Opinion of the European Economic and Social Committee on the Impact of the territoriality of tax law on industrial change
Date: 2007-12-13
Institutions: European Economic and Social Committee
Subjects: domestic market, globalisation, impact study, industrial restructuring, tax harmonisation, tax law, territorial law

16.5.2008

EN

Official Journal of the European Union

C 120/51

Opinion of the European Economic and Social Committee on the ‘Impact of the territoriality of tax
law on industrial change’

(2008/C 120/14)

On 16 February 2007, the European Economic and Social Committee, acting under Rule 29(2) of its Rules
of Procedure, decided to draw up an opinion on the

Impact of the territoriality of tax law on industrial change.

The Consultative Commission on Industrial Change, which was responsible for preparing the Committee's
work on the subject, adopted its opinion on 13 November 2007. The rapporteur was Mr Schadeck and the
co-rapporteur was Mr Gay.

At its 440th plenary session, held on 12 and 13 December 2007 (meeting of 13 December), the European
Economic and Social Committee adopted the following opinion by 102 votes to seven with six abstentions.

Part 1 — Conclusions and recommendations

situation. The EESC notes, however, that taxation is not a critical
factor in SMEs' investment decisions. It has much more bearing
in the more mobile multinational companies.

A.
Europe's economy is highly integrated into the global
economy. The degree of integration varies across the sectors; it
is particularly marked in the case of the industrial activities
most susceptible to globalisation. Consequently, the European
Union's (EU) economic and tax policies must also be defined in
relation to global change. Although this opinion is focused on
the impact of the territoriality of tax law on industrial change
within the EU, the Union should not be viewed in isolation
from the rest of the world.

The EU and each of its Member States are responsible for
B.
managing economic, financial, social and environmental poli-
cies, the requirements of which go beyond market dynamics. It is
therefore important to ensure that the territoriality of tax law
has a positive impact on industrial change at EU level, which
must of course respond to market dynamics, but which also
benefits from being framed by the abovementioned policies,
within a broader context. The very nature of the Lisbon process
hinges on a delicate balance between its various strands (compe-
titiveness, social dimension, environmental protection) which
must be nurtured, with due regard also for tax competition
between the Member States (1).

Tax competition does not solely concern company taxa-
D.
tion. With the increasing mobility of
this
competition also affects personal investment income and taxa-
tion of capital.

financial assets,

E.
The EESC believes that coordinating tax provisions across
the various governments can be a lever for strengthening the
operation of the internal market by eliminating tax dysfunctions
and compliance costs, particularly in border regions. The EESC
reaffirms the recommendations it made in its opinion on
Fiscalis 2013 (3).

In the Committee's view, the lack of coordination between
F
Member States' national direct
leading to
non-taxation (4), abuse and other distortions to the operation of
the internal market. This situation can also lead to destabilisa-
tion or even the erosion of total EU tax revenues.

tax systems

is

C.
The EESC notes that tax competition is one of the aspects
of the single market that can lead to distortions of competition.
With it comes the need for transparency rules and the identifica-
tion of abuse and harmful practices (2). It also requires indicators
to act as a good yardstick for gauging the tax competition

(1) ‘Tax competition exists where decisions taken by a government
[national, regional, or local] directly affect the capacities of other
governments and where market mechanisms are insufficient to control
this interplay’. (Source: OECD); for more details, cf. Appendix 1.

(2) Harmful tax measures are defined broadly by the Code of Conduct
for business taxation as those ‘which affect, or may affect, in a signif-
icant way the location of business activity in the Community’. Then
the Code defines as ‘potentially harmful’
those measures which
‘provide for a significantly lower effective level of taxation, including
zero taxation, than the levels which generally apply in the Member
States in question’
(cf. http://ec.europa.eu/taxation_customs/taxation/company_tax/harm-
ful_tax_practices/index_en.htm).

