WRITTEN QUESTION P-3173/02 by Charles Tannock (PPE-DE) to the Commission. EU funding of the Palestinian Territories.
Date: 2002-10-30
Institutions: European Parliament, Provisional data
Subjects: EU aid, International Monetary Fund, Palestine, budgetary control, fraud against the EU, terrorism, use of aid

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The recent adoption of further legal instruments has not substantially altered the situation described above.

The Commission:

1. When will it move forward to the definitive VAT scheme or at any rate gear the existing rules to meet
present needs? Regarding this latter option, does it not consider it imperative to produce a single legal
instrument grouping together the various provisions scattered throughout primary and secondary
Community legislation?

2.

Should not the many exceptions granted to Member States also be reviewed so that only those which
proved to be particularly necessary and effective would continue to be allowed?

Answer given by Mr Bolkestein on behalf of the Commission

(9 December 2002)

The definitive VAT system is intended to be based on taxation in the Member State of origin of
transactions giving rise to consumption in the Community. Before such a system can be put in place, the
taxation systems of Member States have to be closely harmonised. It has not been possible yet to achieve
the necessary degree of harmonisation.

However, although the Commission still regards the definitive system as a long-term Community goal, it
recognises that, in order to overcome the shortcomings of the present arrangements, improvements to the
present system are necessary in the short term. It therefore launched a new VAT strategy in June 2000
based on four main objectives: simplification and modernisation of current rules, more uniform application
of those rules and closer administrative cooperation (1).

Among the priorities pursued under the new VAT strategy is the codification of
the Sixth VAT
Directive (2). Codifying existing rules is consistent with the objective of simplification. This codification will
take place in the form of a recast of the existing text. It is the purpose of the recast to rationalise the
structure of the text without introducing substantial changes, which should rather be the subject of specific
proposals for implementing the new strategy. The Commission is currently preparing the recast text, which
will be presented as a Commission proposal
in 2003. Once adopted, the recast will provide a clear
overview of Community legislation currently in force.

In its Communication on the new VAT strategy, the Commission also indicated that it would proceed to a
certain rationalisation of
the considerable number of derogations, authorised by the Council under
Article 27 of the Sixth VAT Directive, currently in place. It is envisaged that this exercise should lead to the
presentation of a proposal
integrating into the Directive some derogations which have proved to be
particularly effective. The Commission has started the preparatory work for this exercise in order to be in a
position to present a proposal in the course of 2003.

(1) Communication from the Commission to the Council and the European Parliament: A strategy to improve the

operation of the VAT systems within the context of the internal market (COM(2000) 348 final).

(2) Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States
relating to turnover taxes (cid:1) Common system of value added tax: uniform basis of assessment, OJ L 145,
13.6.1977.

(2004/C 33 E/015)

WRITTEN QUESTION P-3173/02

by Charles Tannock (PPE-DE) to the Commission

(30 October 2002)

Subject: EU funding of the Palestinian Territories

In an exchange which took place in the European Parliament on 22 October 2002 over the issue of
whether or not a Parliamentary Commission of inquiry should be set-up to investigate allegations that EU
funds have been used to fund terrorist activities in the Palestinian Authority territories, Commissioner
Patten suggested that the effect of such scrutiny by the Parliament would be to dry-up assistance to the

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Palestinian Authority because of the psychological effect which it would have on those on the ground
required to disburse funds. The Commissioner also made the point that the Americans, the Israelis and the
UN all look to the EU to provide humanitarian funds, and he has argued in the Foreign Affairs Committee
that to stop funding the Palestinian Territories altogether would be counterproductive to the extent that it
would help to generate wider social tensions, more hatred and ultimately more terrorism. These are all,
clearly, serious arguments.

There are many of us who would accept that the primary focus of our activities must remain the desire to
work towards a two-state solution which affords security to the State of Israel and dignity to the
Palestinians. There remain concerns, however, that EU funds are directly implicated in acts of terrorism
carried-out against women and children, and that more can be done on the ground to ensure that the
opportunities for such abuses are reduced. For example, there are reports that EU monies are paid towards
the salaries of people who do not exist, and that these funds are then misused. The Commission has
indicated that the IMF has played a role in monitoring the use of EU funds and yet in the 27 May edition
of Der Spiegel it is reported that the IMF official responsible has admitted not only that he does not know
how each euro would be spent but that it was impossible to do an effective audit. He went on to add that
the IMF only verifies if the sums of the Palestinian Authority’s are going to the respective department in
the correct amounts.

Could the Commission clarify the role of the IMF in the monitoring process? Is it normal for the IMF to be
involved in monitoring EU funds and who is responsible for the ‘stringent system of ex-ante and ex-post
controls’ to which the Commissioner has referred in the past? Who, for example,
is responsible for
ensuring that everyone who receives a salary exists and is involved in the work for which he or she is
being paid?

