| Author (Person) | Davies, Eric |
|---|---|
| Publisher | ProQuest Information and Learning |
| Series Title | In Focus |
| Series Details | 22.10.00 |
| Publication Date | 22/10/2000 |
| Content Type | News, Overview, Topic Guide | In Focus |
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A number of initiatives affecting Small and Medium Sized Enterprises (SMEs) were announced during the week ending 21 October. On 17 October, Finance Ministers adopted a Directive simplifying legislation on VAT. From January 2002, companies trading in another Member States will no longer be required to appoint a tax representative or agent outside the country in which they are established. On 18 October, the European Commission published a review of Community financial instruments intended to support SMEs, and proposed a framework for future actions. On the same day, the Commission also issued a report on risk capital in Europe, in which it argues that more needs to be done to create a favourable environment for the creation of new and innovative businesses. On 19 October, the Commission published a consultative document on the patenting of computer software. The Commission's intention is to achieve an appropriate balance between encouraging innovation and ensuring adequate competition. At the end of the week, the Commission participated in the 'Training for entrepreneurship' Forum, held in Nice on 19-20 October. Background Small and Medium Sized Enterprises (SMEs) have long been regarded as significant sources of employment in Europe. According to Enterprises in Europe, 1999, there are 18 million SMEs in the EU. They employ 66&percent; of the workforce, are responsible for 55&percent; of turnover and represent 99.8&percent; of all enterprises (excluding those in the agricultural and non-market sectors). The Single European Market - which officially opened in 1993 - was intended to benefit SMEs and stimulate job creation, by removing barriers to trade and promoting the free movement of people, goods, services and capital (for background, see In 1997, a special Employment Summit in Luxembourg confirmed the crucial role of entrepreneurship in creating employment, and in March 2000 the Lisbon Summit addressed the challenges and opportunities presented by the advent of the Information Society and the growth of e-commerce. Leaders expressed a desire to tackle unemployment and to promote economic reform and social cohesion by developing a digital, knowledge-based economy (for further details see In Focus, 25.3.2000: The restructuring of the European Commission which followed the appointment of President Romano Prodi introduced a Directorate-General for Enterprise. The new DG
Policies affecting enterprise, the Single Market and other areas of interest to SMEs are continually developing, as shown by the variety of issues addressed this week: Tax representation Finance Ministers, meeting in the Ecofin Council on 17 October [in French] adopted a Directive modifying the 6th VAT Directive (77/388/EEC). The new Directive removes, from 1 January 2002, the obligation on European traders under the VAT system to appoint a tax representative in Member States in which they are not established. This requirement is judged to be extremely cumbersome and costly, and was criticised by business representatives during a consultative exercise in 1997 (Simplification of Legislation on the Internal Market - SLIM). The new Directive is both the first significant simplification adopted under SLIM and the first practical outcome of the new VAT strategy proposed by the Commission in June 2000 (COM (2000) 348 [pdf]). Frits Bolkestein, European Commissioner responsible for taxation, said he welcomed the Directive, which will eliminate complex, obligatory VAT formalities that were extremely costly for millions of firms within the Single Market. In a Press Release, the Commission says that the Directive is a significant simplification for all European firms with taxable activities in a Member State other than the one in which they are established. It provides that:
Financial support for SMEs The various forms of Community financial support for SMEs are currently managed by the Commission, the European Investment Bank (EIB), or the European Investment Fund (EIF). In a new Communication (summarised in a Press Release), the Commission reviews current funding arrangements and proposes a framework for future action. Four types of support for SMEs are identified: loans, equity, guarantees and grants. The Communication identifies four lessons to be learned from past experience:
Recommendations for future actions are made under three headings: 1 - measures to refocus the available financial instruments on the political priorities identified at the Lisbon European Council. Recent initiatives include the EIB's Innovation 2000 Initiative (i2i) and the reform of the EIF. The Commission suggests four extensions to the Growth and Employment Initiative intended to provide financial assistance for innovative and job-creating SMEs:
