Proposal for a Council Decision on the arrangements concerning the AIEM tax applicable in the Canary Islands
Date: 2001-12-06
Institutions: European Commission
Subjects: Canary Islands, derogation from EU law, import tax, indirect tax, production, tax exemption

C 75 E/328

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Official Journal of the European Communities

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Proposal for a Council Decision on the arrangements concerning the AIEM tax applicable in the
Canary Islands

(2002/C 75 E/22)

COM(2001) 732 final (cid:151) 2001/0284(CNS)

(Submitted by the Commission on 6 December 2001)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community, and in particular Article 299(2),

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Having regard to the opinion of
Committee,

the Economic and Social

Having regard to the opinion of the Committee of the Regions,

Whereas:

(1) Article 299(2) of the EC Treaty states that the provisions
of the Treaty apply to the outermost regions and hence
the Canary Islands, account being taken of their structural
economic and social situation, which is exacerbated by
their
difficult
topography and climate, economic dependence on a few
the permanence and combination of which
products,
severely restrain their development.

remoteness,

insularity,

small

size,

(2) Specific measures must therefore be adopted in order to
establish the conditions for applying the EC Treaty to
those regions. Specific tax policy measures may be
adopted. They must take account of the special charac-
these regions, but without
teristics and constraints of
undermining
the
coherence
integrity
including the internal market
Community legal order,
European Council (1),
and
policies.
Parliament (2), the Committee of the Regions (3) and the

common

The

and

the

of

(1) Paragraph 38 of the conclusions of the Cologne European Council
of 4 June 1999, paragraph 59 of the conclusions of the Lisbon
European Council of 24 March 2000, paragraph 53 of
the
conclusions of
the Feira European Council of 20 June 2000,
conclusions of the European Council held in Nice on 7, 8, and
9 December 2000, conclusions of
the Gotheborg European
Council of 15 and 16 June 2001.

(2) European Parliament resolution of 24 April 1997 on development
problems in the outermost regions of the European Union (OJ C
150, 19.5.1997, p. 62).
European Parliament
resolution of 25 October 2000 on the
Commission report on the measures to implement Article 299(2)
in respect of the outermost regions (OJ C 197, 12.7.2001, p. 197).
(3) Opinion of the Committee of the Regions of 13 December 2000 on
the outermost regions in connection with the
(OJ C 144,

the problems of
report on the implementation of Article 299(2)
16.5.2001, p. 11).

Economic and Social Committee (4) have on several
occasions
these specific
measures.

stressed the need to adopt

(3) On the question of

regions.

taxation, specific measures to be
implemented must be based on the instruments most
appropriate to regional development and support of
long-term tax
these
derogations,
of
criteria
accordance with
coherence of Community law and the internal market
and provided that
these measures are necessary and
proportionate to the objectives pursued.

They may

include

the

in

(4) The indirect

taxation arrangements applicable to the
taxes including
Canary Islands comprise a number of
the Impuesto General
Indirecto Canario (IGIC) and the
(cid:145)Arbitrio sobre la Producci(cid:243)n y sobre las Importaci(cid:243)nes(cid:146)
(APIM) (tax on production and imports) authorised until
31 December 2001 by Article 5 of Council Regulation
(EEC) No 1911/91 of 26 June 1991 on the application
of
the provisions of Community law to the Canary
Islands (5), as amended by Regulation (EC) No 2674/1999
of 13 December 1999 (6),
suspending the degressive
nature of the APIM tax for certain sectors regarded as
sensitive, and extended by Regulation (EC) No 1105/2001
of
(EEC)
30 May
No 1911/91 (7).

Regulation

amending

2001

the

suspending

impact of

the suspension measure.

(5) When Regulation (EC) No 2674/1999 was adopted, the
Council requested the Commission to examine with the
Spanish authorities
the
dismantling of the APIM tax on the economic sectors
concerned and more especially the products forming the
subject of
It also asked the
Commission to present to it, where appropriate in the
light of
this examination, a proposal
concerning the measures to be taken on the basis of the
Treaty, in order to avoid jeopardising certain particularly
vulnerable local production activities, while ultimately
abolishing the tax. This objective of ultimate abolition
of the tax must now be included in the framework of

the results of

(4) Opinion of the Economic and Social Committee of 1 March 2001
for a Council Regulation amending Regulation
on the proposal
(EEC) No 1911/91 on the application of
the provisions of
Community law to the Canary Islands (OJ C 139, 11.5.2001, p. 93).

