Opinion of the European Economic and Social Committee on the "Proposal for a Directive of the European Parliament and of the Council amending Directive 77/799/EEC concerning mutual assistance by competent authorities of the Member States in the field of direct and indirect taxation" (COM(2003) 446 final/2 — 2003/0170 (COD))
Date: 2003-10-29
Institutions: European Economic and Social Committee
Subjects: ESC opinion, EU Member State, administrative cooperation, direct tax, indirect tax, tax authorities, tax law

C 32/94

EN

Official Journal of the European Union

5.2.2004

Opinion of the European Economic and Social Committee on the ‘Proposal for a Directive of the
European Parliament and of the Council amending Directive 77/799/EEC concerning mutual
assistance by competent authorities of the Member States in the field of direct and indirect
taxation’

(COM(2003) 446 final/2 — 2003/0170 (COD))

(2004/C 32/20)

On 5 September 2003, the Council decided to consult the European Economic and Social Committee,
under Article 262 of the Treaty establishing the European Community, on the above-mentioned proposal.

In view of the urgency of the work, the EESC decided at its 403rd plenary session of 29 and 30 October
2003 (meeting of 30 October) to appoint Mr Pezzini as rapporteur-general and adopted the following
opinion with 45 votes in favour, no dissenting votes and three abstentions.

1.

Introduction

1.4.

Scope of the Directive

1.1.
The ground rules for mutual assistance and exchange
of information by competent authorities of Member States for
the purpose of ensuring effective application of national tax
laws were laid down in 1977.

1.4.1.
Initially, the Directive applied only to direct taxes.
Only later was its scope expanded to cover value added tax
(VAT) and excise duties, partly because those areas were not
yet covered elsewhere.

1.2.

Increase in fraud

1.2.1.
the ever
The need for such rules arose out of
increasing risk posed by tax evasion and fraud beyond national
boundaries, which led to significant losses of revenue for
Member States.

1.4.2.
However, the peculiarities specific to this particular
field subsequently led the Commission to regulate the exchange
of information about VAT separately (1). A proposal exclusively
concerning excise duties is expected in the near future.

This situation jeopardised the principles of

1.2.2.
fair
taxation, the free movement of capital, and free competition,
and caused the internal market to work, to say the least,
imperfectly.

1.5. The need for revision

1.2.3.
However, the system of bilateral agreements between
Member States proved ineffective at combating all the types of
tax evasion and fraud, which were multinational in nature,
reflecting an increase in international trade and in the mobility
of people and capital across borders.

1.3.

Structure of the Directive

1.3.1.
The current Directive makes provision for three types
of information exchange — information on request, automatic
exchange and spontaneous exchange. Limits and safeguards
apply to the exchange of such information by competent
authorities of Member States in order to ensure respect and
consideration for the rights of taxpayers and for the secrecy of
the information supplied.

1.5.1.
The social, economic and political context has
changed radically since the Directive was first drafted and
adopted. The size of the internal market and the amount of
trade between Member States have changed. There is no doubt
that the very concept of the internal market, as an extension
of national borders, is now fully accepted — in practice as well
as in theory — by an ever increasing number of operators.
Although this development is in itself highly satisfying, it has
brought with it exponential growth in intra-Community
transactions and ever-better knowledge of the various national
tax systems, which has led to a commensurate increase in tax
evasion and fraud, exploiting any deficiencies in European
legislation and in tax inspection systems generally. In this
context,
there is a clear need to modernise, strengthen
and simplify administrative cooperation and exchange of
information between Member States, and to make them more
efficient.

1.3.2.
stantly monitor the exchange procedures.

Administrations of Member States must also con-

(1) COM(2001) 294 final.

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2. The Commission’s proposal

The proposed changes to the current Directive are

2.1.
listed in Article 1.

2.2.
The first proposed change, which would become the
third subparagraph of Article 2 of the current Directive, sets
out the practicalities of information exchange on request. In
particular,
it states that in order to respond to a request
received from another Member State, the competent authority
of the Member State receiving the request should proceed as if
it were acting on its own account.

2.2.1.
This amendment is totally uncontroversial, as it aims
to eliminate the dilatory effects on enquiries of national
regulations that require the competent authority to notify the
taxpayer that a request for information about him has been
received from the competent authority of another Member
State. Such obligations do not exist when Member States are
the
operating on their own account. The very fact
requesting authority was outside the country used to slow
down the investigations. This discrimination, which was
prejudicial both towards the Member State requesting the
information and towards the working of the internal market,
must thus be eliminated. This amendment is perfectly in line
with that contained in the proposal on VAT (1).

that

The second amendment proposed concerns the second
2.3.
indent of the second subparagraph of Article 7(1). It concerns
the way in which information received from another Member
State by the competent authority of a Member State may be
used. This information must be treated confidentially, in the
same way as information collected in accordance with national
legislation.

