Approximation or harmonisation of internal market laws in sensitive areas, such as company taxes, is subject to unanimous decision making by the EU Council. The Treaty of Lisbon does not change the unanimity rule, although the reform treaty tries to make the relationship between ordinary and special legislative procedures clearer.
***
Article 115 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated version of the Treaty on European Union and the Treaty on the Functioning of the European Union, published in the Official Journal of the European Union, OJ 9.5.2008 C 115/95:
Part Three Union policies and internal actions
Title VII Common rules on competition, taxation and approximation of laws
Chapter 3 Approximation of laws
Article 115 TFEU
(ex Article 94 TEC)
Without prejudice to Article 114, the Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, issue directives for the approximation of such laws, regulations or administrative provisions of the Member States as directly affect the establishment or functioning of the internal market.
***
In Article 2, point 80 of the Treaty of Lisbon (ToL) the IGC 2007 renumbered and amended Article 94 of the Treaty establishing the European Community (TEC), and in point 82 it amended the new Article 95 TFEU (ToL) (OJ 17.12.2007 C 306/69):
APPROXIMATION OF LAWS
80) The order of Articles 94 and 95 shall be reversed. Article 94 shall be renumbered 95 and Article 95 shall be renumbered 94.
---
82) In Article 94, renumbered 95, the words ‘Without prejudice to Article 94,’ shall be inserted at
the beginning.
***
The TFEU table of equivalences confirms that Article 94 TEC first became Article 95 TFEU (ToL) in the original Treaty of Lisbon, and it tells us that it was later renumbered Article 115 TFEU in the consolidated version (OJ 17.12.2007 C 306/211).
***
The current Article 94 of the Treaty establishing the European Community (TEC) is found under Title VI ‘Common rules on competition, taxation and approximation of laws’, Chapter 3 ‘Approximation of laws’, in the latest consolidated version of the treaties in force (OJ 29.12.2006 C 321 E/79).
When the proposed TFEU Article 114 (the current Article 95 TEC) with the normal or ordinary procedures for approximation (harmonisation) of laws was lifted to the beginning of the Chapter 3, the sensitive areas, mentioned in the second paragraph, requiring unanimity, were left to be dealt with in Article 115 TFEU (the current Article 94 TEC) of the amending treaty.
The new order feels like an improvement, but in spite of the words added at the beginning of Article 115 TFEU, plain language to express the scope of the provision would not have been amiss.
The only specific amendment by the Treaty of Lisbon was to add the words ‘Without prejudice to Article 94,’ (renumbered Article 114 TFEU) at the beginning. The words ‘acting unanimously on a proposal from the Commission’ were replaced by ‘acting unanimously in accordance with a special legislative procedure’ according to horizontal amendment 3 of Article 2 of the Treaty of Lisbon (OJ 17.12.2007 C 306/42), and the words ‘common market’ at the end were replaced by ‘internal market’ in line with horizontal amendment 2(g) (OJ 17.12.2007 C 306/41).
Here is the current Article 94 TEC:
Article 94 TEC
The Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament and the Economic and Social Committee, issue directives for the approximation of such laws, regulations or administrative provisions of the Member States as directly affect the establishment or functioning of the common market.
***
We have seen the minor differences between Article 94 TEC in force and Article 115 TFEU.
For the sake of systematic comparison, we look at the Article during the intervening treaty reform stages.
First, we turn to the European Convention, the closest thing to a constituent assembly EU citizens have had. The Article in question is located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter I ‘Internal market’, Section 7 ‘Approximation of legislation’.
Article III-64 of the draft Treaty establishing a Constitution for Europe was still the first Article of Section 7. The terminology of the draft Constitution differed from the TEC and there were some changes in wording, including the words ‘Without prejudice to Article III-65’ added at the beginning. But the substance remained unchanged. See OJ 18.7.2003 C 169/38.
Article III-64 Draft Constitution
Without prejudice to Article III-65, a European framework law of the Council of Ministers shall establish measures for the approximation of such laws, regulations or administrative provisions of the Member States as directly affect the establishment or functioning of the internal market. The Council of Ministers shall act unanimously after consulting the European Parliament and the Economic and Social Committee.
***
In the Treaty establishing a Constitution for Europe, approved by 18 member states, the provisions on approximation (harmonisation) were located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter I ‘Internal market’, Section 7 ‘Common provisions’.
The IGC 2004 lifted Article III-172 (the current Article 95 TEC) as the new ‘high road’ to the top of Section 7, and Article III-173 (the current Article 94 TEC) sank to become the ‘low road’ for areas requiring unanimity.
Consequently, the referral at the beginning changed. The ‘Council of Ministers’ became the ‘Council’ in the Constitutional Treaty, but otherwise the IGC 2004 took over the wording of the draft Constitution.
Article III-173 is found in OJ 16.12.2004 C 310/75:
Article III-173 Constitution
Without prejudice to Article III-172, a European framework law of the Council shall establish measures for the approximation of such laws, regulations or administrative provisions of the Member States as directly affect the establishment or functioning of the internal market. The Council shall act unanimously after consulting the European Parliament and the Economic and Social Committee.
***
What has been said about Article 115 TFEU, with the shifted position, but substantially unchanged from the current Article 94 TEC?
United Kingdom
Professor Steve Peers covered the Treaty of Lisbon in a number of Statewatch Analyses. ‘EU Reform Treaty Analysis no. 3.3: Revised text of Part Three, Titles I to VI of the Treaty establishing the European Community (TEC): Internal Market and competition’ (Version 2, 23 October 2007) includes the current Title VI Common rules on competition, taxation and approximation of laws.
Peers indicated the changing numbering of Article 94 TEC, 95 TFEU (ToL), to be renumbered Article 115 TFEU in the consolidated version, and highlighted the changes, and he added the following comment (pages 30–31):
“The draft Reform Treaty attempts to clarify the relationship between Articles 94 and 95.”
The analysis 3.3 and other useful Statewatch analyses are available through:
http://www.statewatch.org/euconstitution.htm
***
The Foreign and Commonwealth Office (FCO) offers a convenient source of brief annotations on Lisbon Treaty amendments in ‘A comparative table of the current EC and EU treaties as amended by the Treaty of Lisbon’ (Command Paper 7311, published 21 January 2008). It offers the following comment on Article 115 TFEU, Article 95 TFEU (ToL) in the original Lisbon Treaty (page 12):
“In substance the same as Article 94 TEC.”
The FCO comparative table is available at:
http://www.official-documents.gov.uk/document/cm73/7311/7311.asp
***
The UK House of Commons Library Research Paper 07/86 ‘The Treaty of Lisbon: amendments to the Treaty establishing the European Community’ (published 6 December 2007) discussed the approximation of internal market laws on page 60 (under the heading ‘2. Taxation’).
The Research Paper commented briefly on the harmonisation of internal market laws, before moving on to tax harmonisation:
“Articles 94–97 (Constitution Articles III-172 – III-176) are on the approximation of internal market laws. The general aims are unchanged and the Council will adopt measures for the approximation of laws, regulations or administrative provisions of the Member States that directly affect the internal market. The out-dated term “common market” is removed and replaced with “internal market”.”
The Reasearch Paper then proceeded to discuss the approximation (harmonisation) of tax law and the British official position (pages 60–61):
“Harmonisation in the sphere of direct taxes under Article 94 TEC is much more limited than in that of indirect taxes. Although directives introduced under Article 94 TEC may be approved under the co-decision procedure, this does not apply to fiscal provisions. The TFEU, like the Constitution, maintains the requirement for unanimity in Article 95 on any fiscal measure introduced under this Treaty base. The wording of Articles 94 and 95(2) (Constitution Articles III-173 and III-172) is fundamentally unchanged.
The possibility that all taxation measures might be subject to unanimity [sic] at some point in the future has been a controversial issue for some time. The Government’s position on the issue has been stated many times. In June 2003 the then Paymaster General, Dawn Primarolo, said the British Government would “not accept any changes that move away from unanimity on tax matters. When the then Prime Minister, Tony Blair, made a statement to the House following agreement on the Constitution in June 2004, he underlined the point that “this treaty … keeps unanimity for the most important decisions … in particular for tax, social security, foreign policy, defence and decisions on the financing of the Union affecting the British budget contribution.” Tony Blair told the Liaison Committee on 18 June 2007 shortly before the June European Council which agreed the IGC Mandate: “we will not agree to anything that moves to qualified majority voting, something that can have a big say in our own tax and benefit system”.”
(I have deleted the footnotes, but they can be found in the original document.)
The Library Research Paper 07/86 is available at:
http://www.parliament.uk/commons/lib/research/rp2007/rp07-086.pdf
***
The House of Lords European Union Committee report ‘The Treaty of Lisbon: an impact assessment, Volume I: Report’ (HL Paper 62-I, published 13 March 2008) is a valuable resource on the Treaty of Lisbon, but I found no reference to Article 115 TFEU (Article 94 TEC or Article 95 ToL).
The report is accessible at:
http://www.publications.parliament.uk/pa/ld200708/ldselect/ldeucom/62/62.pdf
***
Sweden
The consultation paper ’Lissabonfördraget’ is still valuable as a description of the Lisbon Treaty amendments, and it is available at:
http://www.regeringen.se/content/1/c6/09/49/81/107aa077.pdf
But my standard reference is currently the Swedish government’s draft ratification bill ‘Lagrådsremiss – Lissabonfördraget’, published 29 May 2008 and sent to the Council on Legislation (Lagrådet) for an expert opinion. The draft deals with the EU’s internal policy areas in Chapter 23 ‘Unionens interna åtgärder’, and section 23.1 presents the internal market (Inre marknaden), on pages 175 to 181.