Unlimited intra-EU tax competition risks, on the one
G.
hand, making the least mobile taxpayers — such as small busi-
nesses and services that cannot be relocated — part of a
narrower tax base and, on the other hand, bringing about a

(3) OJ C 93, 27.4.2007.
(4) Double non-taxation may result from the lack of coordination between
national tax systems, ‘for example, in relation to the qualification by
Member States of debt and equity. One Member State may consider a
transaction to be a contribution of equity rather than a loan and there-
fore not treat the income from the capital as taxable, whereas another
Member State may consider the loan to be debt and allow the interest
paid as a deduction for the company paying the interest. This may
result in a deduction in one Member State without corresponding taxa-
tion in another Member State. Another area concerns the use of hybrid
entities, i.e. entities which are regarded as a corporate body (opaque) by
one Member State and as non-corporate (transparent) by another
Member State; this difference in qualification by Member States may
lead to double exemptions or double deductions’ (Source: Commission
Communication entitled ‘Co-ordinating Member States' direct tax
systems in the Internal Market’ (COM(2006) 823 final, point 3).

C 120/52

EN

Official Journal of the European Union

16.5.2008

re-distribution of the tax burden between taxpayers and consu-
mers to cover public expenditure and social transfers. The latter
could undermine social cohesion.

from potential clashes with Treaty provisions. Given that the
CCCTB will probably be introduced on the basis of enhanced
cooperation, the EESC hopes it will be adopted by as many
Member States as possible.

H.
SMEs and service companies are the least well-equipped to
benefit from tax competition. The Committee advocates intro-
ducing support services and training programmes for their
managerial staff (just as for public officials) as well as the estab-
lishment of suitable data bases, particularly in the EU's border
and peripheral regions, to help such companies with the proce-
dures required for branching out internationally.

The Committee calls

O.
for more information on the
content, practicalities and development of the CCCTB project
before updating its opinion on this complex strategic issue,
while in the meantime referring to its exploratory opinion,
issued in 2006, in response to a request from Commissioner
Kovács (8).

The Committee feels that the fight against tax fraud must
its

I.
be a priority and draws attention to the conclusions of
recent opinion on the subject (5).

The transfer of

the tax burden onto the least mobile
J.
the
production factors may decrease the competitiveness of
businesses concerned and their
foreign
competitors. This burden transfer may be detrimental to the rate
of national GDP growth, which may lead to a reduction in
public investment capacity in the absence of new budgetary
resources.

jobs vis-à-vis their

It

feels that

However, the EESC would raise a number of points and
P.
questions concerning the CCCTB.
this optional
project should be adopted by as many Member States as
if necessary) and that the
possible (via transitional measures,
Member States should ultimately apply a single tax base to all
taxpayers at
the end of a coexistence period. Furthermore,
consideration should be given to whether the common base
applied to companies operating on external markets will be
entrusted to a transnational body. Finally, we should also
consider the effects of the common base on tax rates, i.e., the
risk of their increasing dispersion. In this case, a minimum rate
could be established, which could be set just below the current
average rate of the new Member States.

K.
Tax competition prompts Member States to improve their
grip on public expenditure. The Committee would urge that this
not be detrimental to either the range or quality of public
for retaining and attracting
services. Such services are vital
wealth- and job-creating economic activities, which — ulti-
mately — increase the tax base. Tax competition must not be
prejudicial to collective social protection coverage or funding.

Q.
The EESC recommends that the Commission step up its
monitoring of tax practices in certain tax havens that try to tap
into the taxable income of Member States' tax systems.

the commitment made by
L.
The Committee supports
Member States to eliminate harmful
tax competition and a
number of harmful tax measures by 2010 at the latest, as set
out in the Code of Conduct adopted in 1997 (6). It also calls on
the Commission to continue its work in this regard, which it
began at that time.

