Examination of Witness (Questions 1220
WEDNESDAY 7 JUNE 2000
1220. Whose job do you think it is to provide
this information in a readily available fashion when it involves
so much cross-border legislation or regulation? Before lunch we
were told on at least one occasion that perhaps the Commission
or the EU did not feel it was their responsibility. Whose is it
and who is going to pay for it?
A. This morning I was talking to the British
Retail Consortium and we were talking about these same issues.
Of course, they are the bigger players. In the E-Commerce Directive
we actually impose certain transparency requirements on the website
operator. Given that we rely on this idea of country of origin
what we believe in, and here I am talking about the Internal Market
DG, is that first of all the consumer should be aware where the
physical establishment is. So if I am here in Belgium and I go
on to the website, I know it is a United Kingdom company and therefore
I am aware that they are held under United Kingdom law. Secondly,
and we find that it is increasingly the case that it is good business
practice, it is very easy for a small company through a logo to
show which code of conduct it applies, if it belongs to a trade
association or if it belongs to a certain Trustmark scheme, as
the United Kingdom has developed, or an individual ADR system
like the Consumer Association's Web Traders Scheme. It is easy
to provide information to the consumer via your website and even
to hyper link your website back to these codes so that the interested
consumer can look at it and why not to the law as well. This may
be part of the answer to your question. I feel that in terms of
who should do it, the question is rather is the information available
anyway. I am not asking you this but I ask myself how many consumers
actually know all their rights; I suspect very few.
1221. And SMEs?
A. Absolutely. I think what we have with the
Internet is a possibility of improving. It is a medium where it
could be relatively easy in effect not only to put on the information
regarding what the regulatory framework is, which I would say
is partly the responsibility of the judiciary of the Member States
but also at the European levelagain speaking as an official
not from an official Commission positioncertainly in terms
of Directives or Regulations there is no reason why those two
should not be more available. We are certainly using the Internet.
We all have our different websites. I am not sure whether the
co-ordination between Member States and ourselves is as good as
it might. The information is there, it is just a question of linking
into it and making it readily accessible to the consumer. The
consumer should be able to get to it through his access provider
saying what the law is concerning guarantees for example in Europe.
We need to have that direct access rather than expect the consumer
to know that there is a thing called Europa plus where he will
find the information under DG SANCO's website. That is frankly
stretching the credulity a little bit. I think it is a joint effort
but I do agree that information is key. I think that in our E-Commerce
Directive, not wishing to flaunt it too much, we thought that
was very important, that the consumer should be made aware, firstly
that he was buying or entering into negotiations with a company
established in another countrywhich he can discount or
not, some will, some will notand secondly to encourage
traders themselves, if you like, to link into and make clear under
which regulation or code they apply, which ADR schemes, etc, they
apply as well. This in fact is good business practice. That will
build up trust for the consumer. He can consult that information.
It is not costly to do that frankly.
Lord Faulkner of Worcester
1222. Can I ask you a question on this issue
of tax. I am an Australian, and I come to London on holiday and
I decide to buy a suit in Saville Row. I take it home with me
and I can get a certificate which allows me to claim the VAT back
A. That is right.
1223. I am in SydneyI have got home nowand
I now want to buy another suit from the same tailor. I order it
over the Internet and they are going to post it out to me.
1224. Question, do I pay it with tax or without
A. Not being a fiscal expert, if I may condition
my reply. What would happen as far as I can see, at the current
time, the proposal would be that in the same way that in a sense
you paid the tax when you were the tourist and then you got your
money back on leaving, there would be a situation where as, let
us say, the UK company in Saville Row was selling to you, they
would declare, if you like, the VAT that was due to be charged
to you but because they were trading and they would have to prove
thatthis is the proposalto someone outside of the
EU, that tax would not be charged. That is what we are proposing.
It would lead to an equivalence.
1225. That is what you are proposing. Is that
not what happens now?