The Swedish government presents a short background paragraph on the harmonisation of laws in the internal market (page 176):
”Artiklarna 94–97 i EG-fördraget återger möjligheten att harmonisera lagstiftningen på den inre marknaden. Det finns en stor volym sekundärrätt med utgångspunkt i artikel 95 i EG-fördraget samt en omfattande praxis på området. Möjligheten till harmonisering av medlemsstaternas lagar och författningar är en förutsättning för den inre marknadens bibehållande och fortsatta funktion.”
The government later remarks on the essentially unchanged nature of most internal market provisions (e.g. page 176), but on the following page it adds a comment on the changing position of Articles 94 and 95, with the remark that the purpose is to clarify the relationship between the Articles and it mentions the words added at the beginning of Article 95 TFEU (ToL):
“Vad avser tillnärmning av lagstiftning, byter artiklarna 94 och 95 plats. Syftet med omnumreringen är att klargöra förhållandet mellan de båda artiklarna. I inledningen till artikel 95 i EUF-fördraget görs ett tillägg om att artikeln inte ska påverka tillämpningen av artikel 94 i EUF-fördraget.”
The draft bill ‘Lagrådsremiss – Lissabonfördraget’ can be downloaded through:
http://www.regeringen.se/sb/d/5676/a/106277
***
Finland
The Finnish ratification bill, ‘Hallituksen esitys Eduskunnalle Euroopan unionista tehdyn sopimuksen ja Euroopan yhteisön perustamissopimuksen muuttamisesta tehdyn Lissabonin sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta’ (HE 23/2008 vp), is the most systematic analysis of the Lisbon Treaty I have encountered.
Under the heading Approximation of laws (Lainsäädännön lähentäminen), the bill offers a description of Article 95 TFEU (ToL), renumbered Article 115 TFEU. The government explains the subsidiary nature of Article 95 TFEU (ToL) in relation to Article 94. The added words reflect the current interpretation of the relationship between the Articles (page 209):
”95 artiklassa (uusi 115 artikla) määrätään neuvoston mahdollisuudesta antaa komission ehdotuksesta yksimielisesti Euroopan parlamenttia kuultuaan direktiivejä sisämarkkinoiden vaatimaksi jäsenvaltioiden lainsäädäntöjen yhdenmukaistamiseksi. Artikla vastaa perustuslakisopimuksen III-173 artiklaa ja korvaa SEY 94 artiklan seuraavin muutoksin. SEUT 95 artiklassa on uusi määräys, jonka mukaan SEUT 95 artikla ei rajoita SEUT 94 artiklan soveltamista. Tämä tarkoittaa, että SEUT 94 artikla on ensisijainen SEUT 95 artiklaan nähden. Vastaavaa määräystä ei sisälly nykyiseen SEY 94 artiklaan, mutta määräys vastaa nykyistä oikeustilaa. Käytännössä SEY 95 artiklaa ja SEY 94 artiklaa on tulkittu siten, että SEY 95 artikla on ensisijainen SEY 94 artiklaan nähden.”
The Finnish ratification bill is available at:
http://www.finlex.fi/fi/esitykset/he/2008/20080023.pdf
The Swedish language version of the ratification bill ‘Regeringens proposition till Riksdagen med förslag om godkännande av Lissabonfördraget om ändring av fördraget om Europeiska unionen och fördraget om upprättandet av Europeiska gemenskapen och till lag om sättande i kraft av de bestämmelser i fördraget som hör till området för lagstiftningen’ (RP 23/2008 rd), makes the same remarks under ’Tillnärmning av lagstiftning’ on Article 95 TFEU (ToL), the future Article 115 TFEU, on pages 211–212:
”I artikel 95 (blivande artikel 115) föreskrivs om rådets möjlighet att på förslag av kommissionen enhälligt och efter att ha hört Europaparlamentet utfärda direktiv om tillnärmning av sådan lagstiftning i medlemsstaterna som krävs för den inre marknaden. Artikeln motsvarar artikel III-173 i det konstitutionella fördraget och ersätter artikel 94 i EG-fördraget med följande ändringar. I artikel 95 i EUF-fördraget ingår en ny bestämmelse enligt vilken artikel 95 i EUFfördraget inte begränsar tillämpningen av artikel 94 i EUF-fördraget. Detta betyder att artikel 94 i EUF-fördraget är primär i förhållande till artikel 95 i EUF-fördraget. Någon motsvarande bestämmelse ingår inte i nuvarande artikel 94 i EG-fördraget, men bestämmelsen motsvarar rådande rättsläge. I praktiken har artiklarna 95 och 94 i EG fördraget tolkats så att artikel 95 är primär i förhållande till artikel 94.”
The ratification bill in Swedish can be accessed at:
http://www.finlex.fi/sv/esitykset/he/2008/20080023.pdf
***
Both Article 114 TFEU and Article 115 TFEU are general in the sense that they provide legal bases for harmonising measures, when the treaties have not catered for special grounds for internal market legislation.
In the absence of a special base, Article 114 TFEU applies, with the ordinary legislative procedure, for internal market objectives.
When fiscal (tax) provisions, those relating to the free movement of persons and those relating to the rights and interests of employed persons, expressly excluded by Article 114(2) TFEU, directly affect the establishment or functioning of the internal market, Article 115 TFEU enters the picture. These sensitive areas are subject to unanimous decision making by the Council, and the European Parliament is only consulted.
Ralf Grahn
Showing posts with label fiscal provision. Show all posts
Showing posts with label fiscal provision. Show all posts
Wednesday, 11 June 2008
Sunday, 8 June 2008
EU TFEU: Tax harmonisation II
Is Article 113 of the Treaty on the Functioning of the European Union (TFEU) concerned only with indirect taxation, not direct taxation like company tax or income tax?
Are the words added by the EU Treaty of Lisbon (ToL) – and to avoid distortion of competition – a fairly innocuous clarification or even an additional requirement for new tax legislation, or are the sappers at work, undermining the castle walls?
What did the European Convention propose with regard to harmonising taxes, and what happened to these proposals during the intergovernmental conference (IGC 2004), which led to the Treaty establishing a Constitution for Europe?
The first post, EU TFEU: Tax harmonisation I, mapped the road of the provisions on EU tax legislation from Article 93 on the Treaty establishing the European Community (TEC), through the draft Constitution and the Constitutional Treaty, to the Treaty of Lisbon and the consolidated version of the amended EU treaties.
We checked the Lisbon Treaty amendments against our usual sample of the best general comments on the new treaty. The selected documents gave little cause to become wrought up, but something seems to have been afoot, so there seemed to be cause to double-check.
The fate of the Convention’s proposals looked intriguing, but this may require a post of its own.
This left us with the first two questions above. Let us start on the first one.
***
Direct or indirect taxation?
My preliminary reading of Article 113 TFEU (Article 93 TEC) led me to believe that its scope was restricted to various forms of indirect taxes. That was my understanding of ‘turnover taxes, excise duties and other forms of indirect taxation’.
This was substantiated by the UK House of Commons Library Research Paper 07/86, which presented a number of examples of such indirect taxes. This was further corroborated by the draft ratification bill of the Swedish government ‘Lagrådsremiss – Lissabonfördraget’, which mentioned turnover taxes (VAT type taxes), selective purchase taxes and other indirect taxes or charges in the internal market.
The Finnish government’s ratification bill spoke of the harmonisation of indirect taxation, but had I not concluded in my 6 June 2008 post ‘EU TFEU: Prohibited remissions, repayments and countervailing charges’ that the drafters seemed to have confused direct and indirect taxes (the first direct mistake I have encountered)? Surely an additional reason to check again, in spite of the evidence at hand? So I did reread my sources.
***
In addition, flying in the face of these sober assessments, assertions to the contrary abound. Here are a few from Ireland, mainly emanating from or echoing Anthony Coughlan, and branded ‘legally accurate’:
Free Europe “Harmonizing Company taxes in the EU – The Lisbon Treaty amendment to Article 113: a significant and virtually ignored amendment affecting Ireland’s company tax”
The National Platform EU Research & Information Centre “EU Misinformation: Barroso, Bonde and Ireland’s company taxes”
The National Platform EU Research & Information Centre “Lisbon Treaty: Mandatory Tax Harmonisation”
Bruce Arnold “Yes vote would open way for Europe to outlaw our low tax” (Independent.ie)
Irish Issues . org “Treaty amendment on EU harmonized taxes”
Citizens’ European Movement Network “Tax & Investment”
***
These ‘legally accurate’ allegations, variations on the same theme, seem to require a logic of its own kind to concoct (and to follow).
Naturally, it is easy to assert that few EU leaders have been inventive enough to trumpet the consequences for company taxes (direct taxes) of an Article and an amendment concerning VAT and other indirect taxes. Because the Commission or the responsible national leaders have not discussed pears in the context of apples, it has been easy to brand this lack of communication as a conspiracy, misleading the public, not to mention the worst allegations.
Suddenly, an Article on harmonisation of indirect taxation would open the doors to force Ireland to scrap its low corporate tax (direct taxation).
This is nonsense.
***
What does the amendment mean?
The amendment – ‘and to avoid distortion of competition’ – was described by the Swedish government as a clarification and by the Finnish government as an additional requirement.
Neither sheds more light on the meaning of the added words, and I remain in some doubt about how they should be interpreted. On the face of it, joining ‘necessary to ensure’ with an additional ‘AND to avoid’ reads like an additional requirement, in other words one hurdle more.
If the drafters wanted to open up an alternative base for legislation, they should have said ‘OR to avoid distortion of competition’).
But the added words appear in the context of ‘the establishment and the functioning of the internal market’, of which undistorted competition is a fundamental aspect.
Therefore, it may be reasonable to understand the added words as an effort to underline one aspect of a functioning internal market, thereby giving it more visibility and some added weight.
In other words, this aspect may be brought to light when the Commission prepares proposals in the area of VAT, excise duties and other indirect taxes, and the Court of Justice may be called upon to interpret the provision.
But it has nothing to do with company tax or other direct taxes.
***
The texts of the detractors make for confusing reading. Shortly, the ‘truths’ first trumpeted are abandoned in favour of a new line. Even if the Article 113 TFEU is restricted to indirect taxation and the unanimity requirement is preserved, the European Commission and the Court of Justice of the European Union could possibly somehow circumvent the whole provision by applying the rules on undistorted competition in the internal market in order to erode Ireland’s low rate of corporate tax. The chain between the amendment and the allegations is broken, because all of a sudden a new set of rules is called into play.
How could the Court of Justice enter into this? Does Article 113 TFEU bear any of the hallmarks of a directly applicable treaty provision? Is the Article clear, precise and unconditional, in order to have direct effect?
The answer is no. It offers a base for secondary legislation on VAT and other indirect taxes, requiring unanimous decisions by the Council.
With or without the Lisbon Treaty, the Court of Justice will have to assess and to demarcate areas of competence described in general terms, and to find the predominant features in a specific case. Situations leading to future court cases are hard to predict, and the outcomes are going to be based on the facts of the individual cases.
***
An outside observer would expect the representative business interests of a member state threatened by erosion of its favourable company tax to be up in arms at the least hint. What does IBEC (Irish Business and Employers Confederation) say about the Lisbon Treaty?
In short, Irish business supports the Lisbon Treaty, vote yes. All EU member states remain free to determine their own policies regarding taxation and foreign direct investment. No change can be made in the area of taxation without the approval of all member states, including Ireland.
***
For reasonable people – but only for them – this should put the allegations concerning Article 113 TFEU to rest.
***
Direct taxation
Back to the difference between indirect and direct taxation. There is no explicit treaty provision on the harmonisation of legislation on direct taxes, but the current Article 94 TEC allows unanimous directives for the approximation (harmonisation) of laws, regulations and administrative practices which directly affect the establishment or functioning of the common market. With cosmetic change, this will become Article 115 TFEU, and it will continue to be the legal base for harmonising direct taxes.
Why were the allegations mentioned above based on the wrong Article?
***
Pressures
As far as I understand, the position of the member states, including Ireland, in matters of EU harmonisation of indirect taxes does not change at all or only marginally as a result of the Treaty of Lisbon.
There has been and will continue to be political pressure towards elimination of tax obstacles in the internal market and against harmful tax competition. The European Commission has tried to convince the member states to move from unanimity to qualified majority voting, at least in some fiscal matters, but it has failed to move them.
The Commission has presented reasons for a single consolidated tax base for companies with EU activities, and it may dream of future harmonised company tax rates, but very little will probably happen as long as the unanimity rule stands.
Critical voices, sometimes even strident ones, from some member states have shown the existing tensions between countries with different levels of taxes for companies and capital. Member states with high taxes tend to see low rates as unfair competition.
Harmonising taxes, especially direct taxes, has been a frustrating field of endeavour for the Commission. Little progress has been possible, but the Commission has been able to investigate and to define tax arrangements seen to be unfair or distorting. Here is an opportunity for those who want to dig deeper, preferably with a cool head.
***
The history of European integration shows how decisive the shift from unanimity rule to qualified majority voting has been in order to achieve results. To name just one example, without the Single European Act there would still be mainly the idea of a common market, not the reality of a working internal market, in spite of its shortcomings.
The general European interest would be better served by fewer areas hampered by veto powers, but the reality is that our common mansion continues to be a house of cards in the fields where unanimity rules, and the deepening of European integration is a long term project.
***
What did the European Convention propose with regard to harmonising taxes, and what happened to these proposals during the intergovernmental conference (IGC 2004), which led to the Treaty establishing a Constitution for Europe?
The third question and post may shed some additional light on the tensions and the exertions in the field of European taxation.
Ralf Grahn
Are the words added by the EU Treaty of Lisbon (ToL) – and to avoid distortion of competition – a fairly innocuous clarification or even an additional requirement for new tax legislation, or are the sappers at work, undermining the castle walls?
What did the European Convention propose with regard to harmonising taxes, and what happened to these proposals during the intergovernmental conference (IGC 2004), which led to the Treaty establishing a Constitution for Europe?
The first post, EU TFEU: Tax harmonisation I, mapped the road of the provisions on EU tax legislation from Article 93 on the Treaty establishing the European Community (TEC), through the draft Constitution and the Constitutional Treaty, to the Treaty of Lisbon and the consolidated version of the amended EU treaties.
We checked the Lisbon Treaty amendments against our usual sample of the best general comments on the new treaty. The selected documents gave little cause to become wrought up, but something seems to have been afoot, so there seemed to be cause to double-check.
The fate of the Convention’s proposals looked intriguing, but this may require a post of its own.
This left us with the first two questions above. Let us start on the first one.
***
Direct or indirect taxation?
My preliminary reading of Article 113 TFEU (Article 93 TEC) led me to believe that its scope was restricted to various forms of indirect taxes. That was my understanding of ‘turnover taxes, excise duties and other forms of indirect taxation’.
This was substantiated by the UK House of Commons Library Research Paper 07/86, which presented a number of examples of such indirect taxes. This was further corroborated by the draft ratification bill of the Swedish government ‘Lagrådsremiss – Lissabonfördraget’, which mentioned turnover taxes (VAT type taxes), selective purchase taxes and other indirect taxes or charges in the internal market.
The Finnish government’s ratification bill spoke of the harmonisation of indirect taxation, but had I not concluded in my 6 June 2008 post ‘EU TFEU: Prohibited remissions, repayments and countervailing charges’ that the drafters seemed to have confused direct and indirect taxes (the first direct mistake I have encountered)? Surely an additional reason to check again, in spite of the evidence at hand? So I did reread my sources.
***
In addition, flying in the face of these sober assessments, assertions to the contrary abound. Here are a few from Ireland, mainly emanating from or echoing Anthony Coughlan, and branded ‘legally accurate’:
Free Europe “Harmonizing Company taxes in the EU – The Lisbon Treaty amendment to Article 113: a significant and virtually ignored amendment affecting Ireland’s company tax”
The National Platform EU Research & Information Centre “EU Misinformation: Barroso, Bonde and Ireland’s company taxes”
The National Platform EU Research & Information Centre “Lisbon Treaty: Mandatory Tax Harmonisation”
Bruce Arnold “Yes vote would open way for Europe to outlaw our low tax” (Independent.ie)
Irish Issues . org “Treaty amendment on EU harmonized taxes”
Citizens’ European Movement Network “Tax & Investment”
***
These ‘legally accurate’ allegations, variations on the same theme, seem to require a logic of its own kind to concoct (and to follow).
Naturally, it is easy to assert that few EU leaders have been inventive enough to trumpet the consequences for company taxes (direct taxes) of an Article and an amendment concerning VAT and other indirect taxes. Because the Commission or the responsible national leaders have not discussed pears in the context of apples, it has been easy to brand this lack of communication as a conspiracy, misleading the public, not to mention the worst allegations.
Suddenly, an Article on harmonisation of indirect taxation would open the doors to force Ireland to scrap its low corporate tax (direct taxation).
This is nonsense.
***
What does the amendment mean?
The amendment – ‘and to avoid distortion of competition’ – was described by the Swedish government as a clarification and by the Finnish government as an additional requirement.
Neither sheds more light on the meaning of the added words, and I remain in some doubt about how they should be interpreted. On the face of it, joining ‘necessary to ensure’ with an additional ‘AND to avoid’ reads like an additional requirement, in other words one hurdle more.
If the drafters wanted to open up an alternative base for legislation, they should have said ‘OR to avoid distortion of competition’).
But the added words appear in the context of ‘the establishment and the functioning of the internal market’, of which undistorted competition is a fundamental aspect.
Therefore, it may be reasonable to understand the added words as an effort to underline one aspect of a functioning internal market, thereby giving it more visibility and some added weight.
In other words, this aspect may be brought to light when the Commission prepares proposals in the area of VAT, excise duties and other indirect taxes, and the Court of Justice may be called upon to interpret the provision.
But it has nothing to do with company tax or other direct taxes.
***
The texts of the detractors make for confusing reading. Shortly, the ‘truths’ first trumpeted are abandoned in favour of a new line. Even if the Article 113 TFEU is restricted to indirect taxation and the unanimity requirement is preserved, the European Commission and the Court of Justice of the European Union could possibly somehow circumvent the whole provision by applying the rules on undistorted competition in the internal market in order to erode Ireland’s low rate of corporate tax. The chain between the amendment and the allegations is broken, because all of a sudden a new set of rules is called into play.
How could the Court of Justice enter into this? Does Article 113 TFEU bear any of the hallmarks of a directly applicable treaty provision? Is the Article clear, precise and unconditional, in order to have direct effect?
The answer is no. It offers a base for secondary legislation on VAT and other indirect taxes, requiring unanimous decisions by the Council.
With or without the Lisbon Treaty, the Court of Justice will have to assess and to demarcate areas of competence described in general terms, and to find the predominant features in a specific case. Situations leading to future court cases are hard to predict, and the outcomes are going to be based on the facts of the individual cases.
***
An outside observer would expect the representative business interests of a member state threatened by erosion of its favourable company tax to be up in arms at the least hint. What does IBEC (Irish Business and Employers Confederation) say about the Lisbon Treaty?
In short, Irish business supports the Lisbon Treaty, vote yes. All EU member states remain free to determine their own policies regarding taxation and foreign direct investment. No change can be made in the area of taxation without the approval of all member states, including Ireland.
***
For reasonable people – but only for them – this should put the allegations concerning Article 113 TFEU to rest.
***
Direct taxation
Back to the difference between indirect and direct taxation. There is no explicit treaty provision on the harmonisation of legislation on direct taxes, but the current Article 94 TEC allows unanimous directives for the approximation (harmonisation) of laws, regulations and administrative practices which directly affect the establishment or functioning of the common market. With cosmetic change, this will become Article 115 TFEU, and it will continue to be the legal base for harmonising direct taxes.