Part 2 — Background

1. Subject of the opinion

The Committee also supports the Commission's policy
M.
aimed at ensuring that State aid, including selective tax breaks
for business, contributes to the pursuit of sustainable industrial
change and regional development objectives whilst also being
compatible with EU competition policy.

1.1
Taxation (the level of tax burden and the amounts of tax
levied) is often cited as one of the criteria for evaluating how
attractive an area is for industrial, financial and commercial
activity. There is not, however, agreement as to the relative
weight of this criterion in comparison with others, such as the
proximity of markets, production costs, the availability of skilled
workers, public infrastructure and facilities, public funding, etc.

N.
The Committee calls for the introduction of a common
consolidated corporate tax base (CCCTB) (7) in a bid to simplify
and render more equitable and transparent tax practices across
the Member States. This would enable maximum benefit to be
derived from the internal market, whilst safeguarding Member
States' budgetary and fiscal sovereignty and protecting them

1.2
Tax systems are complex and comparing them is not
easy. It is vital, however, to consider whether the tax incentives
of the various authorities achieve the aims for which they were
designed, to assess the impact that any decision seeking to facili-
tate positive industrial change in their areas could have and
relate this to the estimated cost.

(5) Opinion on the Communication from the Commission concerning the need to
fraud

develop a coordinated strategy to improve the fight against fiscal
(OJ C 161, 13.7.2007, p. 8).

(6) Available

at: http://ec.europa.eu/taxation_customs/taxation/compa-
ny_tax/harmful_tax_practices/index_en.htm#code_conduct. See also
Appendix 4.

(7) Cf. the recent Commission Communication on Implementing the Com-
munity Programme for improved growth and employment and the enhanced
competitiveness of EU business: Further Progress during 2006 and next steps
towards a proposal on the Common Consolidated Corporate Tax Base (CCCTB)
(COM(2007) 223 final, 2.5.2007).

1.3
The aim of the opinion is to provide guidelines for antici-
pating and managing industrial change, aiding continued
growth in European competitiveness under the Lisbon objectives
and creating a true internal market, with healthy competition
that is undistorted, or at least permissible (compatible with the
internal market rules).

(8) ECO/165 — CESE 241/2006, OJ C 88, 11.4.2006.

16.5.2008

EN

Official Journal of the European Union

C 120/53

2. Tax competition and mobility of economic factors

3. Impact of taxation on industrial change

This mobility is

2.1
following reasons:

increasing within the EU,

for

the

— large companies view the EU internal market as one single

market, their domestic market;

— e-commerce recognises no national borders;

— production and distribution value chains are becoming more
and more fragmented and their components increasingly
mobile (9);

— improvements in transport infrastructure and reduced costs
resulting from the restructuring of freight transport encou-
rage companies and their subsidiaries to spread out geogra-
phically;

a) Labour and capital taxation

3.1
Taking the EU as a whole, total tax and social security
revenue amounts to approximately 39 % of EU GDP on average
and can be broken down as follows (10):

Corporation tax

Income tax

Social security contributions

Indirect taxation

Other taxes

10 %

25 %

26 %

30 %

9 %

— multinational mergers and acquisitions of companies are

increasing;

TOTAL tax and social security revenue

100 %

— the enlargement of the EU is also contributing to the mobi-

lity of economic investments, people and capital; and

— increasing levels of

language proficiency and training are

helping to increase people's mobility.

2.2
All Member States utilise all aspects of their tax system,
both specific and structural, to attract investment and economic
thus increasing their employment
activity to their country,
potential and tax base.

For their part, taxpayers (both companies and individuals) look
outside of their country to optimise their financial situation.
Their tax liability is one strategic factor, being subject to the
disparities across the national tax systems.

Such tax competition to attract investment also exists

2.3
within individual States.

2.4
It is not easy, however, to measure its actual impact on
the mobility of production factors and capital. While many
studies have been carried out, there has been no real consensus
on their conclusions, save that tax is only one of the factors
determining the location of mobile investment. This point will
be expanded on later.

