Opinion of the European Economic and Social Committee on the Proposal for a Council Directive on the exemption from value added tax and excise duty of goods imported by persons travelling from third countries COM(2006) 76 final — 2006/0021 (CNS)
Date: 2006-07-05
Institutions: European Economic and Social Committee
Subjects: VAT, alcohol, exemption from customs duties, import tax, manufactured goods, third country, traveller

16.12.2006

EN

Official Journal of the European Union

C 309/107

Opinion of the European Economic and Social Committee on the Proposal for a Council Directive
on the exemption from value added tax and excise duty of goods imported by persons travelling
from third countries

COM(2006) 76 final — 2006/0021 (CNS)

(2006/C 309/22)

On 22 February 2006 the Commission decided to consult the European Economic and Social Committee,
under Article 262 of the Treaty establishing the European Community, on the abovementioned 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 7 June 2006. The rapporteur
was Mr Burani.

At its 428th plenary session, held on 5 and 6 July 2006 (meeting of 5 July), the European Economic and
Social Committee unanimously adopted the following opinion.

1. Introduction

The Commission's proposal concerns the harmonisation
1.1
of provisions relating to the import from third countries of
goods in travellers' accompanied baggage that are, by their
nature, subject to VAT or excise duties. Up to certain limits,
such goods have always been imported duty free: the original
provision is in Directive 69/169/EEC of 28 May 1969, which
has since been modified 17 times and is now to be replaced by
the initiative under discussion.

1.2
The system needs to be maintained ‘in order to prevent
double taxation, as well as in cases where, in view of the conditions
under which the goods are imported, the usual need to protect the
economy is absent’ (1). The Commission believes that, whilst the
guiding principle remains unchanged, the number of modifica-
tions that have been made since the directive was first passed,
enlargement, and the configuration of the new external borders
constitute a sufficient reason for a complete revision and repla-
cement of the original directive.

The problem, which per se is a simple one, is compli-
1.3
cated by the need to regulate the import of ‘sensitive’ products,
i.e. tobacco and alcoholic beverages. Although the problem has
always existed, the enlargement of the EU, while leaving the
fundamental
introduces new perspectives:
the different geographic and social situations of the Member
States, the different positions and the wide differences between
levels of taxation. The final result will depend on whether it is
possible to reach agreement on the Commission's proposal for
harmonisation.

issues unchanged,

2. General comments

Originally,

the directive applied to people travelling
2.1
within the Community; since 1993, in line with the principles
of the single market, the restrictions on the movement of
in principle, been abol-
goods between Member States have,
ished. The changes to the external borders of
the EU
following enlargements mean that new aspects have to be
considered; as the Commission says, those borders ‘now include,
inter alia, Russia, Ukraine and Belarus’.

The EESC takes note of this, but observes that, in addi-
2.1.1
tion to the borders mentioned, there are other borders to the

(1) See COM(2006) 76 final — 2006/0021 (CNS), first ‘whereas’.

east
that raise a problem for the new accession countries
because of significant differences in price levels with some
neighbouring third countries; nor should it be forgotten that
new sea borders have been created since the accession of
Cyprus and Malta.

2.1.2
The derogations given to some Member States at
different times, in consideration of particular problems, have
now all expired, with the exception of that granted to Finland,
which is still permitted, until 2007, to apply a limit of not less
than 16 litres to the import of beer from third countries. The
EESC, which has always expressed its opposition to the system
of derogations, welcomes this; however,
in this instance, a
uniform system for all 25 countries may cause a few problems,
which will be described below.

2.2
The proposed directive increases the current duty-
free thresholds: from EUR 175 to EUR 500 for air travellers
and to EUR 220 for all other travellers. The Commission's
explanatory memorandum justified this measure by saying ‘The
cost and effort of travelling by air would suggest that such travel is
likely to be less frequently undertaken by individuals compared to
those choosing to travel by land or ferry. Additionally, air passengers
are by their nature limited to what they can buy and transport, i.e.
they would not be able to transport bulky items.’ The real reason,
however, seems to be a different one: the fourth ‘whereas’
states that ‘The monetary thresholds should take account of the diffi-
culties faced by Member States which share their borders with third
countries with significantly lower prices…’.

2.2.1
The EESC believes that the reason for the discrepancy
between what is stated in the explanatory memorandum and
the fourth ‘whereas’ quoted above is to be found primarily in a
It would not make sense to talk about
tax consideration.
‘bulky items’ (see previous point): there are goods that are small
in size and high in value (cameras, laptop computers, watches,
jewels, etc.) that air travellers would be allowed to import,
but those travelling by car, rail or cruise ship would not.
The other statement, which says that air journeys are ‘less
frequent’ than those by sea or land and would require ‘cost and
effort’, would appear to be referring to specific situations rather
than the phenomenon in general: air journeys (in particular

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those with low-cost airlines) are part of everyday life for
millions of business people and tourists who travel to third
countries each year.