The current text of the Directive has given rise to
2.3.1.
differences in interpretation. In fact, although there is universal
agreement that information received from another Member
State should only be divulged if this latter does not object,
some Member States maintain that specific authorisation (from
the competent authority that supplied the information) is
required before using such information in judicial proceedings.
Conversely, other Member States hold the view that tacit
approval can be assumed unless a specific objection has been
raised.

Member State that supplied the information did not express
an objection when it first supplied it. It will therefore no longer
be necessary to adjourn judicial proceedings in order to wait
for explicit authorisation from the competent authorities of
Member States who considered such a procedure to be
necessary.

The next proposed amendment consists of a redrafting
2.4.
of Articles 8(1) and 8(3) of the current directive, which sets
out the limits to the exchange of information.

2.4.1.
The current text of Article 8(1) has created ambiguity
linked to the ability of a Member State to refuse to supply the
information requested when its national tax laws do not
provide for this.

2.4.2.
The amendment specifically makes it clear that a
Member State can only refuse to supply the information
requested when its national legislation or administrative pro-
cedures do not permit the investigations necessary to obtain
that information.

2.4.3.
There is no doubt that the proposal improves on the
existing text, probably to the greatest extent realistically
attainable. It is nonetheless apparent that the existing differ-
ences between investigative procedures, which are a direct
reflection of the approximate nature of harmonisation between
national tax laws, are an obstacle to an efficient system of
information exchange. This makes it difficult to conduct
effective checks on suspect transactions and therefore impedes
the functioning of the internal market.

Similar observations apply to the proposed amend-
2.4.4.
ment to Article 8(3), aimed at clearing up ambiguities concern-
ing the application of the principle of reciprocity of exchange
of information.

2.4.5.
The Commission proposal makes it clear that the
competent authority of a Member State may refuse to supply
information when the requesting authority is not able to
supply similar information.

2.3.2.
The Committee agrees with the need to amend the
Directive and with the proposed wording, given that the new
text aims to eliminate any ambiguity, thus speeding up and
clarifying the procedure. In future, information received will
be able to be used in the course of public hearings or
sentencing, provided that the competent authority of the

2.4.6. Whilst it appreciates the effort made to eliminate
differences in interpretation, the Committee points out that
recourse to the principle of reciprocity protects the individual
Member State but is prejudicial to the full implementation of
the internal market.

(1) COM(2001) 294 final, Section 5, paragraph 3.

2.5.
The Commission proposes to insert two new articles
after Article 8: 8a and 8b. These bring the rules on direct
taxation into line with those on indirect taxation.

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Article 8a(1) states that, at the request of an authority
2.5.1.
in a Member State, the competent authority in another Member
State should notify the taxpayer, in accordance with the rules
and procedures in force at the time, of any instrument or
decision adopted by the authority of the requesting Member
State. Article 8a(2) lists the main points that should appear on
the notification, while Article 8a(3) lays down the requirement
to inform the requesting Member State promptly of what
action has been taken in response to its request.

2.5.2.
The new article takes note of the various practices
and procedures that apply in national tax legislation and
emphasises the requirement to follow those procedures when
dealing with requests from other Member States. In particular,
the duty to inform, which does not exist in some Member
States, is a fundamental part of the procedures in others. The
procedure would certainly be much simpler if it were managed
directly by the requesting Member State. However, as things
stand, this is unrealistic and risky: unrealistic because it would
imply in-depth knowledge on the part of every national
competent authority of the procedures,
including that of
notification, connected with the legislation of every other
Member State; risky, because a notification that was incomplete
and legally void according to national tax legislation would
have a prejudicial effect on the length of investigations.

2.5.3.
The Commission’s proposal is nonetheless appreci-
ated because, in concrete terms, it emphasises the importance
of such procedures and obliges the requested authority to
inform the requesting authority immediately of notifications it
has sent, in order to facilitate any subsequent action.

2.5.4.
Article 8b provides for the possibility for two or
more Member States to carry out simultaneous controls on a
single taxpayer where these would appear to be more effective
than controls conducted by one Member State alone. The
competent authority of a Member State is to identify the
taxable persons whom it intends to propose for simultaneous
control and notify the respective authorities in other Member
States of the reasons for such controls and of the period of
time in which they should be conducted. The requested
authority shall confirm its agreement or its refusal to its
counterpart authority. If approval is granted, each authority
must then appoint a representative with responsibility for the
control operation.

2.5.5.
The new text recognises the importance of simul-
taneous controls, which are, in fact, considered to be one of
the most effective methods, if not the most effective method
of control. Indeed, it stands to reason that crosschecking data
collected during the same period by competent authorities in
the Member States in which the taxpayers under investigation
operate increases the likelihood of discovering tax evasion or
fraud. It is no coincidence that there are widespread calls for
an increased use of simultaneous controls, above all
to
detect fraudulent use of transfer pricing for intra-Community
transactions between entities operating in several Member
States.

