Proposal for a COUNCIL DECISION amending Decision 2002/546/EC as regards its period of application
Date: 2011-07-19
Institutions: European Commission
Subjects: CCT duties, Canary Islands, customs territory (EU), derogation from EU law, indirect tax, production, tariff nomenclature, tax exemption

EUROPEAN COMMISSION 

Brussels, 19.7.2011 
COM(2011) 443 final 

2011/0192 (CNS) 

Proposal for a 

COUNCIL DECISION 

amending Decision 2002/546/EC as regards its period of application 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

The  Treaty  on  the  Functioning  of  the  European  Union  (TFEU),  which  applies  to  the 
outermost  regions  of  the  EU,  which  include  the  Canary  Islands,  does  not  in  principle  allow 
any difference between the taxation of local products and the taxation of products from Spain 
or other Member States. Article 349 of the TFEU (formerly Article 299(2) of the EC Treaty) 
provides,  however,  for  the  possibility  of  introducing  specific  measures  for  those  regions 
because of the permanent handicaps which affect the economic and social conditions of the 
outermost regions. 

Council Decision 2002/546/EC of 20 June 20021, adopted on the basis of Article 299(2) of the 
EC  Treaty,  authorises  Spain,  up  to  31  December  2011,  to  apply  exemptions  from  or 
reductions  in  the  tax  known  as  AIEM  to  certain  products  produced  locally  in  the  Canary 
Islands. The Annex to that Decision contains a list of products to which tax exemptions and 
reductions  may  be  applied.  The  difference  between  the  taxation  of  locally  manufactured 
products  and  the  taxation  of  other  products  may  not  exceed  5,  15  or  25  percentage  points, 
depending on the product.  

Decision  2002/546/EC  sets  out  the  reasons  for  adopting  specific  measures,  which  include 
isolation,  raw  material  and  energy  dependence,  the  obligation  to  build  up  stocks,  the  small 
size  of  the  local  market  and  the  low  level  of  export  activity.  The  combination  of  these 
handicaps means that production costs, and therefore the cost price of goods produced locally, 
are  increased,  so  that  without  specific  measures  they  would  be  less  competitive  than  goods 
produced elsewhere, even taking into account the cost of transporting the latter to the Canary 
Islands.  This  would  make  it  harder  to  maintain  local  production.  The  specific  measures 
contained  in  Decision  2002/546/EC  were  thus  designed  to  strengthen  local  industry  by 
making it more competitive.  

The global economic crisis of 2009, with its impact in the reduction of travelling, had severe 
consequences  on  the  economy  of  Canary  Islands,  highly  dependent  on  the  revenues  from 
tourism. 

The  reduction  of  working  force  in  the  tourism  sector  has  led  to  a  major  increase  in  the 
unemployment rate in Canary Islands. The unemployment rate that in the period of 2001-2007 
oscillated between 10,4% and 12%, rose to 17,3% in 2008 and 26,2% in 2009. This evolution 
confirms the danger of an economy highly dependent on tourism and the need to promote a 
diversification in the economic activities. 

On 16 November 2010, Spain submitted a request to the European Commission to extend the 
period of application of Decision 2002/546/EC for two years, so that its expiry date coincides 
with the one of the Guidelines on National Regional Aid for 2007-2013.2 

Spain has also introduced a request for the extension for two years of the period of application 
of  Decision  on  State  Aid  NN  22/2008,  according  to  which  the  aid  given  by  the  Spanish 
authorities, in respect of AIEM, is compatible with the common market. The Commission has 

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OJ L 179, 9.7.2002, p.22-27 
OJ C 54, 4.3.2006, p. 13 

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drafted the Decision of State Aid N 544/2010, extending the period of Decision on State Aid 
NN 22/2008, that is ready to be adopted, ensuring the coherence with this proposal. 

As regard the request for the extension of the period of application of Decision 2002/546/EC, 
the  Commission  has  assessed  it  in  light  of  the  scale  of  the  handicaps  affecting  the  Canary 
Islands. It has come to the conclusion that it is justified to grant the request on the basis of the 
available elements.  

