Opinion of the European Economic and Social Committee on the "Proposal for a Council Directive amending Directive 77/388/EEC concerning the common system of value added tax, as regards conferment of implementing powers and the procedure for adopting derogations" (COM(2003) 335 final — 2003/0120 (CNS))
Date: 2003-10-30
Institutions: European Economic and Social Committee
Subjects: ESC opinion, EU Member State, VAT, derogation from EU law, tax harmonisation

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Opinion of the European Economic and Social Committee on the ‘Proposal for a Council
Directive amending Directive 77/388/EEC concerning the common system of value added tax, as
regards conferment of implementing powers and the procedure for adopting derogations’

(COM(2003) 335 final — 2003/0120 (CNS))

(2004/C 32/26)

On 20 June 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.

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was
responsible for preparing the Committee’s work on the subject, adopted its opinion on 16 October 2003.
The rapporteur was Mr Pezzini.

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 62 votes to none with two abstentions.

1.

Introduction

1.1.
The purpose of the proposal to amend Directive 77/
388/EEC providing for the establishment of a common system
of value added tax (Sixth VAT Directive)
is to introduce
measures making the procedures under Articles 27 and 30 of
the directive more transparent, and to establish procedures
allowing the Council to adopt VAT implementing rules at
Community level.

2. The system under Articles 27 and 30

Under Articles 27 and 30, the Council may authorise
2.1.
a Member State to introduce special measures into its national
legislation for derogation from the provisions of the sixth
directive, in order either to simplify the procedure for VAT
charging, or to prevent certain types of
tax evasion or
avoidance, and to facilitate agreements with non-member
countries or international organisations.

The procedure stipulates in particular that a Member
2.2.
State wishing to introduce special derogation measures shall
inform the Commission, providing it with all the information
considered necessary for this purpose. It also lays down that
the decision shall be adopted if, within two months of the date
on which the other Member States were informed of the
request, neither the Commission nor a Member State has asked
for the case to be raised by the Council.

procedure the request for authorisation is submitted by the
Member State to the Commission, which then informs the
other Member States, the Commission is under no obligation
to present a proposal to the Council, which may consequently
incur responsibility for a decision without any procedural
involvement.

its simplified nature,

Furthermore, because of

2.4.
the
procedure does not ensure transparency of Council decisions,
which may jeopardise the proper working of the single market.
As things stand, the tacit adoption of a decision by the Council
denies taxable persons knowledge of
the
the content of
authorisation and of the reasons for the Council’s decision.

3. The Commission’s proposals on the procedure under
Articles 27 and 30 for adopting derogation measures

3.1.
The Commission believes that in the interests of all
concerned, adoption of special derogation measures under
Articles 27 and 30 of the sixth directive should take place
within a procedure which can ensure that decisions are
transparent and in compliance with Treaty provisions and the
general principles of Community law.

2.3.
According to these dispositions, the Council may then
tacitly adopt decisions on matters which have not been laid
before it. In fact, although in the preliminary stages of the

it is
The Commission considers that to this end,
3.2.
necessary to amend the provisions under which the Council
can adopt tacit decisions, so that requests for derogation
instead require a proposal from the Commission and a formal
decision by the Council.

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The Commission specifically proposes that the pro-
3.3.
cedure should be triggered by a Member State lodging a
request with the Commission supported by all the information
deemed useful and necessary for appraisal. If the Commission
considers that it has all the essential information and requires
no clarification,
it notifies the requesting Member State
accordingly. If, on the other hand, it requires further infor-
mation, it asks the appropriate Member State authorities to
provide it.

3.4. Within three months of the conclusion of the investi-
gation — i.e. from notification that no further details are
required regarding the request — the Commission submits to
the Council either a proposal for a decision or a communi-
its objections to adopting the special
cation setting out
derogation measures requested by the Member State.

4.

Implementing measures

4.1.
Experience during the operation of the transitional
arrangements for the taxation of transactions between the
Member States has shown that national differences in the
incidence of the tax or administrative procedures impair the
neutrality of the VAT system, presenting obstacles to the
internationalisation of businesses and the full and effective
completion of the single market. Significant differences in
interpretation and application of the common VAT rules laid
down by the sixth directive persist between individual Member
States.

The VAT Committee however does not have the
4.4.
legislative powers needed to help the Commission adopt
binding decisions. Neither do the guidelines it adopts have
legal status. The Member States are not therefore legally bound
to comply with the guidelines. Neither can the guidelines be
invoked in either national courts or the European Court of
Justice.

The VAT Committee’s purpose is therefore thwarted,
4.5.
with the result that the proper operation of the internal market
and the desirable level of legal certainty are also put at risk.

4.6.
In order to ensure uniform application of the common
VAT system, the committee’s guidelines should be given legal
status.

5. The Commission’s proposals on the implementing

measures

5.1.
The Commission believes that the VAT Committee
should be converted into a regulatory committee assisting it
in implementing existing provisions. The Commission put
forward the same argument in its 1997 (1) proposal to amend
the sixth directive.

5.2.
The Commission however recognises that many Mem-
ber States are convinced that all powers should remain
exclusively with the Council in the field of VAT.

5.3.
Although the Commission stands by the view that
reforming the VAT Committee would, in absolute terms, be
the best solution, it is nevertheless aware that this is not at
present feasible. In the short term, the Commission believes
that a temporary procedure should be introduced allowing the
Council to adopt VAT implementing measures.

Alignment of national

4.2.
laws and, regarding VAT in
particular, measures ensuring uniform application of the tax
across the Union, are of the utmost importance for completion
of the internal market. Measures of this kind were not however
decided when the sixth directive was adopted.

