Taxation is a sensitive matter in Ireland and understandably so. However, the Commission's comprehensive strategy for the EU's future tax policy, approved last Wednesday, stands to benefit Irish citizens and businesses and should be supported.
Essentially, the Commission now wants the Community to put much more emphasis on the concerns of the EU taxpayer. We want to use taxation as an economic policy instrument to underpin the goal set by the Lisbon European Council in March 2000 of making the EU the most competitive economy in the world by 2010, inter alia by a durable reduction in the overall tax burden.
The Commission considers that EU tax policy co-ordination need not imply across-the-board harmonisation. Indeed, a reasonable degree of tax competition may well contribute to a smaller fiscal burden.
Greater approximation of VAT and excise duties on goods and services traded within the internal market is necessary in order to prevent distortions of competition. But in the company tax area, member-states should be free to choose the tax systems that they consider most appropriate and the EU should not attempt to impose uniform rates.
In order to make it easier to compare different member-states' company tax systems, the Commission intends to establish a uniform way of calculating tax bases.
We also want to focus increasingly on eliminating the tax problems facing individuals and businesses operating within the EU internal market. The internal market provides considerable benefits for individuals and businesses in terms of enhanced employment and commercial opportunities, wider choice of goods and services, lower prices and international competitiveness. But in practice, the benefits of the internal market can be seriously restricted by such problems as double taxation, tax discrimination and delays and complications in getting refunds. This is unacceptable.
One method the Commission intends to use increasingly to tackle tax problems affecting the internal market is a more focused use of infringement procedures. The Commission must actively live up to its core responsibility of monitoring the correct application of EU law in member-states and taking action to address problems.
Until now, we have tended to react to incoming complaints. But in future, we intend to take a more pro-active role, using infringements as a policy instrument to tackle tax rules or practices that violate basic internal market rights such as the freedom to provide services, the freedom of establishment and the free movement of people, goods and capital.
The policy adopted by the Commission in April on tackling tax obstacles to cross-border membership of occupational pension funds represents a foretaste of this approach. The Commission will monitor member-states' rules in the field of pensions taxation and take steps to ensure their compliance with the treaty, including, where necessary, initiating legal action.
As a complement to this, the Commission will work with member-states to improve information exchange on pensions and resolve problems of double taxation and double exemption due to mismatches between pension taxation systems.
The Commission will also continue to press for rapid adoption of practical measures such as requiring electronic invoices to be recognised by VAT authorities in all EU countries.
Vehicle taxation is often the source of considerable problems for people moving their cars from one country to another. The Commission therefore intends to examine ways to avoid people having to, for example, pay registration taxes in both the country where they buy their car and the country to which they move.
At the same time, the Commission will examine possible barriers to the free movement of cars arising from the different systems of vehicle taxation applied in various member-states.
A real problem preventing progress in the tax field is the requirement that all tax measures must be adopted on the basis of a unanimous vote of all member-states. The Commission's view is that a move to qualified majority voting at least for certain tax issues is indispensable.
The Commission will also consider making use of the enhanced co-operation mechanism provided for in the Amsterdam and Nice treaties to propose that groups of at least eight member-states co-operate more closely on tax proposals on which the agreement of all member-states is not possible.
Recommendations and guidelines could also be used instead of legislation where appropriate.
The current level of cross-border tax problems cannot be allowed to continue if the EU is to meet the challenge of globalisation and the objectives set by the treaty and by recent European councils. The Commission intends to pursue the objectives it has outlined in full respect of the principle of subsidiarity but having regard also to the requirements of the internal market and to its own role as guardian of the treaties.
Frits Bolkestein, European Commissioner for Taxation and the Internal Market
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