3. Specific comments

2.2.2
The EESC considers it unacceptable that considera-
tion for particular situations leads to harmonisation standards
that discriminate between citizens on the basis of the
means of transport they use. Although, as already stated in
point 2.1.2 above, the EESC has on several occasions opposed
the system of derogations and remains opposed to it in prin-
ciple, it believes that in this case that system seems to be the
only possible way ahead. However, it should be used only
when one or more Member States can prove — in accordance
with the proportionality principle — that a general limit of
EUR 500 will lead to an intolerable loss of their tax revenues.

The proposed directive keeps the quantitative limits
2.3
for tobacco and alcohol. With regard to tobacco, reference is
made to the WHO Convention, ratified by the EU on 30 June
that
2005, which recommends
tobacco
travellers be prohibited or
products by international
restricted. In view of this recommendation, the Commission
proposes a uniform system of reductions in the quantita-
tive limits on such products ‘in order to ensure equal treatment
of all citizens entering the European Union’.

the import of

The EESC expresses its agreement, although it has
2.3.1
some reservations about
the motives relating to tobacco,
which, like the other motives, seem to be based on tax rather
than health considerations; in effect, Article 9(2) gives Member
States the right to apply minimum tobacco import levels which
are much lower than normal. Without calling into question the
harmful effects of tobacco, the — absurd — implication is that
the level of harm varies according to the Member State.

2.4
In addition, the Commission proposes the abolition of
quantitative limits for perfumes, coffee and tea. This takes
account of the fact that perfumes are no longer subject to
excise duty based on EU law, that coffee is subject to such duty
in five Member States and tea in just one. In this regard, the
explanatory memorandum states a fundamental principle (2): the
abolition of quantitative limits is necessary ‘since they no longer
reflect the real pattern of taxation of excisable goods in the
… 25 Member States’. In other words, the limits are abolished
because only a few of the 25 Member States still apply excise
duties to the above-mentioned products.

The EESC agrees unreservedly with the abolition of
2.4.1
these measures, and incidentally notes that in this case the rule
has been applied whereby, keeping in mind the proportion-
ality principle, the common interest prevails over that of
individuals.

2.5
It is precisely from the point of view of proportionality
that the proposed directive opens itself up to criticism in a
number of respects. In general terms, and with reference to the
rule mentioned in point 2.4, the EESC draws attention to the
need for any initiative to be based on consistent application
of a given principle to all the aspects of legislation and not
just to some of them. This statement will be explained more
clearly in the comments relating to the individual articles.

(2) See ibid, 1) CONTEXT OF THE PROPOSAL — Grounds for and

objectives of the proposal, 4th bullet point.

Articles 2, 4, 5 and 7: scope of the directive. These
3.1
articles state that exemption from VAT and excise duty shall be
granted for goods imported in a traveller's personal
luggage
(‘accompanied luggage’) which has passed through a third
country. The directive applies only if the person concerned is
unable to establish that the goods were acquired in an EU
country and do not qualify for any refund of VAT or excise
duty. Personal effects which are imported temporarily or re-
imported following their temporary export are not taken into
account when calculating the value of the goods.

3.1.1
This rule already existed, and still imposes a consider-
able burden on travellers, who are required to carry invoices
proving that articles they already own, especially the more
expensive articles, were acquired in an EU country, or to obtain
a declaration of temporary export on leaving.

3.1.2
The EESC is aware that no easier solutions exist, but it
would point out that in the implementing regulation, or in
some other way, the Commission could usefully advise the
Member States to publicise this rule as most appropriate,
through notices at exit border points and by including it in the
general instructions issued by tourist operators and in air and
sea tickets.

3.2
Article 8: monetary thresholds. The total value of
imported goods qualifying for exemption is EUR 500 for air
travellers and EUR 220 for all other travellers. Member
States may reduce the threshold to no less than EUR 110 for
travellers under the age of fifteen. The value limits apply to
all goods, except for tobacco and alcohol, to which quantitative
limits apply.

The EESC has already expressed its concern (see point
3.2.1
2.2.2) about this discrimination between citizens according to
the mode of transport used. It seems obvious that this distinc-
tion is based on the particular situation of certain Member
States bordering on third countries where prices are very low,
e.g. because of wide tax discrepancies. The problem would be
solved by applying the principle of proportionality (see
points 2.4.1 and 2.5), with derogations granted in specific
cases of proven necessity.

3.2.2
In line with point 2.2.2 above, the EESC confirms its
proposal that the EUR 500 threshold be extended as a
general principle to include all travellers without distin-
guishing between the modes of transport used. A higher
threshold would have the advantage of freeing up customs offi-
cials from the burdensome task of inspecting the wider travel-
ling public, particularly at times of heavy tourist traffic, thus
enabling them to pay attention more effectively to genuine
cases of smuggling. On this subject, it should be emphasised
that the experience and professionalism of customs officers
enables them to distinguish relatively easily between tourists
(who may at most be guilty of a minor offence) and smugglers,
whose actions are punishable under criminal law. The issue of
‘regular’ travellers (neither tourists or workers nor frontier-zone
residents), whose imports are part of small-scale local traf-
ficking for profit, has yet to be resolved.