(5) OJ L 171, 29.6.1991, p. 1.
(6) OJ L 326, 18.12.1999, p. 3.
(7) OJ L 151, 7.6.2001, p. 1.

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measures adopted on the basis of Article 299(2) of the
Treaty, which authorises specific long-term measures to
take account of the handicaps listed.

(6) In their letters of 25 July 2000 and 12 June 2001, the
Spanish authorities sent the Commission on the basis of
Article 299(2) of the EC Treaty details concerning a new
tax known as (cid:145)Arbitrio sobre las Importaciones y Entregas
de Mercanc(cid:237)as en las islas Canarias (AIEM)(cid:146). This is a tax
on supplies of goods in the Canary Islands effected by the
producers of these goods and on imports of comparable
or similar goods of the same type defined by reference to
the Common Customs Tariff Nomenclature. The taxable
base for imported goods shall be based on the customs
value and that of supplies of goods effected by producers
in the Canary Islands shall be based on the total amount
of the consideration. Like the APIM, the AIEM may be
exempted on locally produced goods. The Commission
evaluated this proposed tax in the light of the under-
the Council when Regulation (EC)
takings
the
No 2674/1999 was adopted and in the light of
handicaps affecting industrial production in the Canary
Islands.

it gave

(7) At

the list of handicaps identified is the
the top of
predominance of
the services sector and in particular
tourism in the regional product and also the dependence
of the Canary Islands’ economy on this sector and the
small share of industry in the Canary Islands’ GDP. The
AIEM tax should serve the objective of the autonomous
development of the Canary Islands’ industrial production
sectors and of diversifying the Islands’ economy.

(8) In second place is the isolation inherent

in an island
which hinders the free movement of persons, goods and
services. Dependence on certain modes of transport, air
transport and maritime transport is increased since these
are modes of transport which have not yet been fully
liberalised. Production costs are greater because they are
less efficient and more expensive than road, rail or the
trans-European networks.

(9) As a further consequence of

isolation, higher
production costs result
from dependence in terms of
the obligation to build up
raw materials and energy,
stocks and difficulties affecting the supply of production
equipment.

this

(10) The small size of the market and the low level of export
activity,
the archi-
pelago, and the obligation to maintain diversified but

fragmentation of

the geographical

the
only small production lines
requirements of a small market restrict the opportunities
for economies of scale.

in order

to meet

(11) It is in many cases more difficult or more expensive to
obtain specialised and maintenance services, and training
to subcontract or
for managers and technicians, or
promote business expansion beyond the Canary Islands’
market. The narrow range of distribution methods also
results in overstocking.

(12) As regards the environment, the disposal of

industrial
toxic waste give rise to
waste and the treatment of
higher
costs are higher
environmental
because there are no recycling plants, other than for
certain products, and waste has to be transported to the
mainland and toxic waste has to be treated outside the
Canary Islands.

costs. These

to derive benefits

(13) Generally speaking, the present trend towards the global-
isation of markets, which is characterised by the concen-
tration of production, and consequently specialisation of
production sectors, does not enable business
in the
comparable with
Canary Islands
business situated in less isolated,
larger markets. As a
result, to varying degrees depending on the sector and
product,
is
gradually being replaced by imports. On top of this, a
common feature of local production is interdependence
of local firms, in a form which resembles vertical inte-
gration, so that when activities are relocated in one sector
this triggers the loss of activities in other related sectors.

local production in the Canary Islands

(14) On the basis of all this information and the notification
from the Spanish authorities, it is advisable to authorise
the application of a tax to a list of industrial products for
which exemptions for local products may be allowed.

(15) It is nevertheless advisable to combine the requirements of
Articles 299(2) and 90 of the EC Treaty and observance
of the need for coherence of Community law and the
internal market. This means applying only the measures
strictly necessary and proportionate to the objectives set,
account being taken of
the handicaps of a remote
location. The proposed Community framework therefore
comprises a list of sensitive products for which the
Canary Islands authorities are authorised to introduce a
tax,
the maximum rates being determined by Council
decision, and to apply total or partial exemptions where
these products are produced locally.

