Select Committee on European Communities Fifteenth Report


20 July 1999

By the Select Committee appointed to consider Community proposals, whether in draft or otherwise, to obtain all necessary information about them, and to make reports on those which, in the opinion of the Committee, raise important questions of policy or principle, and on other questions to which the Committee considers that the special attention of the House should be drawn.


Taxes in the EU: can co-ordination and competition co-exist?

*COM(97) 564: Commission Communication: A package to tackle harmful tax competition in the European Union
*6651/98:Proposal for a Directive on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States
8781/98: Proposal for a Directive to ensure a minimum of effective taxation of savings income within the Community
COM(98) 565:Commission's first annual report on the Code of Conduct for business taxation and progress report on taxation of interest from savings and interest and royalty payments
12624/98:Commission Communication: Financial services: building a framework for action
13347/98: Commission Communication on the application of the State aid rules to measures relating to direct business taxation
8089/99: Amended proposal for a European Parliament and Council Directive amending Council Directive 76/308/EEC on mutual assistance for the recovery of claims resulting from operations forming part of the system of financing the European Agricultural Guidance and Guarantee Fund, and of agricultural levies and customs duties and in respect of value added tax and certain excise duties
8329/99: Commission Communication: Implementing the framework for financial markets: action plan
*  Indicates that the Committee has already cleared the document in question, but that it forms part of the context of this enquiry.


1. The Committee has been planning for some time to produce a substantive Report on taxation in the European Union. In summer 1997, an enquiry was launched into Tax and Competition Policy in the Single Market, on the basis of Commission Communications on harmful tax competition[1] and on an Action Plan for the Single Market[2], as well as a draft proposal on energy taxation[3]. Valuable contributions were made by several witnesses[4]. However, after the evidence had been taken matters moved on rapidly, with the Commission making a number of specific proposals in the field of taxation. The Committee therefore decided to publish the evidence as it stood, "in the hope of informing debate within the House of Lords and stimulating further debate"[5]. There was clearly a need for an in-depth enquiry into the new proposals.

2. The Committee therefore decided to mount a new major enquiry into taxation in the European Union, starting in March 1999. The enquiry was designed to look both at the firm proposals on the table and at some broader ideas which had been floated for the future, particularly in the light of the proposals for the completion of the Single Market in financial services.

3. An executive summary of this Report is at Part 2. In Part 3, the Report considers the major issues: some of the fundamental underlying questions on EU taxation. It then looks at the detailed proposals which have now been brought forward by the Commission in relation to both direct and indirect taxes, which are discussed in Part 4. In Part 5, it considers the ideas for further tax co-ordination which have been floated within the European Union, but which are not yet the subject of specific proposals. Finally, Part 6 makes some concluding comments.

4. The enquiry was carried out by Sub-Committee A. The membership of the Sub-Committee during the enquiry is listed at Appendix 1. Our witnesses are listed at Appendix 2. We are grateful to all of them, and particularly to those who gave oral evidence. Readers may find the Glossary in Appendix 3 helpful.

1   COM(97) 564: Commission Communication: A package to tackle harmful tax competition and a previous Communication on the same subject (10427/97): Towards tax co-ordination in the European Union - a package to tackle harmful tax competition.  Back

2   7861/97: Commission Communication concerning the draft Action Plan for the Single Market.

9000/97: Commission Communication: An Action Plan for the Single Market. Back

3   6793/97: Proposal for a Council Directive restructuring the Community framework for the taxation of energy products. Back

4   Including oral evidence from Commissioner Mario Monti; Mr A J Tinsley, the Senior Tax Manager of Unilever plc; and officials from the Department of Trade and Industry, HM Treasury, HM Customs and Excise and Inland Revenue. Back

5   Tax and Competition Policy in the Single Market, HL Paper 117, 28th Report Session 1997-98, paragraph 10. Back

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