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3.3
Article 9: quantitative limits for tobacco. Exemption
from VAT and excise duties for tobacco is subject to quantita-
tive limits. The normal limits are 200 cigarettes, 100 cigarillos,
50 cigars or 250 grammes of smoking tobacco. Member States
may fix minimum quantitative limits (of 40 cigarettes, 20
cigarillos, 10 cigars or 50 grammes of smoking tobacco) which
may be applied by the Member States to all travellers, or only
to travellers other than air travellers.

3.3.1 While it disagrees with the concept of different quan-
titative limits, as noted with regard to monetary thresholds, the
EESC would also add that the minimum limits would cause
considerable inconvenience to EU tourists travelling by car
passing through different countries (EU or non-EU) whose final
destination is not the country in which the minimum limits are
applied. Considering the importance of tourism and the need
to promote rather than hamper it with measures requiring the
adoption of rigorous border controls, the EESC suggests that an
exemption clause be adopted specifically for these cases.

3.4
Article 10: quantitative limits for alcohol. As with
tobacco, the existing quantitative limits are maintained for
alcohol, adapted and subdivided into two categories as follows:
(a) 1 litre of distilled beverages and spirits of an alcoholic
strength exceeding 22 % vol. or undenatured ethyl alcohol of
80 % vol. and over, (b) 2 litres of ‘intermediate products’ and
sparkling wines. The two limits cannot be cumulated. In addi-
tion to the above quantities, 4 litres of still wine and 16
litres of beer may be imported free of tax or duties. These
exemptions do not apply to travellers under the age of 17.

3.4.1
The EESC broadly endorses the measures proposed,
but would draw attention to certain important details. First,
alcohol above 80 % vol., which falls into category (1), is gener-
ally sold only at 98 % or 99 % vol., and 1 litre of such a
product can be used to make 3 litres of alcoholic beverage at
33 % vol. Thus there is no particular logic in equating this with
1 litre of distilled beverages or spirits. As regards the category
of ‘sparkling wines’, which includes both high-value wines (e.g.
champagne) and wines of a very different nature, the EESC
considers that a distinction should no longer be made between
‘sparkling’ and ‘still’ wines as they both concern ‘wines’ with no
bearing on their value.

3.4.2
However, we have an explicit reservation with
regard to the quantities of wine and beer exempted: there is a
definite lack of proportion between the 4 litres of wine and 16
litres of beer, which penalises travellers from countries where
beer is not regularly consumed. Rather than establishing the
same limit,
it is necessary to fix separate quantitative and
alternative limits for each of these beverages.

Brussels, 5 July 2006.

As regards fuel,

3.5
the exemption applies to the fuel
contained in the vehicle's tank and to 10 litres in a portable
container, but derogations are allowed where restrictive
national provisions exist.

3.5.1
The EESC asks the Commission to radically revise
this rule. In the first place, the position of fuel distributors does
not justify extending the exemption to portable containers in
addition to fuel tanks; this option should be removed, if only
in consideration of the danger involved in transporting fuel
outside of fuel tanks. It should also be borne in mind that in
many countries this practice is forbidden under the highway
code. The prohibition should be extended to any additional
containers built in to the vehicle; for lorries, which often have
two containers, the prohibition should apply to any container
not approved at the time of their registration.

Secondly,

restrictive national provisions,

even
3.5.2
where justified by the price disparities between neighbouring
countries, should not be extended to tourists from countries
other than those where the restrictions apply, for the same
reasons given in point 3.3.1. If they are still considered neces-
sary, restrictions could be included with those covering resi-
dents of border
regions and cross-border workers, as
provided for in Article 14 of the proposal for a Directive.

Article 14: frontier zone residents and workers.
3.6
Special arrangements, which underpin the existing rules, apply
for people residing in a frontier zone and for frontier
workers (workers living in an EU country who work in the
frontier zone of a neighbouring third country, or residents of a
third country who work in the frontier zone of a neighbouring
EU country). For these categories,
the Member States may
lower the monetary thresholds and/or quantitative limits.
The proposal defines a ‘frontier zone’ as an area which, as the
crow flies, does not extend more than 15 kilometres from the
frontier. The EESC feels that this delimitation is arbitrary and
does not take into account the geographical, economic and
social characteristics of each frontier zone: each Member State
should be able to delimit its own zones according to circum-
flexibility would allow some
stances; moreover, greater
Member States to address the worrying issue of the ‘unconven-
tional smuggling’ that takes place at the land borders of Eastern
European countries.

Finally, the date on which the Directive should enter
3.7
into effect is set as 31 December 2006. This can be considered
reasonable only if the legislative process proves to be rapid and
smooth.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND