WRITTEN QUESTION E-0673/02 by Ilda Figueiredo (GUE/NGL) to the Commission. Dual taxation of workers — income tax.
Date: 2002-03-08
Institutions: European Parliament, Provisional data
Subjects: Germany, Portugal, double taxation, marital status, residence, tax convention, tax on income, tax relief, worker (EU)

14.11.2002

EN

Official Journal of the European Communities

C 277 E/73

The Council has also, on a number of occasions, stressed the importance of candidate countries achieving
a high level of nuclear safety. To that effect it adopted a report setting out a number of detailed
recommendations. Candidate countries were invited to accept
for
implementing them.

them and indicate schedules

The Council would lastly point out that it does not comment on statements by European Commission
members.

(2002/C 277 E/078)

WRITTEN QUESTION E-0673/02

by Ilda Figueiredo (GUE/NGL) to the Commission

(8 March 2002)

Subject: Dual taxation of workers % income tax

Article 49 of the EC Treaty outlaws restrictions on the freedom to provide services (of which dual taxation
is one). Nonetheless, the author of this question has recently been apprised of cases of Portuguese workers
adversely affected by, precisely, dual taxation.

As is well-known, a large Portuguese community exists in the Federal Republic of Germany. In some cases,
only one member of a married couple works in Germany while the other is still employed in Portugal.

As is to be expected, the spouse working in Germany pays income tax in that country. However, the
spouse who is still employed in Portugal is obliged, when submitting a tax return, to annex a declaration
of income from his or spouse, who is also considered a taxable person.

This creates an unfair situation on two fronts: firstly, one member of a couple is subject to dual taxation;
and secondly, given that German wage levels are considerably higher than those obtaining in Portugal, the
result is an automatic alteration in the tax bracket resulting in a higher percentage of income being
deducted in tax.

Can the Commission state what measures need to be taken to prevent such situations from occurring?

Answer given by Mr Bolkestein on behalf of the Commission

(23 April 2002)

The problem referred to by the Honourable Member % on which the Parliament has received many
petitions % concerns the tax situation of Portuguese working in Germany; these persons are considered to
be residents of Portugal, if their home and family are still in Portugal. Those who have moved with their
family to Germany, are only subject to German tax jurisdiction.

In the Double Taxation Agreement concluded between Germany and Portugal on 15 July 1980, double
taxation of Portuguese resident taxpayers with employment income from Germany is avoided by granting
them a tax credit. This credit allows them to deduct the tax already paid in Germany from their Portuguese
tax obligation (so-called credit method). This method is one of the two options for eliminating double
taxation which States are offered under the Organisation for Economic Cooperation and Development
(OECD) Model Convention: the other is the so-called exemption method, by which one State has the
exclusive right to tax the income, leaving that income exempt from taxation in the other State.

In the absence of harmonisation of income taxes at Community level, the choice of method is a matter for
the Member States. In making this decision, the Member States have to respect the EC Treaty, in particular
the Internal Market concept, but their choice will be valid as long as the aggregate amount of tax to be
paid in both States is no more than that which would be due if the income was taxed in the State with the
higher tax burden. Since Portugal gives full credit for the tax already paid in Germany, there is no violation
of Community law.

C 277 E/74

Official Journal of the European Communities

EN

14.11.2002

Due to the progressive character of the Portuguese national tax, the rate for the Portuguese income is
increased by taking the German income into account (which is not in itself taxable in Portugal). This is
allowed by a so-called progression clause in Article 24(1)(b) of the Double Taxation Convention, which
takes on board Article 23 B (2) of the OECD Model Convention. As an application of the principle of
taxation according to one’s ability to pay taxes, this clause is in line with Community law.

The situation deplored by the Honourable Member can only be altered by a modification of the bilateral
tax convention, for which the contracting States, Germany and Portugal, are exclusively competent.
Nevertheless, the Commission has informally drawn the attention of the authorities of both Member States
to the fact that the Portuguese workers involved perceive the current situation as unfair and that it might
be appropriate to reconsider it.

(2002/C 277 E/079)

WRITTEN QUESTION E-0682/02

by Christopher Heaton-Harris (PPE-DE),
Roger Helmer (PPE-DE) and Neil Parish (PPE-DE) to the Commission

(11 March 2002)

Subject: Milk cooperatives

Can the Commission please explain why a milk cooperative in the UK, which controlled no more than
37 % of the market, was broken up while a milk cooperative in Denmark is permitted to operate while
controlling 85 % of the Danish and Swedish market?

Was the decision to break up the UK’s cooperative influenced by DG Competition?

Who set the current UK limit of 24,9 % of market control for dairy products?

Does the Commission believe that dairy farmers in the UK are entering competition at the same level as
their European competitors?

When will the milk quota scheme end and what, if anything, will replace it?

Answer given by Mr Monti on behalf of the Commission

(12 April 2002)

Both the issues highlighted in the question concern the decisions of national competition authorities, each
applying the national competition legislation of that Member State.

The two decisions addressed different issues:

% the British decision was not taken in response to the structure of the cooperative itself. Rather, it
addressed behaviour judged to operate against the public interest, and resulted in action being taken to
remedy this;

% the Danish decision, on the other hand, was the examination of a merger, and imposed commitments

upon the merged entity with regard to its future behaviour.

A report by the British Monopolies and Mergers Commission (‘MMC’) in July 1999 concluded that Milk
Marque Limited (‘Milk Marque’) was in breach of the 1973 Fair Trading Act in exploiting a monopoly
position in such a way as operated against the public interest. The MMC’s investigation attributed a 49,6 %
share of the supply of milk in Great Britain in 1997/1998 to Milk Marque. Following its investigation, the
MMC recommended that Milk Marque should be broken up. This recommendation was rejected by the
then Secretary of State for Trade and Industry, who instead sought a reform of Milk Marque’s sales
procedures and a wider debate about the future of Milk Marque (1). In the event, however, Milk Marque
decided to voluntarily split during the following period, while it was the subject of interim measures with
regard to its behaviour.