2.5 With its enlargement from 15 to 27 Member States, the
EU has undoubtedly become more diverse. All of
the new
Member States are marked by their specific geographical, histor-
ical, cultural, social, political and economic context, and come
with their own specific industrial fabric, as well as their own
particular tax laws.

3.2
Indirect taxation is essentially made up of consumption
taxes — particularly value added tax (VAT), which is harmonised
at EU level — as well as certain taxes and duties levied on
specific goods and services, which are partly harmonised at
EU level, such as excise duty. Given that indirect taxation plays
only a secondary role in the issue of the location of industry,
this opinion is primarily focused on labour taxation (§ 3.2.1)
and the taxation of capital invested by business (§ 3.2.2).

3.2.1
Employee income tax and total social security contri-
butions correspond to approximately half of the total revenue
from tax and other charges. As this taxation is directly labour-
based,
it clearly increases salaried-worker labour costs. Given
that the cost of labour is a crucial financial factor for industry,
it therefore follows that taxes and other charges — including
social security — on employee income risks having a direct or
indirect impact on the competitiveness of EU industry. There is
a direct
taxes and
impact when public authorities collect
employers' social contributions from companies. When taxes
and social security contributions are deducted from employees,
they firstly reduce employees' net income. They may then also
indirectly impact on the negotiation of gross salaries, or even
prompt migration to other regions and discourage the develop-
ment of any activities other than low-wage-cost manufacturing.

Higher

3.2.1.1
labour costs naturally lead companies to
increase labour productivity by increasing the share of capital
investment. This is particularly marked in Member States where
labour costs are highest. Conversely, the relative cost of labour
is one variable (among others)
to
locate their labour-intensive operations in Member States with
the lowest labour costs. Given that taxes and social security
contributions
in Member States with
above-EU-average salaries (inclusive of employers' social security
contributions and taxes), the tax burden on labour increases the
labour cost differential and thus steers job creation towards
Member States with a more competitive cost structure.

that drives companies

tend to be higher

(9) Cf. Committee opinion on the Value and supply chain development in a
European and global context (CCMI/037 — OJ C 168, 20.7.2007, p. 1).

(10) Source: OECD, Revenue Statistics 1965-2004: 2006 Edition. The data

refers to the EU-15.

C 120/54

EN

Official Journal of the European Union

16.5.2008

3.2.1.2
From the consumer's point of view, the sale price of
manufactured products is clearly influenced by all cost factors,
including taxation. Indirect taxes are levied on the product at
the point of sale to the consumer, and are neutral. VAT is levied
at the same rate within the consumer's Member State, regardless
of whether the product was manufactured in a company in that
country, in another Member State, or outside the EU. On the
other hand, taxes levied within the EU at the different stages of
production, particularly the burden of taxes and charges on
labour costs, are purely national charges, which affect products
at their place of production.
It follows that consumers can
choose between products subjected to varying levels of taxation,
depending on the country of production. Furthermore, even if
labour taxes and social security contributions were harmonised
within the EU,
the consumer would still have the choice
between EU-made products subject to a somewhat heavy tax
and social contribution burden, and products coming from
outside the EU, subject to different — and sometimes much
lower — taxes and charges. It is therefore important to not only
coordinate labour tax and social contribution structures within
the EU but also to factor into the analysis aspects regarding
trade between the Union and the rest of the world.

3.2.1.3
The EESC recommends that the Commission step up
its monitoring of tax practices in certain tax havens that try to
tap into the taxable income of Member States' tax systems.

3.2.2
selves, but also concerns investors, or specifically, shareholders.

Capital taxation primarily concerns companies them-

Corporation tax is levied at nominal levels (11) which
3.2.2.1
vary substantially between the Member States (see table in
Appendix 2). Belgium, Germany, Spain and Malta have rates
between 34 and 38 %, while Cyprus, Ireland, Lithuania and
Latvia have rates between 10 and 15 %.