Why were the allegations mentioned above based on the wrong Article?
***
Pressures
As far as I understand, the position of the member states, including Ireland, in matters of EU harmonisation of indirect taxes does not change at all or only marginally as a result of the Treaty of Lisbon.
There has been and will continue to be political pressure towards elimination of tax obstacles in the internal market and against harmful tax competition. The European Commission has tried to convince the member states to move from unanimity to qualified majority voting, at least in some fiscal matters, but it has failed to move them.
The Commission has presented reasons for a single consolidated tax base for companies with EU activities, and it may dream of future harmonised company tax rates, but very little will probably happen as long as the unanimity rule stands.
Critical voices, sometimes even strident ones, from some member states have shown the existing tensions between countries with different levels of taxes for companies and capital. Member states with high taxes tend to see low rates as unfair competition.
Harmonising taxes, especially direct taxes, has been a frustrating field of endeavour for the Commission. Little progress has been possible, but the Commission has been able to investigate and to define tax arrangements seen to be unfair or distorting. Here is an opportunity for those who want to dig deeper, preferably with a cool head.
***
The history of European integration shows how decisive the shift from unanimity rule to qualified majority voting has been in order to achieve results. To name just one example, without the Single European Act there would still be mainly the idea of a common market, not the reality of a working internal market, in spite of its shortcomings.
The general European interest would be better served by fewer areas hampered by veto powers, but the reality is that our common mansion continues to be a house of cards in the fields where unanimity rules, and the deepening of European integration is a long term project.
***
What did the European Convention propose with regard to harmonising taxes, and what happened to these proposals during the intergovernmental conference (IGC 2004), which led to the Treaty establishing a Constitution for Europe?
The third question and post may shed some additional light on the tensions and the exertions in the field of European taxation.
Ralf Grahn
Saturday, 7 June 2008
EU TFEU: Tax harmonisation I
What does the EU Treaty of Lisbon say about harmonisation of tax law? This post looks at the various stages of the treaty reform process and it refers to a sample of the best available general descriptions of the amending treaties.
After this factual exploration, a second post will take a closer look at what to some seem to be unclear points. At the same time, we will take a peek at some wider issues of tax harmonisation, brought to (relative) light during the long reform process.
***
Article 113 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated version of the Treaty on European Union and the Treaty on the Functioning of the European Union, published in the Official Journal of the European Union, OJ 9.5.2008 C 115/94:
Part Three ‘Union policies and internal actions’
Title VII Common rules on competition, taxation and approximation of laws
Chapter 2 Tax provisions
Article 113 TFEU
(ex Article 93 TEC)
The Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market and to avoid distortion of competition.
***
In Article 2, point 79 of the Treaty of Lisbon (ToL) the IGC 2007 amended Article 93 of the Treaty establishing the European Community (TEC). See OJ 17.12.2007 C 306/69, which says:
TAX PROVISIONS
79) At the end of Article 93, the words ‘within the time limit laid down in Article 14’ shall be
replaced by ‘and to avoid distortion of competition.’.
***
The TFEU table of equivalences tells us that Article 93 TEC first became Article 93 TFEU (ToL) in the original Treaty of Lisbon, but later renumbered Article 113 TFEU in the consolidated version (OJ 17.12.2007 C 306/211).
***
The current Article 93 of the Treaty establishing the European Community (TEC) is found under Title VI ‘Common rules on competition, taxation and approximation of laws’, Chapter 2 ‘Tax provisions’, in the latest consolidated version of the treaties in force (OJ 29.12.2006 C 321 E/79).
When we compare the current Article 93 TEC with the proposed Article 113 TFEU, we notice two specific amendments, which follow directly from the Treaty of Lisbon (above).
The first specific amendment: the disappearance of the words ‘within the time limit laid down in Article 14’, redundant because it refers to the progressive establishment of the internal market by 31 December 1992.
The second specific Lisbon Treaty amendment to the current TEC is the addition of the words ‘and to avoid distortion of competition’ in the liberated slot at the end of the sentence.
The third difference between the TFEU and the TEC follows from the general choices of terminology for the Lisbon Treaty. Horizontal amendment 3 says that in a number of Articles, among these Article 93 TEC, the words ‘acting unanimously on a proposal from the Commission’ shall be replaced by ‘acting unanimously in accordance with a special legislative procedure’ (OJ 17.12.2007 C 306/42).
These are things we can keep in mind, when we look at the wording of Article 93 TEC, currently in force:
Article 93 TEC
The Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market within the time limit laid down in Article 14.
***
We have now seen the small differences between Article 93 TEC in force and Article 113 TFUE .
For the sake of systematic comparison, we look at the provisions on tax harmonisation during the intervening treaty reform stages.
First, we turn to the European Convention, the closest thing to a constituent assembly EU citizens have had. The provisions on tax legislation are located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter I ‘Internal market’, Section 6 ‘Fiscal provisions’.
There are two Articles, III-62 and III-63, of relevance in the draft Treaty establishing a Constitution for Europe. For now, let the contents speak for themselves (OJ 18.7.2003 C 169/38):
Article III-62 Draft Constitution
1. A European law or framework law of the Council of Ministers shall lay down measures for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation provided that such harmonisation is necessary for the functioning of the internal market and to avoid distortion of competition. The Council of Ministers shall act unanimously after consulting the European Parliament and the Economic and Social Committee.
2. Where the Council of Ministers, acting unanimously on a proposal from the Commission, finds that the measures referred to in paragraph 1 relate to administrative cooperation or to combating tax fraud and tax evasion, it shall act, notwithstanding paragraph 1, by a qualified majority when adopting the European law or framework law adopting these measures.
Article III-63 Draft Constitution
Where the Council of Ministers, acting unanimously on a proposal from the Commission, finds that measures on company taxation relate to administrative cooperation or combating tax fraud and tax evasion, it shall adopt, by a qualified majority, a European law or framework law laying down these measures, provided that they are necessary for the functioning of the internal market and to avoid distortion of competition.
That law or framework law shall be adopted after consultation of the European Parliament and the Economic and Social Committee.
***
In the Treaty establishing a Constitution for Europe the tax provisions were located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter I ‘Internal market’, Section 6 ‘Fiscal provisions’.
As compared with the draft Constitution, the IGC 2004 shortened the end of the section with fiscal provisions by leaving just an Article III-171 at the end (OJ 16.12.2004 C 310/73):
Article III-171 Constitution
A European law or framework law of the Council shall establish measures for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation provided that such harmonisation is necessary to ensure the establishment and the functioning of the internal market and to avoid distortion of competition. The Council shall act unanimously after consulting the European Parliament and the Economic and Social Committee.
***
This far, we have been able to see real aspirations to change the provisions on the harmonisation of taxes during the European Convention and the return to the narrower view from the Constitutional Treaty onwards.
This opens up an interesting second level of inquiry, but let us first follow our standard mode of operation, which is based upon a sample of more or less official documents focused on the similarities and differences between the existing treaties and the proposed Lisbon Treaty.
What has been said about Article 113 TFEU, with regard to the current Article 93 TEC?
United Kingdom
Professor Steve Peers covered the Treaty of Lisbon in a number of Statewatch Analyses. ‘EU Reform Treaty Analysis no. 3.3: Revised text of Part Three, Titles I to VI of the Treaty establishing the European Community (TEC): Internal Market and competition’ (Version 2, 23 October 2007) includes the current Title VI Common rules on competition, taxation and approximation of laws.
Peers highlighted the changes to Article 93 TEC and TFEU (ToL), to be renumbered Article 113 TFEU in the consolidated version, without comment (page 29).
The analysis 3.3 and other useful Statewatch analyses are available through:
http://www.statewatch.org/euconstitution.htm
***
The Foreign and Commonwealth Office (FCO) offers a convenient source of brief annotations on Lisbon Treaty amendments in ‘A comparative table of the current EC and EU treaties as amended by the Treaty of Lisbon’ (Command Paper 7311, published 21 January 2008). It offers the following comment on Article 113 TFEU, Article 93 TFEU (ToL) in the original Lisbon Treaty (page 12):
“Draws on Article 93 TEC. The explicit reference to distortion of competition is new, and the reference to the 1992 deadline is removed.”
The FCO comparative table is available at:
http://www.official-documents.gov.uk/document/cm73/7311/7311.asp
***
The UK House of Commons Library Research Paper 07/86 ‘The Treaty of Lisbon: amendments to the Treaty establishing the European Community’ (published 6 December 2007) discussed taxation on page 60 (although the heading ‘2. Taxation’ continued with (tax) harmonisation from page 60 to 61).
Here is the introductory text on Articles 90 to 93 TFEU (ToL), later renumbered Articles 110 to 113 TFEU in the consolidated version:
“Articles 90–93 (Constitution Articles III-170 – III-171) concern taxation. They incorporate the existing tax provisions set out in Articles 90 to 93 TEC. There is a considerable body of European law concerning the harmonisation across Member States of indirect taxes: that is, VAT and excise duties on alcoholic drinks, hydrocarbon oils and tobacco products. At present the Treaty base for this legislation is Article 93 TEC, which states:
The Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market within the time limit laid down in Article 14. (122)
The new Article 93 (Constitution Article III-171) has one substantive change. Legislation for harmonising indirect taxes may be adopted (emphasis added) “provided that such harmonisation is necessary for the establishment or the functioning of the internal market and to avoid distortion of competition.” It remains the case that any such legislation must be agreed by the Council acting unanimously.”
---
Footnote 122 stated: Article 14 refers to the establishment of the single European market on 1 January 1993.
---
The Library Research Paper 07/86 is available at:
http://www.parliament.uk/commons/lib/research/rp2007/rp07-086.pdf
***
The House of Lords European Union Committee report ‘The Treaty of Lisbon: an impact assessment, Volume I: Report’ (HL Paper 62-I, published 13 March 2008) is a valuable resource on the Treaty of Lisbon, but I found no reference to Article 113 TFEU (Article 93 TEC and ToL).
The report is accessible at:
http://www.publications.parliament.uk/pa/ld200708/ldselect/ldeucom/62/62.pdf
In case anyone wants to dig deeper, taxes, unanimity and harmonisation are discussed ‘passim’ in Volume II of the report ‘Evidence’.
***
Sweden
The consultation paper ’Lissabonfördraget’ is still valuable as a description of the Lisbon Treaty amendments for anyone interested, and it is available at:
http://www.regeringen.se/content/1/c6/09/49/81/107aa077.pdf
The Swedish government’s draft ratification bill ‘Lagrådsremiss – Lissabonfördraget’, was published 29 May 2008 and sent to the Council on Legislation (Lagrådet) for an expert opinion. It has since become my standard reference.
The draft deals with the EU’s internal policy areas in Chapter 23 ‘Unionens interna åtgärder’, and section 23.1 presents the internal market (Inre marknaden), on pages 175 to 181.
Tax provisions are dealt with on page 179 in a section called ‘Bestämmelser om skatter’. The government of Sweden remarks on the essentially unchanged nature of the tax provisions in general and it then explains the clarification of Article 93 TFEU (ToL), with the added words presented within quotation marks, but with no comment other than the description as a ‘clarification’ (förtydligande):
”Bestämmelser om skatter
Bestämmelserna om skatter är i princip oförändrade. I artikel 93 i EUF-fördraget om harmonisering av lagstiftningen om omsättningsskatter, punktskatter och andra indirekta skatter eller avgifter på den inre marknaden görs ett förtydligande. Som nödvändig förutsättning för att harmonisera lagstiftning anges som tillägg “att undvika snedvridning av konkurrensen”. Rådet ska, i likhet med nu gällande EG-fördrag, fatta beslut med enhällighet i skattefrågor efter att ha hört Europaparlamentet. (Se artikel 2.79 i Lissabonfördraget.)”
The draft bill ‘Lagrådsremiss – Lissabonfördraget’ can be downloaded through:
http://www.regeringen.se/sb/d/5676/a/106277
***
Finland
The Finnish ratification bill, ‘Hallituksen esitys Eduskunnalle Euroopan unionista tehdyn sopimuksen ja Euroopan yhteisön perustamissopimuksen muuttamisesta tehdyn Lissabonin sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta’ (HE 23/2008 vp), under the heading Provisions on taxes and charges (Veroja ja maksuja koskevat määräykset), offers a statement on Article 93 TFEU (ToL), the future Article 113 TFEU. The essential concordance of this provision on indirect taxation with the current TEC and the Constitutional Treaty is noted. Deleting the deadline and the added requirement to avoid distortion of competition are presented as the only changes (page 208):
”93 artikla (uusi 113 artikla), joka koskee neuvoston toimivaltaa antaa säännöksiä välillistä verotusta koskevan lainsäädännön yhdenmukaistamiseksi, vastaa SEY 93 artiklaa ja perustuslakisopimuksen III-171 artiklaa. Ainoina muutoksina nykyiseen verrattuna on SEY 14 artiklan mukaisen määräajan poistaminen ja se, että lauseeseen, jonka mukaan säännöksiä annetaan tarvittaessa sisämarkkinoiden toimivuuden takaamiseksi, lisätään lisäedellytykseksi myös kilpailun vääristymisen välttäminen.”
The Finnish ratification bill is available at:
http://www.finlex.fi/fi/esitykset/he/2008/20080023.pdf
The Swedish language version of the ratification bill ‘Regeringens proposition till Riksdagen med förslag om godkännande av Lissabonfördraget om ändring av fördraget om Europeiska unionen och fördraget om upprättandet av Europeiska gemenskapen och till lag om sättande i kraft av de bestämmelser i fördraget som hör till området för lagstiftningen’ (RP 23/2008 rd), makes the same remarks under ’Bestämmelser om skatter och avgifter’ on Article 93 TFEU (ToL), the future Article 113 TFEU, on page 211:
”Artikel 93 (blivande artikel 113), som gäller rådets befogenheter att anta bestämmelser om harmonisering av lagstiftningen om indirekta skatter, motsvarar artikel 93 i EGfördraget och artikel III-171 i det konstitutionella fördraget. Den enda ändringen jämfört med nuläget är att tidsfristen enligt artikel 14 i EG-fördraget stryks och att till satsen, enligt vilken bestämmelser vid behov kan antas för att säkerställa att den inre marknaden fungerar, fogas som tilläggsvillkor även för att undvika snedvridning av konkurrensen.”
The ratification bill in Swedish can be accessed at:
http://www.finlex.fi/sv/esitykset/he/2008/20080023.pdf
My comment: At this stage, take notice of two things. First, Article 113 TFEU has been charaterised as a provision on different forms of indirect (not direct) taxation. The added words ‘and to avoid distortion of competition’ have been described as a clarification or as an added requirement.
But I have understood that Article 113 TFEU has been a fountain for much debate (more or less factual). In a wider context, the proposals of the European Convention and their fate during the IGC 2004 are intriguing. Both seem to call for a second posting on the subject of EU tax harmonisation.
Ralf Grahn
After this factual exploration, a second post will take a closer look at what to some seem to be unclear points. At the same time, we will take a peek at some wider issues of tax harmonisation, brought to (relative) light during the long reform process.
***
Article 113 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated version of the Treaty on European Union and the Treaty on the Functioning of the European Union, published in the Official Journal of the European Union, OJ 9.5.2008 C 115/94:
Part Three ‘Union policies and internal actions’
Title VII Common rules on competition, taxation and approximation of laws
Chapter 2 Tax provisions
Article 113 TFEU
(ex Article 93 TEC)
The Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market and to avoid distortion of competition.
***
In Article 2, point 79 of the Treaty of Lisbon (ToL) the IGC 2007 amended Article 93 of the Treaty establishing the European Community (TEC). See OJ 17.12.2007 C 306/69, which says:
TAX PROVISIONS
79) At the end of Article 93, the words ‘within the time limit laid down in Article 14’ shall be
replaced by ‘and to avoid distortion of competition.’.
***
The TFEU table of equivalences tells us that Article 93 TEC first became Article 93 TFEU (ToL) in the original Treaty of Lisbon, but later renumbered Article 113 TFEU in the consolidated version (OJ 17.12.2007 C 306/211).
***
The current Article 93 of the Treaty establishing the European Community (TEC) is found under Title VI ‘Common rules on competition, taxation and approximation of laws’, Chapter 2 ‘Tax provisions’, in the latest consolidated version of the treaties in force (OJ 29.12.2006 C 321 E/79).
When we compare the current Article 93 TEC with the proposed Article 113 TFEU, we notice two specific amendments, which follow directly from the Treaty of Lisbon (above).
The first specific amendment: the disappearance of the words ‘within the time limit laid down in Article 14’, redundant because it refers to the progressive establishment of the internal market by 31 December 1992.
The second specific Lisbon Treaty amendment to the current TEC is the addition of the words ‘and to avoid distortion of competition’ in the liberated slot at the end of the sentence.
The third difference between the TFEU and the TEC follows from the general choices of terminology for the Lisbon Treaty. Horizontal amendment 3 says that in a number of Articles, among these Article 93 TEC, the words ‘acting unanimously on a proposal from the Commission’ shall be replaced by ‘acting unanimously in accordance with a special legislative procedure’ (OJ 17.12.2007 C 306/42).
These are things we can keep in mind, when we look at the wording of Article 93 TEC, currently in force:
Article 93 TEC
The Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market within the time limit laid down in Article 14.
***
We have now seen the small differences between Article 93 TEC in force and Article 113 TFUE .
For the sake of systematic comparison, we look at the provisions on tax harmonisation during the intervening treaty reform stages.
First, we turn to the European Convention, the closest thing to a constituent assembly EU citizens have had. The provisions on tax legislation are located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter I ‘Internal market’, Section 6 ‘Fiscal provisions’.
There are two Articles, III-62 and III-63, of relevance in the draft Treaty establishing a Constitution for Europe. For now, let the contents speak for themselves (OJ 18.7.2003 C 169/38):
Article III-62 Draft Constitution
1. A European law or framework law of the Council of Ministers shall lay down measures for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation provided that such harmonisation is necessary for the functioning of the internal market and to avoid distortion of competition. The Council of Ministers shall act unanimously after consulting the European Parliament and the Economic and Social Committee.
2. Where the Council of Ministers, acting unanimously on a proposal from the Commission, finds that the measures referred to in paragraph 1 relate to administrative cooperation or to combating tax fraud and tax evasion, it shall act, notwithstanding paragraph 1, by a qualified majority when adopting the European law or framework law adopting these measures.
Article III-63 Draft Constitution
Where the Council of Ministers, acting unanimously on a proposal from the Commission, finds that measures on company taxation relate to administrative cooperation or combating tax fraud and tax evasion, it shall adopt, by a qualified majority, a European law or framework law laying down these measures, provided that they are necessary for the functioning of the internal market and to avoid distortion of competition.
That law or framework law shall be adopted after consultation of the European Parliament and the Economic and Social Committee.
***
In the Treaty establishing a Constitution for Europe the tax provisions were located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter I ‘Internal market’, Section 6 ‘Fiscal provisions’.
As compared with the draft Constitution, the IGC 2004 shortened the end of the section with fiscal provisions by leaving just an Article III-171 at the end (OJ 16.12.2004 C 310/73):
Article III-171 Constitution
A European law or framework law of the Council shall establish measures for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation provided that such harmonisation is necessary to ensure the establishment and the functioning of the internal market and to avoid distortion of competition. The Council shall act unanimously after consulting the European Parliament and the Economic and Social Committee.
***
This far, we have been able to see real aspirations to change the provisions on the harmonisation of taxes during the European Convention and the return to the narrower view from the Constitutional Treaty onwards.
This opens up an interesting second level of inquiry, but let us first follow our standard mode of operation, which is based upon a sample of more or less official documents focused on the similarities and differences between the existing treaties and the proposed Lisbon Treaty.
What has been said about Article 113 TFEU, with regard to the current Article 93 TEC?
United Kingdom
Professor Steve Peers covered the Treaty of Lisbon in a number of Statewatch Analyses. ‘EU Reform Treaty Analysis no. 3.3: Revised text of Part Three, Titles I to VI of the Treaty establishing the European Community (TEC): Internal Market and competition’ (Version 2, 23 October 2007) includes the current Title VI Common rules on competition, taxation and approximation of laws.
Peers highlighted the changes to Article 93 TEC and TFEU (ToL), to be renumbered Article 113 TFEU in the consolidated version, without comment (page 29).
The analysis 3.3 and other useful Statewatch analyses are available through:
http://www.statewatch.org/euconstitution.htm
***
The Foreign and Commonwealth Office (FCO) offers a convenient source of brief annotations on Lisbon Treaty amendments in ‘A comparative table of the current EC and EU treaties as amended by the Treaty of Lisbon’ (Command Paper 7311, published 21 January 2008). It offers the following comment on Article 113 TFEU, Article 93 TFEU (ToL) in the original Lisbon Treaty (page 12):
“Draws on Article 93 TEC. The explicit reference to distortion of competition is new, and the reference to the 1992 deadline is removed.”
The FCO comparative table is available at:
http://www.official-documents.gov.uk/document/cm73/7311/7311.asp
***
The UK House of Commons Library Research Paper 07/86 ‘The Treaty of Lisbon: amendments to the Treaty establishing the European Community’ (published 6 December 2007) discussed taxation on page 60 (although the heading ‘2. Taxation’ continued with (tax) harmonisation from page 60 to 61).
Here is the introductory text on Articles 90 to 93 TFEU (ToL), later renumbered Articles 110 to 113 TFEU in the consolidated version:
“Articles 90–93 (Constitution Articles III-170 – III-171) concern taxation. They incorporate the existing tax provisions set out in Articles 90 to 93 TEC. There is a considerable body of European law concerning the harmonisation across Member States of indirect taxes: that is, VAT and excise duties on alcoholic drinks, hydrocarbon oils and tobacco products. At present the Treaty base for this legislation is Article 93 TEC, which states:
The Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market within the time limit laid down in Article 14. (122)
The new Article 93 (Constitution Article III-171) has one substantive change. Legislation for harmonising indirect taxes may be adopted (emphasis added) “provided that such harmonisation is necessary for the establishment or the functioning of the internal market and to avoid distortion of competition.” It remains the case that any such legislation must be agreed by the Council acting unanimously.”
---
Footnote 122 stated: Article 14 refers to the establishment of the single European market on 1 January 1993.
---
The Library Research Paper 07/86 is available at:
http://www.parliament.uk/commons/lib/research/rp2007/rp07-086.pdf
***
The House of Lords European Union Committee report ‘The Treaty of Lisbon: an impact assessment, Volume I: Report’ (HL Paper 62-I, published 13 March 2008) is a valuable resource on the Treaty of Lisbon, but I found no reference to Article 113 TFEU (Article 93 TEC and ToL).
The report is accessible at:
http://www.publications.parliament.uk/pa/ld200708/ldselect/ldeucom/62/62.pdf
In case anyone wants to dig deeper, taxes, unanimity and harmonisation are discussed ‘passim’ in Volume II of the report ‘Evidence’.
***
Sweden
The consultation paper ’Lissabonfördraget’ is still valuable as a description of the Lisbon Treaty amendments for anyone interested, and it is available at:
http://www.regeringen.se/content/1/c6/09/49/81/107aa077.pdf
The Swedish government’s draft ratification bill ‘Lagrådsremiss – Lissabonfördraget’, was published 29 May 2008 and sent to the Council on Legislation (Lagrådet) for an expert opinion. It has since become my standard reference.
The draft deals with the EU’s internal policy areas in Chapter 23 ‘Unionens interna åtgärder’, and section 23.1 presents the internal market (Inre marknaden), on pages 175 to 181.
Tax provisions are dealt with on page 179 in a section called ‘Bestämmelser om skatter’. The government of Sweden remarks on the essentially unchanged nature of the tax provisions in general and it then explains the clarification of Article 93 TFEU (ToL), with the added words presented within quotation marks, but with no comment other than the description as a ‘clarification’ (förtydligande):
”Bestämmelser om skatter
Bestämmelserna om skatter är i princip oförändrade. I artikel 93 i EUF-fördraget om harmonisering av lagstiftningen om omsättningsskatter, punktskatter och andra indirekta skatter eller avgifter på den inre marknaden görs ett förtydligande. Som nödvändig förutsättning för att harmonisera lagstiftning anges som tillägg “att undvika snedvridning av konkurrensen”. Rådet ska, i likhet med nu gällande EG-fördrag, fatta beslut med enhällighet i skattefrågor efter att ha hört Europaparlamentet. (Se artikel 2.79 i Lissabonfördraget.)”
The draft bill ‘Lagrådsremiss – Lissabonfördraget’ can be downloaded through:
http://www.regeringen.se/sb/d/5676/a/106277
***
Finland
The Finnish ratification bill, ‘Hallituksen esitys Eduskunnalle Euroopan unionista tehdyn sopimuksen ja Euroopan yhteisön perustamissopimuksen muuttamisesta tehdyn Lissabonin sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta’ (HE 23/2008 vp), under the heading Provisions on taxes and charges (Veroja ja maksuja koskevat määräykset), offers a statement on Article 93 TFEU (ToL), the future Article 113 TFEU. The essential concordance of this provision on indirect taxation with the current TEC and the Constitutional Treaty is noted. Deleting the deadline and the added requirement to avoid distortion of competition are presented as the only changes (page 208):
”93 artikla (uusi 113 artikla), joka koskee neuvoston toimivaltaa antaa säännöksiä välillistä verotusta koskevan lainsäädännön yhdenmukaistamiseksi, vastaa SEY 93 artiklaa ja perustuslakisopimuksen III-171 artiklaa. Ainoina muutoksina nykyiseen verrattuna on SEY 14 artiklan mukaisen määräajan poistaminen ja se, että lauseeseen, jonka mukaan säännöksiä annetaan tarvittaessa sisämarkkinoiden toimivuuden takaamiseksi, lisätään lisäedellytykseksi myös kilpailun vääristymisen välttäminen.”
The Finnish ratification bill is available at:
http://www.finlex.fi/fi/esitykset/he/2008/20080023.pdf
The Swedish language version of the ratification bill ‘Regeringens proposition till Riksdagen med förslag om godkännande av Lissabonfördraget om ändring av fördraget om Europeiska unionen och fördraget om upprättandet av Europeiska gemenskapen och till lag om sättande i kraft av de bestämmelser i fördraget som hör till området för lagstiftningen’ (RP 23/2008 rd), makes the same remarks under ’Bestämmelser om skatter och avgifter’ on Article 93 TFEU (ToL), the future Article 113 TFEU, on page 211:
”Artikel 93 (blivande artikel 113), som gäller rådets befogenheter att anta bestämmelser om harmonisering av lagstiftningen om indirekta skatter, motsvarar artikel 93 i EGfördraget och artikel III-171 i det konstitutionella fördraget. Den enda ändringen jämfört med nuläget är att tidsfristen enligt artikel 14 i EG-fördraget stryks och att till satsen, enligt vilken bestämmelser vid behov kan antas för att säkerställa att den inre marknaden fungerar, fogas som tilläggsvillkor även för att undvika snedvridning av konkurrensen.”
The ratification bill in Swedish can be accessed at:
http://www.finlex.fi/sv/esitykset/he/2008/20080023.pdf
My comment: At this stage, take notice of two things. First, Article 113 TFEU has been charaterised as a provision on different forms of indirect (not direct) taxation. The added words ‘and to avoid distortion of competition’ have been described as a clarification or as an added requirement.
But I have understood that Article 113 TFEU has been a fountain for much debate (more or less factual). In a wider context, the proposals of the European Convention and their fate during the IGC 2004 are intriguing. Both seem to call for a second posting on the subject of EU tax harmonisation.
Ralf Grahn
Wednesday, 4 June 2008
EU TFEU: Tax provisions
The EU Treaty of Lisbon leaves the tax provisions (fiscal provisions) of the current Treaty establishing the European Community essentially unchanged.
Article 110 of the Treaty on the Functioning of the European Union prohibits tax discrimination within the internal market and imposes a requirement of neutrality on the member states’ governments.
***
Article 110 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated version of the Treaty on European Union and the Treaty on the Functioning of the European Union, published in the Official Journal of the European Union, OJ 9.5.2008 C 115/93:
Part Three ‘Union policies and internal actions’
Title VII Common rules on competition, taxation and approximation of laws
Chapter 2 Tax provisions
Article 110 TFEU
(ex Article 90 TEC)
No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.
Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.
***
In Article 2, point 78 of the Treaty of Lisbon (ToL) the IGC 2007 amended Article 88 of the Treaty establishing the European Community (TEC) and in point 79 it dealt with Article 93 TEC. This means that no specific amendments were made to Article 90 TEC. Cf. OJ 17.12.2007 C 306/69.
***
The TFEU table of equivalences tells us that Article 90 TEC first became Article 90 TFEU (ToL) in the original Treaty of Lisbon, but later renumbered Article 110 TFEU in the consolidated version (OJ 17.12.2007 C 306/211).
***
The current Article 90 of the Treaty establishing the European Community (TEC) is found under Title VI ‘Common rules on competition, taxation and approximation of laws’, Chapter 2 ‘Tax provisions’, in the latest consolidated version of the treaties in force (OJ 29.12.2006 C 321 E/78).
No specific amendment and no horizontal amendment; the wording of Article 90 TEC is exactly the same as Article 110 TFEU.
***
We have now seen that 90 TEC in force and 110 TFUE are exactly the same.
Still, for the sake of systematic comparison, we look at the arcana of the Article during the intervening treaty reform stages.
First, we turn to the European Convention, the closest thing to a constituent assembly EU citizens have had. The Article in question is located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter I ‘Internal market’, Section 6 ‘Fiscal provisions’.
Article III-59 of the draft Treaty establishing a Constitution for Europe was exactly the same as Article 90 TEC (OJ 18.7.2003 C 169/37).
***
In the Treaty establishing a Constitution for Europe the tax provisions were located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter I ‘Internal market’, Section 6 ‘Fiscal provisions’.
Even if the first paragraph of Article III-170 was the same as Article III-59 proposed by the European Convention, the IGC 2004 created an Article with three paragraphs by housing Articles III-60 and III-61 of the draft Constitution under the same roof (OJ 16.12.2004 C 310/73. Cf. OJ 18.7.2003 C 169/37–38):
Article III-170 Constitution
1. No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.
Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.
2. Where products are exported by a Member State to the territory of another Member State, any repayment of internal taxation shall not exceed the internal taxation imposed on them whether directly or indirectly.
3. In the case of charges other than turnover taxes, excise duties and other forms of indirect taxation, remissions and repayments in respect of exports to other Member States may not be granted and countervailing charges in respect of imports from Member States may not be imposed unless the provisions contemplated have been previously approved for a limited period by a European decision adopted by the Council on a proposal from the Commission.
***
What has anyone been able to say about the unchanged Article 110 TFEU?
United Kingdom
Professor Steve Peers covered the Treaty of Lisbon in a number of Statewatch Analyses. ‘EU Reform Treaty Analysis no. 3.3: Revised text of Part Three, Titles I to VI of the Treaty establishing the European Community (TEC): Internal Market and competition’ (Version 2, 23 October 2007) includes the current Title VI Common rules on competition, taxation and approximation of laws.
Peers indicated the changing numbering of Article 90 TEC and TFEU (ToL), to be renumbered Article 110 TFEU in the consolidated version, without comment (page 28).
The analysis 3.3 and other useful Statewatch analyses are available through:
http://www.statewatch.org/euconstitution.htm
***
The Foreign and Commonwealth Office (FCO) offers a convenient source of brief annotations on Lisbon Treaty amendments in ‘A comparative table of the current EC and EU treaties as amended by the Treaty of Lisbon’ (Command Paper 7311, published 21 January 2008). It offers the following comment on Article 110 TFEU, Article 90 TFEU (ToL) in the original Lisbon Treaty (page 12):
“Unchanged from Article 90 TEC.”
The FCO comparative table is available at:
http://www.official-documents.gov.uk/document/cm73/7311/7311.asp
***
The UK House of Commons Library Research Paper 07/86 ‘The Treaty of Lisbon: amendments to the Treaty establishing the European Community’ (published 6 December 2007) discussed taxation on page 60 (although the heading ‘2. Taxation’ continued with (tax) harmonisation from page 60 to 61).
Because this blog post is an introduction to the tax provisions, we reproduce the comments on Articles 90 to 93 TFEU (ToL), later renumbered Articles 110 to 113 TFEU in the consolidated version:
“Articles 90–93 (Constitution Articles III-170 – III-171) concern taxation. They incorporate the existing tax provisions set out in Articles 90 to 93 TEC. There is a considerable body of European law concerning the harmonisation across Member States of indirect taxes: that is, VAT and excise duties on alcoholic drinks, hydrocarbon oils and tobacco products. At present the Treaty base for this legislation is Article 93 TEC, which states:
The Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market within the time limit laid down in Article 14. (122)
The new Article 93 (Constitution Article III-171) has one substantive change. Legislation for harmonising indirect taxes may be adopted (emphasis added) “provided that such harmonisation is necessary for the establishment or the functioning of the internal market and to avoid distortion of competition.” It remains the case that any such legislation must be agreed by the Council acting unanimously.”
---
Footnote 122 stated: Article 14 refers to the establishment of the single European market on 1 January 1993.
---
The Library Research Paper 07/86 is available at:
http://www.parliament.uk/commons/lib/research/rp2007/rp07-086.pdf
***
The House of Lords European Union Committee report ‘The Treaty of Lisbon: an impact assessment, Volume I: Report’ (HL Paper 62-I, published 13 March 2008) is a valuable resource on the Treaty of Lisbon, but I found no reference to Article 110 TFEU (Article 90 TEC and ToL).
The report is accessible at:
http://www.publications.parliament.uk/pa/ld200708/ldselect/ldeucom/62/62.pdf
In case anyone wants to dig deeper, taxes, unanimity and harmonisation are discussed ‘passim’ in Volume II of the report ‘Evidence’.
***
Sweden
The consultation paper ’Lissabonfördraget’ is still valuable as a description of the Lisbon Treaty amendments, and it is available at:
http://www.regeringen.se/content/1/c6/09/49/81/107aa077.pdf
The Swedish government’s draft ratification bill ‘Lagrådsremiss – Lissabonfördraget’, was published 29 May 2008 and sent to the Council on Legislation (Lagrådet) for an expert opinion. The draft deals with the EU’s internal policy areas in Chapter 23 ‘Unionens interna åtgärder’, and section 23.1 presents the internal market (Inre marknaden), on pages 175 to 181.
Tax provisions are dealt with on page 179 in a section called ‘Bestämmelser om skatter’. The government of Sweden remarks on the essentially unchanged nature of the tax provisions in general and it then explains the clarification of Article 93 TFEU (ToL):
”Bestämmelser om skatter
Bestämmelserna om skatter är i princip oförändrade. I artikel 93 i EUF-fördraget om harmonisering av lagstiftningen om omsättningsskatter, punktskatter och andra indirekta skatter eller avgifter på den inre marknaden görs ett förtydligande. Som nödvändig förutsättning för att harmonisera lagstiftning anges som tillägg “att undvika snedvridning av konkurrensen”. Rådet ska, i likhet med nu gällande EG-fördrag, fatta beslut med enhällighet i skattefrågor efter att ha hört Europaparlamentet. (Se artikel 2.79 i Lissabonfördraget.)”
The draft bill ‘Lagrådsremiss – Lissabonfördraget’ can be downloaded through:
http://www.regeringen.se/sb/d/5676/a/106277
***
Finland
The Finnish ratification bill, ‘Hallituksen esitys Eduskunnalle Euroopan unionista tehdyn sopimuksen ja Euroopan yhteisön perustamissopimuksen muuttamisesta tehdyn Lissabonin sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta’ (HE 23/2008 vp), offers an introductury comment on taxes and charges (Veroja ja maksuja koskevat määräykset) and a brief statement on the unchanged nature of Article 90 TFEU (ToL), renumbered Article 110 TFEU (page 208):
”Määräykset koskevat veroihin ja maksuihin sovellettavia pääperiaatteita sekä neuvoston toimivaltaa niiden osalta ja ne vastaavat määräysten sanamuodon teknisiä tarkistuksia lukuun ottamatta pääasiallisesti nykyisen EYsopimuksen kolmannen osan VI osaston 2 luvun määräyksiä samoin kuin perustuslakisopimuksen III-171 ja III-172 artiklan määräyksiä.
90 artiklaa (uusi 110 artikla), joka kieltää jäsenvaltioita määräämästä muiden jäsenvaltioiden tuotteille korkeampia välillisiä tai välittömiä sisäisiä maksuja kuin kotimaisille tuotteille, ei muuteta.”
The Finnish ratification bill is available at:
http://www.finlex.fi/fi/esitykset/he/2008/20080023.pdf
The Swedish language version of the ratification bill ‘Regeringens proposition till Riksdagen med förslag om godkännande av Lissabonfördraget om ändring av fördraget om Europeiska unionen och fördraget om upprättandet av Europeiska gemenskapen och till lag om sättande i kraft av de bestämmelser i fördraget som hör till området för lagstiftningen’ (RP 23/2008 rd), presents the same introductory remark on fiscal provisions under ’Bestämmelser om skatter och avgifter’ and the comment on the unchanged nature of Article 90 TFEU (ToL), the future Article 110 TFEU, on page 211:
”Bestämmelserna gäller de huvudprinciper som ska tillämpas på skatter och avgifter samt rådets befogenheter i fråga om dem och de motsvarar de tekniska anpassningarna av bestämmelsernas ordalydelse med undantag i huvudsak för bestämmelserna i avdelning VI kapitel 2 i det nuvarande EG-fördragets tredje del liksom även bestämmelserna i artiklarna III-171 och III-172 i det konstitutionella fördraget.
Artikel 90 (blivande artikel 110), som förbjuder medlemsstaterna att direkt eller indirekt på varor från andra medlemsstater lägga interna skatter eller avgifter som är högre än de skatter eller avgifter som direkt eller indirekt läggs på liknande inhemska varor, ändras inte.”
The ratification bill in Swedish can be accessed at:
http://www.finlex.fi/sv/esitykset/he/2008/20080023.pdf
Ralf Grahn
Article 110 of the Treaty on the Functioning of the European Union prohibits tax discrimination within the internal market and imposes a requirement of neutrality on the member states’ governments.
***
Article 110 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated version of the Treaty on European Union and the Treaty on the Functioning of the European Union, published in the Official Journal of the European Union, OJ 9.5.2008 C 115/93:
Part Three ‘Union policies and internal actions’
Title VII Common rules on competition, taxation and approximation of laws
Chapter 2 Tax provisions
Article 110 TFEU
(ex Article 90 TEC)
No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.
Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.
