Select Committee on European Scrutiny Thirty-Eighth Report





COM(02) 10


Draft Decision by the Commission for a Community programme to improve the operation of the taxation system in the internal market (Fiscalis 2007 Programme).

Legal base:

Article 95 EC; co-decision; qualified majority voting



HM Customs and Excise and Inland Revenue

Basis of consideration:

Minister's letter of 10 July 2002

Previous Committee Report:

HC 152-xxii (2001-02), paragraph 11(20 March 2002)

To be discussed in Council:

Not known

Committee's assessment:

Legally and politically important

Committee's decision:

Not cleared; request to be kept informed




    1. The existing Fiscalis programme was established in 1998 for five years with the objectives of improving co-operation between Member States and candidate countries in the field of indirect taxation, disseminating best practice and helping officials to reach a high level of knowledge of EU indirect tax law. The proposal is for the creation of a new five-year programme for administrative co-operation on tax (Fiscalis 2007).
    2. We considered the document on 20 March 2002. The Paymaster General (Dawn Primarolo) told us then that the Government recognises the importance of administrative co-operation in countering fraud and generally supports the Fiscalis programme. However, she added that the Government disagrees with the proposed extensions to direct tax and insurance premium taxes (IPT).
    3. Like the Minister we generally welcomed the proposal but were concerned at the possibility that Fiscalis could be extended to direct tax and IPT. We left the document uncleared and asked the Minister to keep us informed of developments.
    4. The Minister's letter

    5. The Minister tells us that in subsequent negotiations the Government has maintained vigorously its opposition to the inclusion of direct tax and IPT. However the Government has received little support and a compromise text still covers these taxes. But the compromise text contains three fundamental changes:

    • activities are restricted to raising awareness of Community law;

    • the UK (and other Member States) need not participate in any direct tax related activities; and

    • there is an explicit provision that participating countries may restrict the scope of exchanges to VAT and/or excise duty officials.

    1. The Minister assures us that "These are important changes because they ensure that the UK can maintain clear control over these sensitive areas of tax policy." She says that, given the Government's overall support for strengthened cooperation, it would be inappropriate for the UK to vote against such a measure and that she has therefore decided that the UK should abstain on any Council vote on the current text as it goes through the co-decision process with the European Parliament.
    2. Conclusion

    3. We note the Minister's assurance that this proposal as now amended, although still covering direct tax and IPT, will not compromise the Government's clear control of policy on these matters. We note also the Minister's intention not to vote against the current text. We leave the document uncleared and again ask the Minister to keep us fully informed of progress on it.


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Prepared 11 November 2002