Generally, the new Member States have much lower corporation
tax rates than the old Member States: the average for the EU-15
is 29,5 %, while for the EU-10 it is 20,3 % (12).

However,

the nominal

rates give an incomplete
3.2.2.2
picture of the tax levied. In fact, the actual tax levied must take
account of the means of determining the taxable income and of
the different technical processes used to determine the tax rate.

(11) The statutory tax rate is the legally imposed rate.

The effective tax rate is the amount of tax an individual or firm pays
when all other government tax offsets or payments are included,
divided by the individual or firm's total income or taxable income.
The implicit tax rates are defined for each economic function. They
are computed as the ratio of total tax revenues of the category
(consumption, labour, and capital) to a proxy of the potential tax
base defined using the production and income accounts of the
national accounts.
The overall
is computed as the ratio
implicit
between revenue from all capital taxes, and all (in principle) poten-
tially taxable capital and business income in the economy. It aims at
representing the average tax burden falling on capital income.
(Source of the above definitions: European Commission, DG TAXUD
— Cf. Structures of the taxation systems in the EU, 1995-2004).
Comparative tables for nominal and implicit rates on capital within
the EU are included in Appendices 2 and 3. It is not possible to include
an equivalent table for effective rates, given the differing methods of
calculating them.

tax rate on capital

(12) Source: European Commission, Structures of the taxation system in the
European Union: 1995-2004, p. 83 (doc. TAXUD E4/2006/DOC/
3201). Data on Bulgaria and Romania are not available to date.

It is therefore useful to also consider the implicit tax rate on
capital, which compares the tax levied on companies with their
gross operating surplus (13) (see table in Appendix 3).

3.2.2.3
ments is striking:

The discrepancy between the two measuring instru-

— Some Member States have a very high nominal corporation
tax rate, but seem in fact to impose a relatively low tax
burden on their companies.

— Other Member States have an ‘attractive’ (very low) nominal
corporation tax rate, but seem however to impose a rela-
tively high tax burden on their companies.

— Clearly, certain Member States apply a high rate to a narrow
tax base while others apply a lower rate to a broader base.
The effective tax burden is clearly the result of these two
variables, so that it is not possible to base the analysis solely
on the nominal tax rates. This theory is borne out by the
figures for Ireland and Germany, for example (14).

3.2.2.4
These statistics in themselves illustrate the complexity
of the tax issue (15). Rather than draw premature conclusions
from this, we shall merely focus on the differences between the
Member States, differences which,
in certain situations, can
mean that a given industrial company operating on the
EU market can face tax costs — including social security contri-
butions — that vary greatly from one Member State to the next.

b) The company's value added chain

3.3
Traditional small and medium-sized enterprises (SMEs)
are more and more open to market globalisation — whether
participating in it or subject to it — particularly those located in
border and peripheral regions of the EU. Often taking the form
of individually- or family-owned companies, these SMEs do not
benefit as much from tax competition as large multinational
corporations. They do not have the organisation, management
capabilities, the means or the knowledge to derive maximum
from this competition. Rather, ensuring compliance
benefit
regarding tax returns in different countries, and varying national
tax bases, rates, exemptions, write-off rules, etc., entail extra
costs for SMEs and represent a barrier to accessing external

(13) For a more detailed methodological analysis and presentation of the

data, cf. op. cit., pages 84-87.

(14) With regard to Germany and Ireland, another indicator tends to
confirm the aforementioned paradox. Taxes on capital represent 15 %
of total taxation in Germany, whereas in Ireland the figure is 28 %
(source: Structures of
the taxation systems in the EU, 1995-2004,
European Commission, Table C.3_T).

(15) Within this opinion, it will not be possible to analyse such data for
each Member State and provide detailed explanations, nor to tally
these statistical indicators with other data bases.

