  those  measures  which  affect,  or  may
affect,  in  a  significant  way  the  location  of  business  activity  in  the  Community.

Business  activity  in  this  respect  also  includes  all  activities  carried  out  within  a  group  of  companies.

The  tax  measures  covered  by  the  code  include  both  laws  or  regulations  and  administrative  practices.

B. Within  the  scope  specified  in  paragraph  A,  tax  measures  which  provide  for  a  significantly  lower
effective  level  of  taxation,  including  zero  taxation,  than  those  levels  which  generally  apply  in  the
Member  State  in  question  are  to  be  regarded  as  potentially  harmful  and  therefore  covered  by  this  code.

Such  a  level  of  taxation  may  operate  by  virtue  of  the  nominal  tax  rate,  the  tax  base  or  any  other
relevant  factor.

When  assessing  whether  such  measures  are  harmful,  account  should  be  taken  of,  inter  alia:

1.(cid:217)whether  advantages  are  accorded  only  to  non(cid:220)residents  or  in  respect  of  transactions  carried  out  with

non(cid:220)residents,  or

2.(cid:217)whether  advantages  are  ring(cid:220)fenced  from  the  domestic  market,  so  they  do  not  affect  the  national  tax

base,  or

3.(cid:217)whether  advantages  are  granted  even  without  any  real  economic  activity  and  substantial  economic

presence  within  the  Member  State  offering  such  tax  advantages,  or

4.(cid:217)whether  the  rules  for  profit  determination  in  respect  of  activities  within  a  multinational  group  of
companies  departs  from  internationally  accepted  principles,  notably  the  rules  agreed  upon  within  the
OECD,  or

5.(cid:217)whether  the  tax  measures  lack  transparency,  including  where  legal  provisions  are  relaxed  at  adminis(cid:220)

trative  level  in  a  non(cid:220)transparent  way.

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Standstill  and  Rollback

Standstill

C. Member  States  commit  themselves  not  to  introduce  new  tax  measures  which  are  harmful  within  the
meaning  of  this  code.  Member  States  will  therefore  respect  the  principles  underlying  the  code  when
determining  future  policy  and  will  have  due  regard  for  the  review  process  referred  to  in  paragraphs  E
to  I  in  assessing  whether  any  new  tax  measure  is  harmful.

Rollback

D. Member  States  commit  themselves  to  re(cid:220)examining  their  existing  laws  and  established  practices,  having
regard  to  the  principles  underlying  the  code  and  to  the  review  process  outlined  in  paragraphs  E  to  I.
Member  States  will  amend  such  laws  and  practices  as  necessary  with  a  view  to  eliminating  any  harmful
measures  as  soon  as  possible  taking  into  account  the  Council’s  discussions  following  the  review  process.

Review  process

Provision  of  relevant  information

E. In  accordance  with  the  principles  of  transparency  and  openness  Member  States  will  inform  each  other
of  existing  and  proposed  tax  measures  which  may  fall  within  the  scope  of  the  code.  In  particular,
Member  States  are  called  upon  to  provide  at  the  request  of  another  Member  State  information  on  any
tax  measure  which  appears  to  fall  within  the  scope  of  the  code.  Where  envisaged  tax  measures  need
parliamentary  approval,  such 
information  need  not  be  given  until  after  their  announcement  to
Parliament.

Assessment  of  harmful  measures

F. Any  Member  State  may  request  the  opportunity  to  discuss  and  comment  on  a  tax  measure  of  another
Member  State  that  may  fall  within  the  scope  of  the  code.  This  will  permit  an  assessment  to  be  made  of
whether  the  tax  measures  in  question  are  harmful,  in  the  light  of  the  effects  that  they  may  have  within
the  Community.  That  assessment  will  take  into  account  all  the  factors  identified  in  paragraph  B.

G. The  Council  also  emphasizes  the  need  to  evaluate  carefully  in  that  assessment  the  effects  that  the  tax
measures  have  on  other  Member  States,  inter  alia  in  the  light  of  how  the  activities  concerned  are
effectively  taxed  throughout  the  Community.

Insofar  as  the  tax  measures  are  used  to  support  the  economic  development  of  particular  regions,  an
assessment  will  be  made  of  whether  the  measures  are  in  proportion  to,  and  targeted  at,  the  aims  sought.
In  assessing  this,  particular  attention  will  be  paid  to  special  features  and  constraints  in  the  case  of  the
integrity  and  coherence  of  the
outermost  regions  and  small 
Community  legal  order,  including  the  internal  market  and  common  policies.

islands,  without  undermining  the 

Procedure

H. A  group  will  be  set  up  by  the  Council  to  assess  the  tax  measures  that  may  fall  within  the  scope  of  this
code  and  to  oversee  the  provision  of  information  on  those  measures.  The  Council  invites  each  Member
State  and  the  Commission  to  appoint  a  high(cid:220)level  representative  and  a  deputy  to  this  group,  which  will
be  chaired  by  a  representative  of  a  Member  State.  The  group,  which  will  meet  regularly,  will  select  and
review  the  tax  measures  for  assessment  in  accordance  with  the  provisions  laid  down  in  paragraphs  E  to
G.  The  group  will  report  regularly  on  the  measures  assessed.  These  reports  will  be  forwarded  to  the
Council  for  deliberation  and,  if  the  Council  so  decides,  published.

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I. The  Council  invites  the  Commission  to  assist  the  group  in  carrying  out  the  necessary  preparatory  work
for  its  meetings  and  to  facilitate  the  provision  of  information  and  the  review  process.  To  this  end,  the
Council  requests  Member  States  to  provide  the  Commission  with  the  information  referred  to  in
paragraph  E  so  that  the  Commission  may  coordinate  the  exchange  of  such  information  between  the
Member  States.

State  aid

J. The  Council  notes  that  some  of  the  tax  measures  covered  by  this  code  may  fall  within  the  scope  of  the
provisions  on  State  aid  in  Articles  92  to  94  of  the  Treaty.  Without  prejudice  to  Community  law  and  the
objectives  of  the  Treaty,  the  Council  notes  that  the  Commission  undertakes  to  publish  guidelines  on  the
application  of  the  State  aid  rules  to  measures  relating  to  direct  business  taxation  by  mid(cid:220)  1998,  after
submitting  the  draft  guidelines  to  experts  from  the  Member  States  at  a  multilateral  meeting,  and
commits  itself  to  the  strict  application  of  the  aid  rules  concerned,  taking  into  account,  inter  alia,  the
negative  effects  of  aid  that  are  brought  to  light  in  the  application  of  this  code.  The  Council  also  notes
that  the  Commission  intends  to  examine  or  re(cid:220)examine  existing  tax  arrangements  and  proposed  new
legislation  by  Member  States  case  by  case,  thus  ensuring  that  the  rules  and  objectives  of  the  Treaty  are
applied  consistently  and  equally  to  all.

Action  to  combat  tax  avoidance  and  evasion

K. The  Council  calls  on  the  Member  States  to  cooperate  fully  in  the  fight  against  tax  avoidance  and
evasion,  notably  in  the  exchange  of  information  between  Member  States,  in  accordance  with  their
respective  national  laws.

L. The  Council  notes  that  anti(cid:220)abuse  provisions  or  countermeasures  contained  in  tax  laws  and  in  double

taxation  conventions  play  a  fundamental  role  in  counteracting  tax  avoidance  and  evasion.

Geographical  extension

M. The  Council  considers  it  advisable  that  principles  aimed  at  abolishing  harmful  tax  measures  should  be
adopted  on  as  broad  a  geographical  basis  as  possible.  To  this  end,  Member  States  commit  themselves  to
promoting  their  adoption  in  third  countries;  they  also  commit  themselves  to  promoting  their  adoption
in  territories  to  which  the  Treaty  does  not  apply.

In  particular,  Member  States  with  dependent  or  associated  territories  or  which  have  special  responsi(cid:220)
bilities  or  taxation  prerogatives  in  respect  of  other  territories  commit  themselves,  within  the  framework
of  their  constitutional  arrangements,  to  ensuring  that  these  principles  are  applied  in  those  territories.  In
this  connection,  those  Member  States  will  take  stock  of  the  situation  in  the  form  of  reports  to  the  group
referred  to  in  paragraph  H,  which  will  assess  them  under  the  review  procedure  described  above.

Monitoring  and  revision

N. In  order  to  ensure  the  even  and  effective  implementation  of  the  code,  the  Council  invites  the
Commission  to  report  to  it  annually  on  the  implementation  thereof  and  on  the  aspplication  of  fiscal
State  aid.  The  Council  and  the  Member  States  will  review  the  provisions  of  the  code  two  years  after  its
adoption.