***
In Article 2, point 78 of the Treaty of Lisbon (ToL) the IGC 2007 amended Article 88 of the Treaty establishing the European Community (TEC) and in point 79 it dealt with Article 93 TEC. This means that no specific amendments were made to Article 90 TEC. Cf. OJ 17.12.2007 C 306/69.
***
The TFEU table of equivalences tells us that Article 90 TEC first became Article 90 TFEU (ToL) in the original Treaty of Lisbon, but later renumbered Article 110 TFEU in the consolidated version (OJ 17.12.2007 C 306/211).
***
The current Article 90 of the Treaty establishing the European Community (TEC) is found under Title VI ‘Common rules on competition, taxation and approximation of laws’, Chapter 2 ‘Tax provisions’, in the latest consolidated version of the treaties in force (OJ 29.12.2006 C 321 E/78).
No specific amendment and no horizontal amendment; the wording of Article 90 TEC is exactly the same as Article 110 TFEU.
***
We have now seen that 90 TEC in force and 110 TFUE are exactly the same.
Still, for the sake of systematic comparison, we look at the arcana of the Article during the intervening treaty reform stages.
First, we turn to the European Convention, the closest thing to a constituent assembly EU citizens have had. The Article in question is located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter I ‘Internal market’, Section 6 ‘Fiscal provisions’.
Article III-59 of the draft Treaty establishing a Constitution for Europe was exactly the same as Article 90 TEC (OJ 18.7.2003 C 169/37).
***
In the Treaty establishing a Constitution for Europe the tax provisions were located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter I ‘Internal market’, Section 6 ‘Fiscal provisions’.
Even if the first paragraph of Article III-170 was the same as Article III-59 proposed by the European Convention, the IGC 2004 created an Article with three paragraphs by housing Articles III-60 and III-61 of the draft Constitution under the same roof (OJ 16.12.2004 C 310/73. Cf. OJ 18.7.2003 C 169/37–38):
Article III-170 Constitution
1. No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.
Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.
2. Where products are exported by a Member State to the territory of another Member State, any repayment of internal taxation shall not exceed the internal taxation imposed on them whether directly or indirectly.
3. In the case of charges other than turnover taxes, excise duties and other forms of indirect taxation, remissions and repayments in respect of exports to other Member States may not be granted and countervailing charges in respect of imports from Member States may not be imposed unless the provisions contemplated have been previously approved for a limited period by a European decision adopted by the Council on a proposal from the Commission.
***
What has anyone been able to say about the unchanged Article 110 TFEU?
United Kingdom
Professor Steve Peers covered the Treaty of Lisbon in a number of Statewatch Analyses. ‘EU Reform Treaty Analysis no. 3.3: Revised text of Part Three, Titles I to VI of the Treaty establishing the European Community (TEC): Internal Market and competition’ (Version 2, 23 October 2007) includes the current Title VI Common rules on competition, taxation and approximation of laws.
Peers indicated the changing numbering of Article 90 TEC and TFEU (ToL), to be renumbered Article 110 TFEU in the consolidated version, without comment (page 28).
The analysis 3.3 and other useful Statewatch analyses are available through:
http://www.statewatch.org/euconstitution.htm
***
The Foreign and Commonwealth Office (FCO) offers a convenient source of brief annotations on Lisbon Treaty amendments in ‘A comparative table of the current EC and EU treaties as amended by the Treaty of Lisbon’ (Command Paper 7311, published 21 January 2008). It offers the following comment on Article 110 TFEU, Article 90 TFEU (ToL) in the original Lisbon Treaty (page 12):
“Unchanged from Article 90 TEC.”
The FCO comparative table is available at:
http://www.official-documents.gov.uk/document/cm73/7311/7311.asp
***
The UK House of Commons Library Research Paper 07/86 ‘The Treaty of Lisbon: amendments to the Treaty establishing the European Community’ (published 6 December 2007) discussed taxation on page 60 (although the heading ‘2. Taxation’ continued with (tax) harmonisation from page 60 to 61).
Because this blog post is an introduction to the tax provisions, we reproduce the comments on Articles 90 to 93 TFEU (ToL), later renumbered Articles 110 to 113 TFEU in the consolidated version:
“Articles 90–93 (Constitution Articles III-170 – III-171) concern taxation. They incorporate the existing tax provisions set out in Articles 90 to 93 TEC. There is a considerable body of European law concerning the harmonisation across Member States of indirect taxes: that is, VAT and excise duties on alcoholic drinks, hydrocarbon oils and tobacco products. At present the Treaty base for this legislation is Article 93 TEC, which states:
The Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market within the time limit laid down in Article 14. (122)
The new Article 93 (Constitution Article III-171) has one substantive change. Legislation for harmonising indirect taxes may be adopted (emphasis added) “provided that such harmonisation is necessary for the establishment or the functioning of the internal market and to avoid distortion of competition.” It remains the case that any such legislation must be agreed by the Council acting unanimously.”
---
Footnote 122 stated: Article 14 refers to the establishment of the single European market on 1 January 1993.
---
The Library Research Paper 07/86 is available at:
http://www.parliament.uk/commons/lib/research/rp2007/rp07-086.pdf
***
The House of Lords European Union Committee report ‘The Treaty of Lisbon: an impact assessment, Volume I: Report’ (HL Paper 62-I, published 13 March 2008) is a valuable resource on the Treaty of Lisbon, but I found no reference to Article 110 TFEU (Article 90 TEC and ToL).
The report is accessible at:
http://www.publications.parliament.uk/pa/ld200708/ldselect/ldeucom/62/62.pdf
In case anyone wants to dig deeper, taxes, unanimity and harmonisation are discussed ‘passim’ in Volume II of the report ‘Evidence’.
***
Sweden
The consultation paper ’Lissabonfördraget’ is still valuable as a description of the Lisbon Treaty amendments, and it is available at:
http://www.regeringen.se/content/1/c6/09/49/81/107aa077.pdf
The Swedish government’s draft ratification bill ‘Lagrådsremiss – Lissabonfördraget’, was published 29 May 2008 and sent to the Council on Legislation (Lagrådet) for an expert opinion. The draft deals with the EU’s internal policy areas in Chapter 23 ‘Unionens interna åtgärder’, and section 23.1 presents the internal market (Inre marknaden), on pages 175 to 181.
Tax provisions are dealt with on page 179 in a section called ‘Bestämmelser om skatter’. The government of Sweden remarks on the essentially unchanged nature of the tax provisions in general and it then explains the clarification of Article 93 TFEU (ToL):
”Bestämmelser om skatter
Bestämmelserna om skatter är i princip oförändrade. I artikel 93 i EUF-fördraget om harmonisering av lagstiftningen om omsättningsskatter, punktskatter och andra indirekta skatter eller avgifter på den inre marknaden görs ett förtydligande. Som nödvändig förutsättning för att harmonisera lagstiftning anges som tillägg “att undvika snedvridning av konkurrensen”. Rådet ska, i likhet med nu gällande EG-fördrag, fatta beslut med enhällighet i skattefrågor efter att ha hört Europaparlamentet. (Se artikel 2.79 i Lissabonfördraget.)”
The draft bill ‘Lagrådsremiss – Lissabonfördraget’ can be downloaded through:
http://www.regeringen.se/sb/d/5676/a/106277
***
Finland
The Finnish ratification bill, ‘Hallituksen esitys Eduskunnalle Euroopan unionista tehdyn sopimuksen ja Euroopan yhteisön perustamissopimuksen muuttamisesta tehdyn Lissabonin sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta’ (HE 23/2008 vp), offers an introductury comment on taxes and charges (Veroja ja maksuja koskevat määräykset) and a brief statement on the unchanged nature of Article 90 TFEU (ToL), renumbered Article 110 TFEU (page 208):
”Määräykset koskevat veroihin ja maksuihin sovellettavia pääperiaatteita sekä neuvoston toimivaltaa niiden osalta ja ne vastaavat määräysten sanamuodon teknisiä tarkistuksia lukuun ottamatta pääasiallisesti nykyisen EYsopimuksen kolmannen osan VI osaston 2 luvun määräyksiä samoin kuin perustuslakisopimuksen III-171 ja III-172 artiklan määräyksiä.
90 artiklaa (uusi 110 artikla), joka kieltää jäsenvaltioita määräämästä muiden jäsenvaltioiden tuotteille korkeampia välillisiä tai välittömiä sisäisiä maksuja kuin kotimaisille tuotteille, ei muuteta.”
The Finnish ratification bill is available at:
http://www.finlex.fi/fi/esitykset/he/2008/20080023.pdf
The Swedish language version of the ratification bill ‘Regeringens proposition till Riksdagen med förslag om godkännande av Lissabonfördraget om ändring av fördraget om Europeiska unionen och fördraget om upprättandet av Europeiska gemenskapen och till lag om sättande i kraft av de bestämmelser i fördraget som hör till området för lagstiftningen’ (RP 23/2008 rd), presents the same introductory remark on fiscal provisions under ’Bestämmelser om skatter och avgifter’ and the comment on the unchanged nature of Article 90 TFEU (ToL), the future Article 110 TFEU, on page 211:
”Bestämmelserna gäller de huvudprinciper som ska tillämpas på skatter och avgifter samt rådets befogenheter i fråga om dem och de motsvarar de tekniska anpassningarna av bestämmelsernas ordalydelse med undantag i huvudsak för bestämmelserna i avdelning VI kapitel 2 i det nuvarande EG-fördragets tredje del liksom även bestämmelserna i artiklarna III-171 och III-172 i det konstitutionella fördraget.
Artikel 90 (blivande artikel 110), som förbjuder medlemsstaterna att direkt eller indirekt på varor från andra medlemsstater lägga interna skatter eller avgifter som är högre än de skatter eller avgifter som direkt eller indirekt läggs på liknande inhemska varor, ändras inte.”
The ratification bill in Swedish can be accessed at:
http://www.finlex.fi/sv/esitykset/he/2008/20080023.pdf
Ralf Grahn
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