16.5.2008

EN

Official Journal of the European Union

C 120/55

markets. At the same time, however, these internationalised (or
aspiring-to-be internationalised) SMEs represent one of the best
assets for growth,
in terms of creating wealth, added value,
innovation and, of course, jobs, in line with the Lisbon process.
Support is needed to help businesses with these procedures.
With a view to easing the transition, SME managerial staff must
receive training, like that given to public officials.

3.4 Many companies
significantly on
intra-Community trade — especially those involved in interna-
tional trade, beyond the EU — generally operate under another
economic model, i.e.:

that do impact

— such companies take the form of limited liability companies,
whose shareholders are not necessarily based in the same
region or Member State as the company's head office;

— they generally take the form of parent companies and subsi-
diaries, making up a broadly integrated group of companies;

— the group's various entities operate in several Member

States, and

— each of the group's units has a specific function, each is
involved in creating added value and the value-added chain
is clearly demarcated between the various companies, each
assuming a particular function within the overall strategy.

3.5 Modern industrial groups carry out a range of interlinked
economic functions (value and supply chain management, orga-
nisation of the various production phases, optimising of intan-
gible assets such as expertise, patents, brands, etc.) with the ulti-
mate aim of marketing their products in line with a strategy
based on systematic market analyses. The location of
these
different economic functions fits into an overall strategy, one
factor of which is taxation.

3.6
In such a group structure, both the individual legal enti-
ties and the overall group should be analysed. The group assigns
economic functions to its various entities in accordance with
market-based economic data, with a view to optimising the
group's overall efficiency and profitability. Member States are
entitled to refine their tax systems in order to fuel economic
activity. Business is also entitled to treat taxation in the same
way as other costs incurred.

3.7
Each legal entity is bound by the tax law in force at its
location and information on the tax system is one of several
decision-making factors at play in the overall management of
the group.

discussing the location or relocation of a group, it would be
more appropriate to carry out a functional analysis of the indus-
trial fabric and to determine the location factors pertaining to
the various economic functions at Member State and EU levels,
and perhaps beyond. Certain economic functions are more
mobile than others and, for certain mobile functions, taxation
has more bearing on location than for other functions. While it
is clearly the case that taxation is one of the decision-making
factors, it would, however, be wrong to overestimate its influ-
ence on the choice of location.

4. The framework for competition between Member States based on

company taxation

Tax competition within the EU is currently framed by

4.1
three sets of measures:

— the code of conduct and system of communicating changes
in tax law,
introduced in 1997, has established an active
dialogue with finance ministers, aimed at ensuring that legis-
lative measures do not promote harmful tax competition
(points 4.2 to 4.4);

— EU competition law, particularly regarding State aid, aims to
ensure that the introduction of certain tax measures or the
practical application of tax law does not effectively grant
certain companies State aid that is contrary to the proper
operation of the internal market (points 4.5 to 4.7);

— the majority of Member States have introduced legislative
measures aimed at preventing the creation of artificial and
abusive structures designed to allow companies to enjoy
preferential tax regimes (point 4.8).

4.2
The code of conduct, which is not legally binding,
commits Member States to respecting the principles of healthy
tax competition. Following this process, a range of legislative,
regulatory and administrative tax measures were identified,
which have — or could have — a significant impact on the
location of business within the EU. The Member States made a
firm commitment to roll back existing tax measures that consti-
tuted harmful tax competition by 2010 at the latest, without
exception (16).

The Committee welcomes the results of

4.3
this code of
conduct, as by eliminating harmful tax practices (17), the Member
States are thus increasing healthy tax competition within the EU
and helping to complete the internal market.

The Committee would encourage the Commission to continue
this initiative by expanding the scope of the code of conduct
and assessing certain tax measures introduced in recent years.

3.8
within EU markets is therefore very complex. Rather

The situation pertaining to industrial groups operating
than

(16) For certain measures, a deadline as late as 2016 has been agreed.
(17) See definition provided in footnote 2.

