CELEX: 51980PC0203
Language: en
Date: 1980-04-29
Title: PROPOSAL FOR A COUNCIL DIRECTIVE ON THE COMMON SYSTEM OF TAXATION APPLICABLE TO MERGERS, DIVISIONS AND CONTRIBUTIONS OF ASSETS OCCURRING BETWEEN COMPANIES OF DIFFERENT MEMBER STATES (Communication by the Commission to the Council)

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (80) 203
Vol. 1980/0061
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concernant l'ouverture au public des archives historiques de la Communauté économique
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983,
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003
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In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983
concerning the opening to the public of the historical archives of the European Economic
Community and the European Atomic Energy Community (OJ L 43, 15.2.1983, p. 1), as
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In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1.
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                                 COM(80)203 final
                                                 Brussels - 29th April 1980
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                         PROPOSAL FOR^ COUNCIL DIRECTIVE
               ON THE COMMON SYSTEM OF TAXATION APPLICABLE TO
          MERGERS , DIVISIONS AND CONTRIBUTIONS OF ASSETS OCCURRING
                  BETWEEN COMPANIES OF DIFFERENT MEMBER STATES
                  ( Communication by the Commission to the Council )
C0MC80 ) 203 final
 ---pagebreak--- Subject : Proposal for a Council directive on the common system of . taxation
            applicable to mergers , divisions and contributions of assets
            occurring between companies of different Member States
The above proposal ( 1 ) was laid before the Council as long ago as 1969 . •
Its main purpose is to defer the taxation that would otherwise occur when
two companies from different Member States engage in a merger or similar
operation . The proposal is of crucial importance to Community industrial ■
policy , since it removes some of the tax obstacles to co-operation across
frontiers between enterprises wishing to concentrate or disperse their
activities .                                                          /
The proposal must also be seen in its political context as parallel to
the work on the Statute for European Companies ( 2 ) and on the Draft
Convention on International Mergers ( 3 ). However the proposal could be of
immediate practical use for certain forms of cross-frontier co-operation ,
irrespective of developments in these two other areas-
The importance of the mergers proposal has been recognised by the Council ,
in its Resolution of 17 December 1973 on Industrial Policy ( 4 )    which
identifies the abolition of taxation obstacles to mergers and the early
adoption of the Statute for European Companies as essential ingredients
of Community industrial policy . .
 ( 1 ) O.J. N° C 39 , 22.3.1969
 ( 2 ) Amended proposal for a Council regulation on the Statute for European
       companies , Supplement to EC Bulletin N° 4-1975              -
 ( 3 ) Draft Convention on the international merger ofsocietes anonymes ,
       Supplement to EC Bulletin N° 13 / 73
 ( 4 ) O.J. N° C 117 , 31.12.1973 , paras 3 and 4
 ---pagebreak---                                   y
                                      - 2 -
 We have-now reached the point where nearly all the technical problems have
been solved in the course of Council discussions . The adoption of the
directive is , however , blocked by political objections on the part of the
Netherlands and the Federal Republic of Germany . Both Member States fear
that , once the tax obstacles to cross-frontier mergers , etc . are removed ,
companies engaging in a merger or similar operation will transfer the head
of the corporate group outside their respective countries . The inducement
for a Dutch company to do so is the more favourable tax treatment of
dividends under imputation systems , which grant relief for corporation tax ,
and in the case of a German company , mergers could be used as a means of
avoiding the obligations of worker participation ( Mitbestimmungsgesetz ) .
It should be pointed out that the fears expressed by the Netherlands and
Germany cancel each other out in their bilateral relationships in as much
as each Member State envisages mergers taking place in a one way direction
towards the other Member State . This contradiction in their positions
inevitably casts considerable doubt on their validity . It is , moreover ,
a mistake to assume that decisions regarding mergers will be taken solely
for tax reasons or , in the case of Germany , for reasons of social policy .
Other considerations generally carry much greater weight , such as the
need to obtain sources of finance , to diversify production , to penetrate
new markets , and even to meet competition from third countries .
Despite efforts by the Commission to satisfy the two Member Sates concerned ,
they have not moved from their respective positions , thus blocking the
proposal which the seven other Member States would , with minor reservations ,
be prepared to approve . The Commission for its part insists that the taxa - '
tion of mergers and similar operations presents a serious problem
requiring urgent attention , since without a settlement there cannot be an
effective Community industrial policy .                     -
It is therefore imperative that the mergers proposal should be discussed
in the Council , especially when it is borne in mind that the proposal has
never during its eleven years of existence , been brought before the Ministers
 To facilitate this discussion , the Commission is preparing
 ---pagebreak--- proposals for safeguarding the interests of any Member State against the
 risks referred to above and for monitoring the opration of the directive .
We envisage a safeguard article to protect any Member State which finds
that , following the introduction of the Directive , mergers or similar               .
operations are taking place unilaterally in other Member States to such
an extent as to create serious economic or social - problems . Under this
article the Member State could apply , stating its reasons , to the Commission
for authority to take such measures as are necessary to- correct the imbalance .
The Commission would decide , within a limited period of time and after '           *       /    ■->-
consulting the other Member States , whether authorisation should be granted ,
and if so , under what conditions . The Commission 's decision refusing
authorisation , granting authorisation or attaching conditions to the                   , .
                                                     !
authorisation , would be subject to review by the Council which , acting by a,
qualified majority , could substitute' its own decision . If authorisation were
granted , the decision would have to specify the period for which it was
granted . All decisions taken under the safeguard article would be published .
These safeguard provisions would , however , cease to have effect once there
were Community rules in force dealing with worker participation and with
systems of corporation tax . As regards the latter , the Commission considers
that the adoption of the directive concerning the common taxation system
for international mergers should lead to renewed efforts to harmonize
systems of company taxation . It therefore calls upon the European Parliament
which has not yet delivered its final opinion on the proposal for harmoni­
zing company taxation made by the Commission in 1975 ( 1 ) as well as on the
Council to give priority to the consideration of this matter ^ .
Finally , the operation afthe mergers directive will need permanent super -                   •'
vision . It won I H therefore seem aporopriate to add an arti cle requi ring the Commi ssion
to supervise the application of the Directive , report on its supervision to -
the Council every two years and make such proposals as seem appropriate .
C1 ) Proposal for a Council directive concerning the harmonization of
     systems of company taxation and of withholding taxes on dividends ,
     O.J. N° C 253 , 5.11.1975 .