Answer given by Mr Patten on behalf of the Commission

(10 December 2002)

On 4 November 2002 Commission officials met with Members of the Parliament from Budgetary Control
Committee (Cocobu), Committee on Budgets (COBU), Foreign Affairs Committee (AFET) on EU aid to the
Palestinians. A similar meeting was held on 14 November 2002 between Vice-President Podestà and
Commission officials. A series of documents on the management of Community funds to the Palestinians
were handed over to the Members of Parliament and to Mr Podestà at these meetings.

As regards ex-ante and ex-post controls, EU Direct Budgetary Aid is a financial contribution that accrues to
the Palestinian Authorithy (PA) budget together with tax transfers from the Israeli government, and other
PA revenue, as well as other donor budget support. All these funds serve to finance PA public expenditures
in general under the control of the PA Ministry of Finance. Neither EU funds nor the other donor funds
are earmarked for specific expenses, and therefore, cannot be attributed to any specific payment. However,
the International Monetary Fund (IMF) monitors if the budget in its aggregates (overall expenditure, wages,
non-wage expenditure, arrears) is executed in line with the monthly expenditure plan that has been agreed
with the IMF and the EU. All payments to the budget, including the most recent transfers of tax revenue
withheld by the Israeli government (July, August and October 2002) have been made on the basis of this
monitoring mechanism. Furthermore,
in order to improve control of public expenditure in general,
conditions attached to EU budgetary assistance to the PA foresee the establishment of both internal and
external audit systems that correspond to international best practices. These measures are part of an overall
fiscal and administrative reform program that has been announced by the Palestinian Authority in July
2002 and which has been endorsed by the Quartet (United States, European Union, Russia, United Nations
Secretary General). As confirmed by the most recent report of the task force (local level) on the progress of
reform (20 September 2002), the Ministry of Finance has hired a chief financial controller and has
deployed nine financial controllers in nine ministries, the objective being to have forty financial controllers
in major ministries and spending agencies. Necessary steps to strengthen the existing external audit system
are planned for the coming months.

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Recently, the control over the payroll of the West Bank staff has been transferred to the Ministry of
Finance. Therefore, the Ministry of Finance is the responsible entity for the control of the payroll, new
recruitment and the respective allocations for payment of the salaries to the Ministries concerned.

(2004/C 33 E/016)

WRITTEN QUESTION P-3307/02

by Marco Cappato (NI) to the Commission

(14 November 2002)

Subject: Four-year prison sentence for the cyber-dissident Le Chi Quang

The Vietnamese ‘cyber-dissident’ Le Chi Quang, accused of publishing criticism of the communist regime
on the Internet, has been jailed for 4 years by a Hanoi court for ‘offences against the State and the Socialist
Republic of Vietnam’. Foreign journalists were not allowed to attend the trial, which lasted only a few
hours.

Le Chi Quang was arrested on 21 February 2002 at an internet café in Hanoi and has since been detained
in the ‘B14’ prison accused of circulating via the Internet a letter on the situation in the border regions
with China. The letter was addressed to the Chinese President Jiang Zemin on the occasion of an official
visit to Vietnam. The 32 year old IT professor accused Hanoi of having made territorial concessions to
China when negotiating the common borders. He also circulated on the Internet some documents in
support of democracy.

Since June, free access to the Internet and satellite television has been reserved for Communist Party and
Vietnamese government cadres, while those responsible for cybercafés have been required to monitor how
their clients use the Internet. France has reportedly provided the Vietnamese government with control
systems for Internet access free of charge.

Did the Commission ask to attend Le Chi Quang’s trial? What steps has the Commission taken or does it
intend to take to secure the immediate release of Mr Le Chi Quang and the review of his trial on the basis
of the relevant international standards? What control mechanisms has the Commission established to
ensure that EU funded or co-funded development and cooperation programmes are not used by the
Vietnamese authorities to implement anti-democratic and repressive policies, such as the recent measures
concerning the use of Internet?

Answer given by Mr Patten on behalf of the Commission

(6 December 2002)

The Commission would refer the Honourable Member to its answer to Written Question E-2854/02 by
Mr Pannella (1).

The Commission did not request to be present at the trial of Mr Quang, nor was it informed in advance of
its date and place. It is not customary for the Commission to attend trials of Vietnamese citizens as official
observers.

Promotion of human rights and democracy and of good governance were identified as cross-cutting
themes in the Country Strategy for Vietnam approved by the Commission in May 2002. In this context,
the Commission and the Member States have welcomed the elaboration by the Government of Vietnam of
a Master Plan for legal reform based on a ‘Legal Needs Assessment’ prepared in collaboration with the
international donor community.

All projects and programmes supported by the Commission in Vietnam, as in other countries, are subject
to a rigorous process of (cid:1) financial and other (cid:1) checks and balances, including for compliance with
Union policy on human rights and democracy.

In addition, the Commission has obtained confirmation that there is no foundation for the suggestion
referred to by the Honourable Member that the French Government has supplied the Government of
Vietnam with control systems for the Internet.

(1) OJ C 192 E, 14.8.2003, p. 82.