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Bureau of National Affairs

Wednesday February 7, 2001

International Taxes

EU Commissioner to Recommend Shift In
Focus From Harmonization to Tax Barriers

     BRUSSELS--European Union Commissioner Frits Bolkestein will recommend Feb. 7 that the EU executive body orient its activities toward removing tax barriers for companies in the EU single market instead of focusing on further harmonization. 

     The Commission indicated the new approach would take a more realistic assessment of the political climate. 

     A major factor in the Commission's new focus is based on the difficulty of gaining unanimous approval in the EU Council of Ministers on tax legislation. The decision also is based on a decision by EU member states not to extend qualified majority voting to some taxation areas at the conclusion of an Intergovernmental Conference in Nice, France, in December (239 DTR G-3, 12/12/00).

     Another factor Bolkestein considered when preparing an "orientation debate" before the Commission is the intense political sensitivity of tax harmonization legislation in some EU member states, including the United Kingdom, Spain, and Sweden. At the same time the Commission said its new emphasis falls in line with the goals outlined in 2000 in Lisbon when the European Union agreed on a plan to overtake the United States when it comes to competitiveness in the so-called New Economy (59 DTR G-1, 3/27/00).

     "While work on eliminating harmful tax competition will continue, there must be an increased focus on the practical taxation problems of individuals and businesses operating within the single market," stated a Commission document on the issue obtained by BNA. "There is now a need to pay increased attention to the tax obstacles and distortions inhibiting the exercise of the four EU treaty freedoms [movement of capital, labor, goods, and services] as well as to the inefficiencies linked to the operation of 15 different tax systems within the EU." 

     'Soft Law,' Reinforced Cooperation

     As for how it will make progress toward its taxation priorities, the Commission said it would use not only legislation but "soft law" as well as a new mechanism, agreed to in Nice, called reinforced cooperation.

     Reinforced cooperation, when approved in the Nice Treaty that will replace the Amsterdam Treaty, will allow groups of member states to move ahead on certain kinds of legislation, if the agreed measure does not interfere with EU single market rules. 

     Soft law measures will include peer pressure, multilateral surveillance, and guidelines, the Commission said.

     The Commission paper also stated the EU executive body should step up its role as enforcer of EU law and increase the number of infringement cases before the European Court of Justice. 

     By Joe Kirwin

     Copyright © 2001 by The Bureau of National Affairs, Inc., Washington D.C.


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