WRITTEN QUESTION E-3366/00 by Erik Meijer (GUE/NGL) to the Commission. Avoiding tax by spreading high incomes over different Member States.
Date: 2000-10-27
Institutions: European Parliament, Provisional data
Subjects: European tax cooperation, competence of the Member States, tax avoidance, tax on income

C 174 E/40

Official Journal of the European Communities

EN

19.6.2001

(2001/C 174 E/041)

WRITTEN QUESTION E-3366/00

by Erik Meijer (GUE/NGL) to the Commission

(27 October 2000)

Subject: Avoiding tax by spreading high incomes over different Member States

1.
Is the Commission aware that highly paid residents of Member States of the European Union have
the opportunity of having their income paid in different Member States so that in each individual Member
State they have a relatively low income and consequently, as a result of a progressive tax rate, are assigned
at a low tax bracket?

Can the Commission confirm that this system of salary split has been used for some time by senior
2.
managers of major international companies who allegedly work in a different country every day of the
week, and that it is now being used to an increasing extent by other highly paid executives of the firms in
question as a means of obtaining personal tax relief?

Does the Commission agree that the option of spreading a tax liability over different Member States
3.
can only be justified if work is demonstrably being performed in different Member States, and that it
should not result in persons benefiting from greater tax relief than the one to which they would have been
entitled in one Member State?

4.
Do all Member States make it obligatory for residents to state on their tax returns taxable income in
other countries, with details of the amount per country, and is it possible to use this information as a way
of counteracting unintentional tax immunity?

5. What does the Commission intend to do to preclude future abuse of existing schemes, for example,
by harmonising the tax systems of Member States in such a way that tax concessions that are currently
granted are offset by:

(a)

(b)

increasing each tax base to a proportion of the grand total of the income received in different Member
States, or

levying in one Member State a sum equal to the improperly obtained tax concession and subsequently
spreading it over the Member States concerned?

Answer given by Mr Bolkestein on behalf of the Commission

(7 December 2000)

The (cid:145)salary split(cid:146) described by the Honourable Member is the result of arrangements made under bilateral
tax treaties between Member States on the sharing of the tax base and avoiding double taxation when
taxpayers are involved in cross border activities. These bilateral tax treaties are as a rule based on the
Organisation for economic cooperation and development (OECD) model double taxation convention.

As regards directors(cid:146) remuneration, Article 16 of the OECD model convention states that: (cid:145)Directors(cid:146) fees
and other similar payments derived by a resident of a Contracting State in his capacity as a member of the
boards of directors of a company which is resident of the other Contracting State may be taxed in that
other State(cid:146).

Concerning income from employment, Article 15(1) of the OECD model convention states that: (cid:145)Salaries,
wages and other similar remuneration derived by a resident of a Contracting State in respect of an
employment shall be taxable only in that State unless the employment is exercised in the other Contracting
State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that
other State.(cid:146)

Where a taxpayer(cid:146)s income is taxed in a Member State other than his state of residence, Member States,
under these bilateral tax treaties, essentially apply one of two methods to avoid double taxation: the credit
method (income taxed in the source state is included in the taxable income in the state of residence but
foreign taxes are credited against residence state taxes) or the exemption with progression method (income

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taxed in the source state is excluded from the taxable income in the residence state but may be taken into
account in calculating the amount of tax on the remaining income in the residence state).

In certain circumstances, it is possible, as the Honourable Member suggests, that where a Member State
applies the exemption method to employment income derived by a resident from other states, the salary
split results in a level of taxation which is lower than if the income were earned only in that Member State.

In the absence of harmonisation at Community level, direct
taxation falls in principle within the
competence of the Member States, subject to respect for the provisions of the Treaty. It is therefore
primarily for the Member States concerned to address any problems of tax avoidance under domestic and
treaty rules. The Honourable Member raises however a further point requiring Community involvement.
The lack of effective exchange of information between Member States may lead to a level of taxation
below that which would be due under the tax rules of a Member State. This question is touched upon in a
report of the Ad hoc working party on tax fraud of 22 May 2000 (FISC 67), which was approved by the
Ecofin Council of 5 June 2000. The recommendations in the field of administrative co-operation and
mutual assistance contained in the report include the (cid:145)Stepping up of information exchange between
Member States regarding in particular the following situations (cid:133) (cid:129) income paid to delocalised taxpayers,
particularly sports personalities, artists and multinational business executives(cid:146). The Council called on the
Commission to submit possible proposals based on all the recommendations unanimously agreed.

The Commission is at present considering the steps which could be taken to give effect
recommendations made by the Ad hoc working group on this subject.

to the

(2001/C 174 E/042)

WRITTEN QUESTION E-3382/00

by Carmen Fraga EstØvez (PPE-DE) to the Commission

(3 November 2000)

Subject: Criteria used by the Commission for allocating fishing opportunities

In its reply to priority Written Question P-2974/00 (1) in which I enquired as to the criteria used by the
Commission to set reference periods for the allocation of fishing opportunities, the Commission once more
demonstrates, as on various occasions over recent months, its total contempt for the European Parliament,
and particularly its monitoring of the executive by means, inter alia, of parliamentary questions. In view of
the fact that the reply not only does not contain the slightest specific information on the matter raised, but
also that it can only be interpreted as a further sign of the Commission(cid:146)s impertinence and arrogance vis-(cid:224)-
vis the European Parliament, I once again ask the Commission:

With regard to the key question of the setting of reference periods, which could mean the loss of
significant fishing opportunities for certain fleets, together with the loss of income that this entails, will the
Commission state whether this is a purely discretional matter that is decided on at whim on a case-by-case
basis? Are there any objective criteria in this area, as could be inferred from the Commission(cid:146)s previous
reply?

Likewise, are the (cid:145)historical maximum(cid:146) years included in these reference periods on the basis of specific
criteria, or according to the nationality of the fleet which stands to benefit?

If it is the case that the Commission has complete discretion in this area, does it not agree that in order to
create a minimum of transparency with regard to the parties concerned, there is no reason not to make
public the criteria on which its decisions are based?

(1) OJ C 113 E, 18.4.2001, p. 223.