C 120/56

EN

Official Journal of the European Union

16.5.2008

4.4
In parallel with this, a system of communication has
been established between the Member States and the Commis-
sion, aimed at checking that changes in tax law are consistent
with EU policy. Member States have undertaken to refrain from
introducing any measures deemed harmful to the EU's interests.

The Committee feels that the fight against tax fraud must
its

4.9
be a priority and draws attention to the conclusions of
recent opinion on the subject (18).

that would distort or

4.5
Under the provisions of the Rome Treaties, Member
States are prohibited from granting aid to business,
including tax breaks,
risk distorting
competition within the single market and responsibility is
bestowed on the Commission for monitoring this. In 1997,
when beginning work on the code of conduct, finance ministers
meeting in the ECOFIN Council gave the Commission a
clear mandate to pursue its action on State aid aimed at elimi-
nating any Member State tax legislation not in keeping with the
above-mentioned Treaty provisions.

4.6
Over the last ten years, the Commission has gradually
stepped up its action in this area. It has not only launched a
clarification process — in consultation with the Member States
— which provided clearer criteria on which to base its action in
a range of areas, but has also undertaken specific actions against
particular tax measures adopted by certain Member States.

4.7
Unlike the code of conduct, which is non-binding politi-
cally, State aid law is legally binding. The Commission has a
great deal of authority in this area and can prohibit the entry
into force of an incompatible aid measure, require that it be
modified, or even compel
the Member State concerned to
recover any aid incompatible with the internal market, where it
has not been notified prior to implementation. In this case, reci-
pient companies are obliged to pay back any tax benefits
granted to them.

4.8
The majority of Member States have tax provisions
aimed at combating tax evasion and the transfer of
activities to tax havens. In fact, all Member States want to
attract economic activity to their countries,
to generate tax
revenue from such activity and to avoid the relocation of tax
bases abroad.

4.8.1
Although the tax measures adopted vary from one
Member State to the next, the question sometimes arises as to
whether
such provisions are compatible with the internal
market and free movement within the EU, given that the tax
law applied by all Member States must comply with EU law.
The European Court of Justice has clarified its position on this
matter: essentially,
the provisions aimed at combating tax
evasion and the transfer of revenue to tax havens are in prin-
ciple incompatible with the principle of free movement within
the EU; such provisions could, however, be justified only where
they are limited to combating commensurately the establish-
ment of artificial and abusive structures.

4.10
Article 93 of the EC Treaty provides for the adoption
by the Council, acting unanimously, of ‘provisions for the harmoni-
sation of legislation concerning turnover taxes (…) to the extent that
such harmonisation is necessary to ensure the establishment and the
functioning of the internal market’.

4.11
The European Commission has undertaken several
interesting initiatives aimed at completing the internal market
through measures affecting company taxation. In particular, the
Commission confirmed on 3 May 2007 that it would continue
its efforts to introduce a common consolidated corporate tax
base (CCCTB). During the first half of 2008,
the taxation
Commissioner intends to present a proposal for a Directive
aimed at implementing the CCCTB by 2010. The EESC shares
the Commission's view that the CCCTB could make a major
contribution to the success of the internal market, although it
means more transparency and therefore more active tax compe-
tition. The Committee urges the Commission to persevere with
its work, despite the complexity of the issues. At this stage it
seems premature, however, to comment on this plan in more
detail, since the Commission has not yet presented a detailed
model for the definition of a consolidated common base and
for the introduction of a consolidated tax system across the
EU's 27 Member States. Nevertheless, the Committee would
raise a number of points and questions concerning the future of
the CCCTB company taxation project.

5. Points and questions that the Committee would raise regarding the

common consolidated corporate tax base (CCCTB)

5.1
Given that the CCCTB could be optional for Member
States (probably on the basis of enhanced cooperation), the
EESC hopes it will be adopted by as many Member States as
possible, via transitional measures, if necessary.