A. No, now
1226. If it is posted out you do not pay VAT.
A. No, you do not.
1227. It is more simple now.
A. The reason why the Member States are pushing
for this Directive is rather the other way round where Community
consumers are supposedly buying in America and not paying tax
on it. The idea is to say no to those traders who are completely
established in America. Of course that would not hold for Amazon
for example, for Amazon.co.UK who are based in the United Kingdom
Lord Faulkner of Worcester
1228. British company.
A. Yes. British company, Amazon.co.UK.
1229. But Amazon.com.
A. Yes, if you were buying from let us say an
American established trader, the idea there would be they would
have to register themselves for tax purposes in the Community
and get you to pay tax. They would charge you.
1230. I have one question. When people in Britain
buy something on the Internet from America, half of the time with
the good scam, somebody, the poor fellow ends up paying the VAT,
the other person
A.gets away with it, absolutely.
1231. How is it happening in Europe?
A. Same problem, Lord Paul. This is why I was
talking about the problem of enforceability. I would not want
my tax colleagues to hear this. Even if we change the Sixth VAT
Directive, it does not necessarily mean that people will feel
obliged to go and declare that they bought from America and that
they wish to pay tax as good UK citizens or French citizens. I
think that is a problem. Another example of that is what I alluded
to regarding pharmaceutical products. I am not saying this to
be flippant, I understand thatand I am sure pharmaceutical
companies can confirm thisbefore Viagra came on to our
market there was a large quantity sold over the Internet from
the US into Europe. You cannot expect peopleI do not but
maybe that is my south London upbringingto say "Oh,
well, I bought this on the Internet" and go and tell the
authorities, "why do you not do it here". Do you see
what I mean? That is a general problem. That is why there needs
to be an international solution.
1232. I was reading an article the day before
yesterday that you can buy in America, talking of Viagra, without
prescription so people are ordering like mad.
Lord Paul: And bringing it in.
Lord Faulkner of Worcester
1233. You are required to give evidence of a
A. That is right.
1234. The consumer association are doing it
as a test.
1235. They are putting down a condition which
makes Viagra very dangerous but nonetheless the stuff still arrives.
A. Sure. This was why I was saying certainly
we considered in terms of the Directive we wanted to bring legal
certainty in Europe but we were very cautious as to what was going
on in America as well. We did not make a proposal without considering
what was going on in the States. On the other hand, there are
solutions to this. This may sound odd but there can be competitive
advantage by having the most effective, which is not necessarily
the most restrictive, regulatory framework in encouraging investment
and trade within the Community or from the Community into America.
In effect if you could have a situation where your regulatory
framework offers the best in terms of efficient protection of
trade then you will attract trade to Europe, which is really what
we are trying to do. The issue of pharmaceuticals, it is very
interesting what you say. We even have the problem at intra Community
level because the European Directive allows for the advertising
to the general public of OTC pharmaceuticals, in other words not
under prescription, but the Member States have different lists
of what are prescribed and non prescribed pharmaceuticals. The
existing Community Directives allows for the example that one
of you provided where an individual consumer crosses a border
and buys for his or her personal use a particular product. They
can bring it back into the country without a problem. So in effect
if you have a situation where you have an OTC drug which is prescribed
in one country but not in another, if, let us say, Bootsto
take an exampleset up a site offering that drug in the
United Kingdom, as they are allowed to do, then in theory the
consumer should be able to buy that at a distance in spite of
the fact that you need a prescription for it in another Member
State. The key problem here, which is going to come under discussion,
of course, is the whole issue of social security and what is reimbursed
and what is not reimbursed which is a very real issue. This working
group has been set up on pharmaceuticals specifically for that.
1236. The Risk Capital Action Plan calls for
remaining obstacles to the creation of a fully integrated pan-European
risk capital market to be removed by the end of 2003. What are
the main obstacles? Do you have a priority list? Are you on course
to achieve this target?
A. I tried to get as much information as I could
on this. The issue regarding risk capital is integrated into the
Financial Services Action Plan that I mentioned earlier. Some
of the information I can tell you is how far we are going on that
in terms of improving the remaining obstacles and the priorities.