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and

following

industries,

categories:

agricultural

(16) Industrial products for which there is exemption fall into
the
fisheries
products, building materials, chemicals, products of the
metalworking
beverages,
textiles and leather, paper, graphic
tobacco products,
arts and publishing. These sectors and products largely
correspond to the sensitive sectors identified by Regu-
this
lation (EC) No 2674/1999. The provisions of
Decision shall apply to the implementation of
these
exemptions without prejudice to the possible application
of Articles 87 and 88 of the EC Treaty.

foodstuffs

and

(17) The maximum rates which may be applied to the
industrial products in question vary depending on sector
and product by 5 % to 15 %. The rates applicable to these
products correspond, according to the Spanish authorities,
to the level of the APIM tax as it resulted in 1996 from
the application of Regulation (EEC) No 1911/91 and the
acts adopted pursuant to the Regulation and the Regu-
lation on the (cid:145)tarifa especial(cid:146) tax.

(18) The rate applicable to finished tobacco products is never-
theless higher, because the tobacco sector is an excep-
tional case. The tobacco industry, which had greatly
expanded in the Canary Islands, has been declining very
markedly for a number of years. The traditional handicaps
of insularity described above are of course at the root of
the decline in local tobacco production in the Canary
Islands. The phenomenon of numerous relocations of
firms established in the Canary Islands is also the result
of the globalisation of the economy and concentration of
production and the emergence and development of new
markets outside Europe. The decline in local production
led to 67 % job losses between 1985 and 2000. The series
of relocations and closures has involved the production
plants of multinationals which are among the world’s
leading manufacturers.

increased steadily over

(19) This phenomenon of declining local production is in
furthermore, with a local market on which
contrast,
the same period. The
sales
increased sales of
tobacco are attributed by producers
partly to the buoyant market created by tourists. The
retail price of tobacco products in the Canary Islands is
still very attractive. A comparison shows price differences
of about half compared with the selling prices of tobacco
in the rest of Spain.
Increased taxes on tobacco since
1995,
in particular the IGIC, have not slowed down
sales of tobacco products, which rose steadily over the
corresponding period. It has proved possible to maintain
a large volume of supply on this growing market despite
the drop in local production as a result of the increase in
imports from 5 % to 32 % between 1992 and 2000.

tobacco. Increased taxation is in direct relation with the
objective of maintaining production in the Canary Islands.

(21) It is nevertheless necessary to bear in mind the coherence
of the internal market, as required by Article 299(2) of
the EC Treaty. Trade is important in this sector. Imports of
tobacco products into the Canary Islands have increased
in recent years but the proportion of exports of tobacco
from the Canary Islands is also large. At present some
76 % of
the Canary Islands’ cigarette production is
exported and only 24 % goes to the Canary Islands’
the
market. Comparison of
volume of
from Canary Islands has been
increasing since 1995, but the volume of imports has
increased even more. This means that,
in a growing
market, local production does not cover all requirements.
These findings underpin the argument that an AIEM is
needed as a sufficient incentive to maintain or restore
local production given the importance of trade in this
sector.

the figures

exports

reveals

that

(22) Account being taken of these factors, the fact that the tax
may be accompanied by a total exemption for local
local producers enjoy a
that
production and the fact
benefit
in relation to other producers, comprising the
opportunity to import up to 20 000 tonnes a year of
initial
raw and
proposal drawn up by the Spanish authorities, who
that
suggested a rate of 45 %,
reason a much higher
the other
rate than for all
products but not exceeding 25 % is proposed.

seems excessive. For

semi-manufactured

tobacco (1),

the

(23) The objectives of promoting the socio-economic devel-
opment of the Canary Islands are reflected at national
level in the purpose of the tax and the allocation of the
revenue it generates. The incorporation of the revenue
from this tax in the resources of
the Canary Islands
economic and tax system and its use for an economic
and
the
promotion of local activities will be a legal obligation.

development

involving

strategy

social

(24) The arrangements are to apply for ten years. It will never-
theless be necessary to evaluate the proposed system after
five years. The Spanish authorities must therefore present
to the Commission by 31 December 2005, at the latest, a
report on the application of the arrangements referred to
in Article 1, in order to check the impact of the measures
taken and their contribution to promoting or maintaining
local economic activities, account being taken of
the
handicaps affecting the outermost regions. On this basis,
the
authorised under
and exemptions
Community rules will be revised if necessary,

scope,

rates

(20) Account being taken of all these factors, there are grounds
increase in the rate of the AIEM for

for a substantial

(1) Commission Regulation (EC) No 1528/2001 of 26 July 2001
amending Regulation (EEC) No 2179/92 laying down detailed
rules for the application of the specific import measures for the
Canary Islands as regards tobacco (OJ L 202, 27.7.2001, p. 9).