5.2
If the CCCTB system is optional for business, this will
mean that the administrations of participating Member States
will have to deal with two different tax and returns systems. Is
this conceivable at a time when most Member States are seeking
to increase public service productivity?

If the CCCTB system is adopted by multinationals,

is
5.3
there not a risk of distortions
(formalities,
accounting and tax systems) between companies within a given
Member State which is in favour of
the
CCCTB?

the application of

in treatment

(18) Opinion on the Communication from the Commission concerning the need
to develop a co-ordinated strategy to improve the fight against fiscal fraud.
(ECO/187 — OJ C 161, 13.7.2007, p. 8).

16.5.2008

EN

Official Journal of the European Union

C 120/57

5.4 With regard to the two previous points, should we not
be aiming for a single system to be gradually applied to all
taxpayers within the same Member State?

If

5.5
the CCCTB system is to bring more transparency,
should the declaratory common base be entrusted to a transna-
tional body?

5.6 With the CCCTB system, tax differences hidden in the
calculation of tax bases will be reflected in the rates within the
Member States that have opted for
the
common tax base system not result in a greater dispersion of
tax rates (at least nominal rates)? There is a risk of renewed
competition over published tax rates. A Commission study

the CCCTB. Will

(2001) noted that
primary cause of tax-competition-related economic distortion!

the dispersion of nominal rates was the

If tax rate differentials were to remain (contrary to the
5.7
recent
trend towards convergence) — or even increase —
between the Member States that opt for the CCCTB, could we
envisage the introduction of a minimum rate for these Member
States? This rate could be set just below that adopted by the
new Member States,
for example. The situation will remain
unchanged for these countries with regard to the import of
foreign capital. The other Member States could adopt a higher
tax rate without fear of overly aggressive external fiscal policies
affecting their economic capital.

Brussels, 13 December 2007.

The President

of the European Economic and Social Committee

Dimitris DIMITRIADIS

Opinion of

the European Economic and Social Committee on the ‘Impact of European

environmental rules on industrial change’

(2008/C 120/15)

On 16 February 2007 the European Economic and Social Committee, acting under Rule 29(2) of its Rules
of Procedure, decided to draw up an opinion on the

Impact of European environmental rules on industrial change.

The Consultative Commission on Industrial Change, which was responsible for preparing the Committee's
work on the subject, adopted its opinion on 13 November 2007. The rapporteur was Mr Pezzini and the
co-rapporteur was Mr Nowicki.

At its 440th plenary session, held on 12-13 December (meeting of 12 December), the European Economic
and Social Committee adopted the following opinion by 137 votes to 1 with 1 abstention.

1. Conclusions and recommendations

facing

public

Environmental policy is currently one of the main social
1.1
challenges
economic
decision-makers. The slow global response to environmental
problems can no longer be an excuse for putting off the legisla-
tive and behavioural changes needed to achieve the EU's funda-
mental objective, i.e. to achieve sustainable development.

authorities

and

1.3
The Committee believes that all economic and social
operators — whether public or private — and politicians and
public authorities must be fully aware of the fact that we are
facing a new industrial revolution that places quality of life and
of the environment at the heart of development and requires a
new, integrated approach to planning, production and consump-
tion, and to conserving and managing natural resources.

European industry has great potential

1.2
to become a
sustainable economy, but its success will increasingly depend on
its ability to innovate in the area of industrial change. This
change is necessary as a result of opening up markets, and
globalisation and technological and behavioural changes, which
are accelerated by a growing acceptance of the need to protect
the environment and natural resources.

1.4
The Committee believes there is an urgent need to move
on from a defensive, knee-jerk approach to one that is decisive
and proactive, preparing the future by launching at EU- and
Member State level a clear, stable framework of positive actions
on a sustainable basis to speed up:

— the development and application of clean product and

process technologies;