5.4.
The Commission is of the opinion that at present,
certain powers should be reserved for the Council. The
Commission realises that raising taxes, particularly VAT, is a
key part of the economic and budgetary strategy of the
Member States.

4.3.
The VAT Committee was set up to facilitate uniform
implementation of the provisions of the directive and to enable
more efficient cooperation between the Member States and the
Commission. As a consultative committee, its task is to agree
guidelines on how the sixth directive is to be applied, especially
problems arising from the distinction between goods and
services or their classification, or the determination of the
place and possible conditions of taxation.

The Commission therefore proposes that the measures
5.5.
necessary to implement existing provisions should be adopted
by the Council acting unanimously on a proposal from the
Commission, according to the procedure under Articles 27
and 30 of the directive.

(1) COM(97) 325 final.

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The Commission identifies those areas where action is
5.6.
required, in the light of the questions raised by Member States,
or by the Commission itself, on the VAT Committee. Regarding
matters on which the committee has unanimously adopted
guidelines, the Commission examines whether or not these
guidelines should be converted into binding legal instruments.
The VAT Committee itself is involved in this examination, and
it should in any event be consulted before the Commission
presents any proposal to the Council.

The EESC notes that to date, many special derogation
6.1.5.
measures have been approved (1):
it is very likely that the
forthcoming enlargement of the Union will herald further
requests for derogations.

6.1.6.
It also hopes that the Commission will be able to
rationalise the numerous derogation arrangements currently
in existence (2), and that in future prevention of tax evasion
and simplification can also be pursued by means of closer
administrative cooperation (3), as set out in the draft Com-
mission directive (4) on tackling tax evasion and avoidance.

5.7. Where the VAT Committee concludes that legally
binding implementing rules should be drawn up in order to
ensure harmonised interpretation of the common VAT system,
the Commission presents a proposal for a decision to the
Council.

6.2.

Implementing measures

6. Conclusions

6.1. The system under Articles 27 and 30

6.1.1.
The EESC agrees that the smooth functioning of the
Value Added Tax system is one of the preconditions for the
proper operation of the single market.

The EESC therefore considers that the procedures
6.1.2.
legislation special measures for
to introduce into national
derogation from the provisions of the sixth directive must
involve formal decisions by the Council, and must also be fully
transparent, so that taxable persons can be aware of the
content and reasons for authorisations.

6.1.3.
The EESC shares the Commission’s view that the
procedures under Articles 27 and 30 of the directive do not
meet these transparency requirements. It regrets in particular
that the Council may tacitly adopt decisions on matters which
have not been formally laid before it, and that such tacit
adoption of decisions prevents the parties concerned (taxable
persons, Member States, etc.) from knowing the content of the
derogation or the reasons for the Council’s decision.

to amend the provisions allowing the Council

The EESC therefore supports the Commission’s pro-
6.1.4.
posal
to
take tacit decisions, by establishing instead that requests for
derogation require a proposal from the Commission and a
formal decision by the Council.

6.2.1.
The EESC agrees with the view that existing differ-
ences between the Member States’ administrative and regulat-
ory procedures put the neutrality of taxation at risk, and
constitute a serious obstacle to the completion of the single
market.
the rules
In this regard, uniform application of
represents a key factor in improving the temporary system.

In the EESC’s view,

6.2.2.
the adoption of
measures ensuring the uniform application at Community
level of the common VAT system is of key importance.

therefore,

assisting

6.2.3.
The EESC is convinced that, in line with the pro-
cedure followed in other areas of Community legislation,
the VAT Committee should be converted into a regulatory
adopting
committee
implementing measures for existing provisions. The EESC
previously put forward this argument in its opinion on the
Proposal for a Council Directive amending Directive 77/388/
EEC on the common system of Value Added Tax (the Value
Added Tax Committee) (5).

Commission

the

in

The EESC is aware of the view of many Member
6.2.4.
States that where VAT is concerned, all powers should remain
exclusively with the Council, and consequently supports the
Commission’s prudent approach in proposing that at present,
the adoption of VAT implementing measures be reserved for
the Council.

(1) To date, 147 special derogation measures have been authorised:
2 for Austria, 15 for Belgium, 8 for Denmark, 2 for Finland,
17 for France, 20 for Germany, one for Greece, 12 for Ireland,
11 for Italy, 13 for Luxembourg, 18 for the Netherlands, 3 for
Portugal, 20 for the United Kingdom, 3 for Spain and two for
Sweden (source: Commission services).
(2) In this regard, see COM(2000) 348 final.
(3) OJ C 116, 20.4.2001, p. 59.
(4) COM(2003) 446 final/2, 31.7.2003.
(5) OJ C 19, 21.1.1998, p. 56.

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However, the EESC hopes that in the medium term,
6.2.5.
the Commission will be able to press forward with the
guidelines laid down in the Communication to the Council
and the European Parliament on a strategy to improve the
operation of the VAT system within the context of the internal
market, and that it may consequently be able to re-submit the
1997 proposal to amend the sixth directive (1).

In any event, the EESC hopes that as a result of the
6.2.6.
institutional changes emerging from the European Convention,
the Commission will be given powers to implement European
legislation and, by the same token, that unanimous voting will
be abandoned in favour of qualified majority voting in the
field of indirect taxation (VAT) (except where the fixing of
VAT rates is involved, until a proper compensation system is
introduced).

(1) COM(97) 325 final.

Brussels, 30 October 2003.

The President

of the European Economic and Social Committee

Roger BRIESCH