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HAS ADOPTED THIS DECISION:

Article 1

Until 31 December 2011, the Spanish authorities shall be auth-
orised to apply a tax known as (cid:145)Arbitrio sobre las Import-
islas Canarias
aciones y Entregas de Mercanc(cid:237)as en las
(AIEM)(cid:146),
in
the rates and exemptions
accordance with Articles 2 and 3, to products imported into
and obtained in the Canary Islands, as listed in Annex.

for which are set

Article 2

For the products listed in Annex I.A, the rates of the

1.
AIEM tax may not exceed 5 %.

For the products listed in Annex I.B, the rates of the

2.
AIEM tax may not exceed 15 %.

For the products listed in Annex I.C, the rates of the

3.
AIEM tax may not exceed 25 %.

produced locally in the Canary Islands,
reductions of the tax referred to in Article 1.

total or partial

These exemptions must
the strategy for the
economic and social development of the Canary Islands and
contribute to the promotion of local activities.

form part of

Article 4

The Spanish authorities shall present to the Commission at the
latest by 31 December 2005 a report on the application of the
arrangements referred to in Article 1, in order to check the
impact of the measures taken and their contribution to the
promotion or maintenance of
economic activities,
account being taken of handicaps affecting the outermost
regions.

local

On this basis, the Commission shall present a report to the
Council, and where appropriate a proposal for adapting the
provisions of this Decision.

Article 3

Article 5

By way of derogation from Articles 23, 25 and 90 of the
the Spanish authorities shall be authorised to lay
Treaty,
the products listed in Annex that are
in respect of
down,

This Decision shall be applicable from 1 January 2002.

This Decision shall be addressed to the Kingdom of Spain.

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ANNEX

A. List of products referred to in Article 2(1) according to the classification of the Common Customs Tariff

nomenclature:

Agriculture and fishery products:
0203 11/0203 12/0203 19/0207 11/0207 13/0302 69 61 00/0302 69 94 00/0701 90/0702/0703/0803

Building materials:
3816/3824 40 00 00/3824 90 45 00/3824 90 70 00/6809

Chemicals:
2804 30 00/2804 40 00/2851 00 30/3208/3209/3210/3212 90 90 00/3213/3214/3401/3402/3406/3814 00 90 90/
3920 30 00 90/3921 90 60/3923 90 90/4012 10

Metal-working industries:
7604/7608/8428 39 98 00/8479 50 00 00

Food industry:
0210 11 11 00/0210 11 31 00/0210 12 19 00/0210 19 40 00/0210 19 81 00/0305 41 00/0901 22 00 00/1101/
1901 20 00 90/1901 90 91 96/2006 00 31 00/1601/1602/1704 90 30 00/1704 90 51 90/1704 90 55 00/1704 90 71/
1704 90 75 00/1806/1901 90 99/1904 10 10/1905/2007 91 10/2008 99 61/2008 99 68/2009 11/2009 19/2009 40/
2009 50/2009 70/2009 80/2009 90/2105/2309

Beverages:
2201/2202

Textiles and leather:
6112 31/6112 41

Paper:
4822 90/4823 90 90 90

Graphic arts and publishing:
4910

B. List of products referred to in Article 2(2) according to the classification of the Common Customs Tariff

nomenclature:

Agriculture and fishery products:
0407 00 30

Building materials:
2523 29 00 00/2523 90/7010

Chemicals:
3809 91 00/3917/3923 10 00/3923 21 00/3923 30 10/3924 10 10

Metal-working industries:
7309 00/7325/7610/9403 20 99 00/9404

Food industry:
0403/0901 21/1902/2103/2106 90 98

Beverages:
2203/2208 40

Textiles and leather:
6302

Paper:
4808/4818 10/4818 20/4818 30/4818 90 90 10/4819/4821/4823 59 10/4823 59 90

Graphic arts and publishing:
4909/4911

C. List of products listed in Article 2(3) according to the classification of the Common Customs Tariff

nomenclature:

Tobacco:
2402