WRITTEN QUESTION E-0854/01 by Christopher Huhne (ELDR) to the Commission. Taxation levels.
Date: 2001-03-22
Institutions: European Parliament, Provisional data
Subjects: EU Member State, fiscal policy, tax relief

20.12.2001

EN

Official Journal of the European Communities

C 364 E/17

In addition, the compulsory monitoring plan carried out annually by the Member States should be targeted
to animals and active substances of special concern. This should include the use of non-steroidian anti-
inflammatory substances referred to by the Honourable Member. The Commission is not aware that many
of the fighting bulls are drugged with phenylbutazone and would like to receive appropriate evidence in
order to decide on proper follow-up.

Finally, the Commission would like to emphasise that, within the framework of the Common Agricultural
Policy (CAP), there is no special subsidy designed to support the breeding of bulls for fighting. However,
Council Regulation (EC) No 1254/1999 of 17 May 1999 on the common organisation of the market in
beef and veal (1) destined to support the beef production does not exclude specifically those bulls which
later appear as being used in bullfights. Livestock farmers decide if and which of their animals (generally
a small number of their bulls) will be used for fighting purposes only when the animals are adult.
Therefore, at the normal age for applying for the beef premium, the fact that an animal will be used for
fighting is unknown.

(1) OJ L 160, 26.6.1999.

(2001/C 364 E/019)

WRITTEN QUESTION E-0854/01

by Christopher Huhne (ELDR) to the Commission

(22 March 2001)

Subject: Taxation levels

Does the Commission believe that any Member State has such a high general level of taxation that a tax
cut might increase revenue through incentive effects?

Answer given by Mr Solbes Mira on behalf of the Commission

(26 June 2001)

Although there is a theoretical possibility that high tax rates result in lower tax revenues and, that,
therefore, a lowering of tax rates leads to increased fiscal revenues, there are no clear indications about the
level tax rates have to reach in order to produce so-called Laffer-type effects (1).

In the joint report on (cid:145)The Contribution of Public Finances to Growth and Employment. Improving Quality
and Sustainability(cid:146), which was submitted to the European Council of Stockholm, the Commission and the
Council, on the basis of the accumulated experience, affirmed that tax cuts are not fully self-financing, and
need to be accompanied with spending reforms. The report considers that the necessary amount of
expenditure reductions has to be gauged by the starting budgetary and cyclical economic position, while
an appropriate balance also has to be drawn between cutting taxes and running down government debt
and/or improving the long-term sustainability of public finances. In addition, the effects of tax reforms also
depend on the degree to which tax cuts target supply side rigidities. In particular, where (cid:145)incentive(cid:146) effects
are concerned, tax cuts targeted to highly distortionary taxes, such as those on labour, especially at the
lower end of the wage scale, may lead to positive effects on investment, employment and growth in the
long run, which may result in higher tax revenues, partially offsetting the negative effects of cutting rates.

(1) Laffer-type effects refer to the possibility that a cut in tax rates could lead to an increase (instead of, as expected, to
a reduction) of tax revenues. However, in the real world, against what was suggested by Laffer, tax cuts are not self-
financing. Other things equal, tax cuts lead to a reduction in tax revenues.