First, indeed, the report from the Commission to the Council on the application of the special 
arrangements  concerning  the  AIEM  tax  applicable  in  the  Canary  Islands,  adopted  on  28 
August 2008, confirmed that the AIEM was functioning in a satisfactory manner and without 
the  need  to  any  amendments  to  the  provisions  of  Decision  2002/546/EC.  The  continued 
existence  of  the  handicaps  is  also  confirmed  by  the  report  sent  with  the  present  request  for 
extending the period of application of Decision 2002/546/EC. 

Second, the the request seeks an extension for two years only. 

2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

The  Spanish  authorities'  request  to  extend  the  application  of  the  AIEM  was  a  response  to 
requests from the economic sectors concerned.  

The Commission has not used an impact assessment. 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

Summary of the proposed measures 

To extend the period of application of Decision 2002/546/EC that authorises Spain to apply 
exemptions  from  or  reductions  in  the  tax  known  as  AIEM  for  certain  products  produced 
locally in the Canary Islands. 

Legal basis 

Article 349 TFEU. 

Subsidiarity principle 

Only the Council is authorised, on the basis of Article 349 TFEU, to adopt specific measures 
in favour  of the outermost regions to adjust the application of the Treaties to those regions, 
including  the  common  policies,  because  of  the  permanent  handicaps  which  affect  the 
economic and social conditions of the outermost regions. 

The proposal therefore complies with the subsidiarity principle.  

Proportionality principle 

The proposal complies with the proportionality principle for the following reasons: 

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Its purpose is to extend the period of application of Decision 2004/162/EC for a period of two 
years,  in  order  to  make  it  coincide  with  the  Guidelines  on  National  Regional  Aid,  that  are 
applicable for the period 2007-2013. 

The Commission has confirmed in its report to the Council on the application of the special 
arrangement  concerning  the  AIEM  tax  applicable  in  the  Canary  Islands  that  the  AIEM  was 
functioning  in  a  satisfactory  manner  and  without  the  need  to  any  amendments  to  the 
provisions of Decision 2002/546/EC. 

Any further extension will be authorised only following a fresh product-by-product analysis. 

Choice of instrument 

Proposed instrument: Council Decision. 

Other instruments would not have been appropriate for the following reason: 

The text to be amended is itself a Council Decision, adopted on the same legal basis (Article 
299(2) of the then EC Treaty). 

4. 

BUDGETARY IMPACT 

The proposal has no impact on the budget of the European Union. 

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2011/0192 (CNS) 

Proposal for a 

COUNCIL DECISION 

amending Decision 2002/546/EC as regards its period of application 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 349 thereof, 

Having regard to the proposal from the European Commission,3 

After transmission of the draft legislative act to the national Parliaments, 

Having regard to the opinion of the European Parliament,4 

Acting in accordance with a special legislative procedure, 

Whereas: 

(1) 

(2) 

Council  Decision  2002/546/EC  of  20  June  2002,  adopted  on  the  basis  of  Article 
299(2)  of  the  EC  Treaty,  authorises  Spain,  up  to  31  December  2011,  to  apply 
exemptions from or reductions in the tax known as AIEM to certain products produced 
locally in the Canary Islands. The Annex to that Decision contains a list of products to 
which  tax  exemptions  and  reductions  may  be  applied.  The  difference  between  the 
taxation of locally manufactured products and the taxation of other products may not 
exceed 5, 15 or 25 percentage points, depending on the product. 

It  appears  justified  to  extend  the  period  of  application  of  Decision  2002/546/EC  for 
two years, since the basic elements justifying the authorisation provided through this 
decision have remained unchanged. In this regards, the report from the Commission to 
the Council on the application of the special arrangements concerning the AIEM tax 
applicable  in  the  Canary  Islands5  confirmed  that  the  AIEM  was  functioning  in  a 
satisfactory  manner  and  without  the  need  for  any  amendments  to  the  provisions  of 
Council Decision 2002/546/EC. 

(3)  Moreover, the report received from the Spanish authorities confirms that the handicaps 
that justified the approval of total exemptions and partial reduction of the AIEM tax to 
a list of products produced locally in the Canary Islands are still valid, 

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OJ C […], […], p. […]. 
OJ C […], […], p. […]. 
COM (2008) 528 

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HAS ADOPTED THIS DECISION:  

Article 1 

In Article 1 of Decision 2002/546/EC, the date of 31 December 2011 is replaced by the date 
of 31 December 2013.  

Article 2 

This Decision is addressed to the Kingdom of Spain. 

Done at Brussels,  

For the Council 
The President 

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