The insertion of Article 8b is therefore to be wel-
2.5.6.
comed. However, it should be noted that the ability to refuse
to act on a request for simultaneous controls, even if there is a
reason for doing so, could limit the scope of such controls and
with it the cooperation between Member States’ adminis-
trations.

3. Conclusion

The EESC accepts the need to put in place an effective
3.1.
system of information exchange between Member States in
order to combat tax evasion and fraud.

3.2.
It takes note that the expansion of the internal market,
both in geographical and economic terms, along with the
increase in the number of taxpayers operating in more than
one Member State, makes closer cooperation among national
administrations essential.

3.3. While recognising the peculiarities specific to each
sector, the EESC emphasises that improved and more system-
atic coordination between control systems for direct and
indirect taxes and excise duties is an indispensable part of an
effective system of control and of mutual assistance by Member
States’ competent authorities.

The EESC reaffirms (1) that the differences that exist
3.4.
between the administrative procedures of the Member States
are prejudicial to the effectiveness of controls, increase the
length of time required to carry them out, and represent a
significant obstacle to the working of the single market.

3.5.
Once again, the defence of national interests is limiting
the benefits that could be derived from a more efficient internal
market and, in this instance, from detecting and combating
tax evasion and fraud. As the EESC has already pointed out (2),
administrative cooperation and the prevention of fraud must
go hand in hand with modernisation and simplification of tax
regimes. This is all the more true in an enlarged Union in
which harmonisation becomes more important.

(1) EESC opinion on the Proposal for a Regulation of the Council
amending Directive 77/388/EEC on the common system of Value
Added Tax (the Value Added Tax Committee), OJ C 19, 21.1.1998,
p. 56.

(2) EESC Opinion on the Proposal for a Regulation of the European
Parliament and of the Council amending Regulation (EEC) No 218/
92 on administrative cooperation in the field of indirect taxation
(VAT), and the Proposal
for a Council Directive amending
Directive No 77/388/EEC as regards the Value Added Tax
arrangements applicable to certain services supplied by electronic
means, OJ C 116, 20.4.2001, p. 59.

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It would be helpful to complement supranational legal
3.6.
instruments, such as the European company, with suitable tax
instruments and associated control and information-exchange
procedures. In other words, it would be possible to envisage
the phasing-in of a European control and exchange system
that is not tied to current national procedures.

3.7.
The EESC takes the opportunity to denounce once
again the limits imposed by the principle of unanimity, which
currently applies to all decisions on Community tax legislation,
and reaffirms the need to replace this with qualified majority
voting.

3.8.
It is odd that people often talk in general terms about
the constitutional principles of fair taxation when referring to

the potential distortions of the European internal market, and
then go on in practice to accept differences and privileges born
of national legislation and procedures.

3.9.
Taking into account existing national procedures and
the political desire not to overturn these, the EESC accepts the
proposed amendments as a move towards convergence and
as a further, albeit inadequate, step towards modernising
cooperation between Member States. Furthermore, the EESC
calls on the competent authorities of Member States to
respond promptly to requests for cooperation from other
administrations, without discriminating against such requests
in favour of investigations of a purely national nature. To this
effect, control and information-exchange technology must
obviously be able to keep up with the most sophisticated
forms of fraud and evasion, which use the most modern
technology available.

Brussels, 30 October 2003.

The President

of the European Economic and Social Committee

Roger BRIESCH

Opinion of the European Economic and Social Committee on the ‘Proposal for a regulation of
the European Parliament and of the Council laying down requirements for feed hygiene’

(COM(2003) 180 final — 2003/0071 (COD))

(2004/C 32/21)

On 30 April 2003 the Council decided to consult the European Economic and Social Committee, under
Articles 37 and 152 of the Treaty establishing the European Community, on the above-mentioned
proposal.

The Section for Agriculture, Rural Development and the Environment, which was responsible for
preparing the Committee’s work on the subject, adopted its opinion on 14 October 2003. The rapporteur
was Mr Donnelly.

At its 403rd plenary session of 29 and 30 October 2003 (meeting of 30 October) the European Economic
and Social Committee adopted the following opinion by 84 votes to two with five abstentions.

1.

Introduction

Feed crises over recent years have demonstrated that
1.1.
serious failures at any stage in the feed chain can have
enormous economic consequences. In the past this cost has
been largely met from public funds. While contaminated feed
material has been largely responsible for these crises, European

farmers and consumers have experienced the severe economic
impacts resulting from them.

Directive 95/69/EC (1) laying down the conditions and
1.2.
arrangements for approving and registering certain establish-
ments and intermediaries operating in the animal feed sector,

(1) OJ L 332, 30.12.1995.