First, it was set out in the EU Summit in Lisbon that 2003 would
be the Risk Capital Action Plan deadline. The key areas which
we are looking at are EU legislation on listings and public offer
prospectus. That needs to be reviewed. We are preparing proposals
for market information which could introduce the simplified shelf
registration techniques for companies that wish to have their
shares publicly traded. That is one area which is a priority on
which we are working. Again, that is in conjunction with finance
ministries working towards a single financial reporting framework
so that we have consolidated annual reports, which obviously is
important, and work is ongoing on that. There is also a proposal
for a Directive on occupational pension funds and that should
be presented this summer, at least that is the plan. In a sense
we are trying to move forward. Another area that could be of interest
to you in that respect is there is going to be a fundamental review
of the Investment Services Directive and this will begin this
summer with a consultation as far as I am aware. We are taking
very seriously the problem regarding the obstacles to the integration
of capital markets. One has to be clear when you are talking in
terms of pension funds, etc., some of the Member States are, unlike
the United Kingdom, extremely reluctant to take this forward.
You mentioned the French earlier, it seems to be sacrosanct that
all money that goes into French pension funds should be for French
investment, that is as I have always understood it, which will
clearly lead to difficult negotiations. That is as much as I can
tell you. Are we on course for achieving this target? I could
not answer that, not least because it is not my responsibility.
1237. The Data Protection Directive of 1995
is an important element in building consumer confidence. We understand
that the Commission and the US Government are close to an agreement
on the US proposal for safe harbours. What is the progress on
these negotiations, and to what extent would the agreement to
accommodate the US put EU consumers' data at risk?
A. There has been agreement on the Data Protection
Directive on the safe harbours. When will the Directive be implemented?
The "safe harbors" agreement is not a Directive, the
agreement, let us put it that way, regarding safe harbours was
first agreed with the US and was presented to the Data Protection
Commissioners a week ago and they have agreed in principle to
taking it forward. As regards the transposition of the Directive,
I believe that was due to have already taken place but it has
not taken place in most Member States yet. That is the only answer
I can give on that one. It is very much now in Member States'
hands to transpose this fact as rapidly as possible.
1238. The US experience also suggests that incentives
(notably, share options) is of special importance in retaining
talent in an industry where demand exceeds supply. What is the
Commission's view? (We recognise that this subject is governed
by Member States' fiscal policies).
A. Regarding share options and retaining talent
in the industry where demand exceeds supply, what is the Commission's
view, I do not know. I cannot be more frank than that. I like
the parenthesis "(We recognise that this subject is governed
by Member States' fiscal policies"), yes, so do we! What
I can say is that in the context of the Lisbon Summit a lot of
accent was put on comparing in the areas I work the lacklustre
performance of the European services industry compared with the
US services industry. The issue was raised in particular in terms
of start-up performance. In that respect what I can tell you is
that currently, certainly in my service, a task force is looking
at what remains to be doneunfortunately it is quite a long
list of issuesto facilitate the Internal Market for services
in general, so we are not talking here just on-line. Obviously
we look at the regulatory side again, and that comes back to the
answer to your first question but I suspect that other services,
and notably the Employment DG will also be looking at these sorts
of issues in terms of seeing how it can encourage employment,
particularly with the development of micro enterprises, one man
consultancies or other service providers where the real growth
is. It is very much an SME start up issue which is taken very
seriously. But, as your wording suggests in your question, it
is again highly sensitive because we are walking into something
completely different. Really what we are dealing here with are
labour law and practices. Probably the United Kingdom hasand
this is me speaking openly as I see ita more flexible system.
In other Member States it is still highly regulated and therefore
difficult in a sense to set up any kind of start up, etc... I
would not say the Commission is necessarily going to come forward
with something but it has to respond to the conclusions of the
1239. Can I ask you our final question. The
e-Europe Action Plan also calls for greater use of smart cards.
This does not attract universal support amongst EU consumers who
fear that the amount of information contained on such a card leaves
them open to manipulation. How do you think this issue could be
dealt with? I think I might say that during the course of taking
evidence earlier we have established that a majority of Member
States do in fact have ID cards, do they not?