2 - measures to improve coherence and co-ordination between the various Community financial instruments. The Commission suggests that an annual report presented to the European Parliament and the Council would ensure appropriate accountability and give early warning of the need for any new action. 3 - measures to enhance the visibility and accessibility of Community actions. A new website is proposed to provide a 'one-stop information shop' for SMEs and financial institutions, covering all Community financial instruments, including those available from the EIB. Venture capital In a separate Communication on risk capital (venture capital), the Commission argues that more needs to be done to create an environment favourable to creating and sustaining new and innovative businesses in Europe. In a Press Release, EU Commissioner for Economic and Financial Affairs, Pedro Solbes, said 'there is a need for further progress in implementing relevant structural reforms, in financial-market integration and in promoting a culture of entrepreneurship'. Frits Bolkestein, Internal Market Commissioner, stressed that 'timely implementation of the Financial Services Action Plan by 2005 will do much to foster a more integrated EU risk capital market.' The EU risk capital market performed strongly in 1999, with an increased number of 'business angels' investing some €12 billion in young SMEs - an increase of 80&percent; since 1988. However, there is still a significant gap between the EU and the United States - where venture capital investments rose by 150&percent;. To close the gap, the Commission proposes a number of actions. The Communication invites Member States to act in three priority areas:
The risk capital market provides equity financing for young and innovative businesses, which have a significant role to play in generating employment. Risk capital figured prominently in the conclusions of the Lisbon European Council in March 2000 (see COM (2000) 336 - Progress in financial services [pdf]), and the Council called for implementation of the Risk Capital Action Plan [pdf] (RCAP) by 2003. RCAP proposes initiatives to be taken at Community and/or at Member State level in the areas of market fragmentation, institutional and regulatory barriers, taxation, paucity of high-tech SMEs, human resources and cultural barriers. Software patents The absence of EU-level legislation on the patentability of computer-implemented inventions may be a potential barrier to industrial growth, competitiveness and the development of the Internal Market. The Commission has therefore issued a consultative document and is inviting comments until 15 December 2000. Patenting of software is a divisive issue: some parties believe that patents stimulate innovation by protecting developers' investments; others argue that patents stifle competition and therefore hinder innovation. In publishing the discussion paper (summarised in a Press Release), the Commission seeks to identify the best approach to the issue, and to strike a balance between promoting innovation and ensuring adequate competition. The Commission's final position will take into account the likely impact of patents for computer-implemented inventions, especially for:
The consultations will allow the Commission to take account of developments since its 1997 Green Paper on patents. In the light of recent developments in the United States, the Commission has also launched an independent study on the economic impact of patentability of computer programs. The study appears to favour a harmonisation and clarification of relevant European patent laws. Interested parties are invited to comment on its findings as part of the current consultation. In a Communication on patent protection issued in February 1999, the Commission identified the need for legislative action regarding patent protection for computer-implemented inventions. Although computer programs 'as such' are excluded from patentability, thousands of patents for technical inventions using a computer program have been granted by national patent offices and by the European Patent Office (EPO). The application of different rules means that harmonisation is needed. In parallel with the Commission's initiatives, amendments to the European Patent Convention are currently under discussion. An intergovernmental conference will be held in Munich in November 2000, and it is possible that a decision will be taken to remove computer programs from the list of items in the Convention that cannot be patented. Entrepreneurship The Commission's Enterprise DG took part in the 'Training for entrepreneurship' [in French] Forum in Nice on 19-20 October 2000. Training for entrepreneurship is an extension of the Action plan to promote entrepreneurship and competitiveness adopted in April 1999 (stemming from the Business Environment Simplification Task Force - BEST), and the Meetings on company creation [in French] held in Paris in April 2000. The Forum was organised within the framework of concerted action between the European Commission and the Member States in the field of enterprise policy. It offered participants the opportunity to share experiences and contribute to the diffusion of knowledge and best practices in the areas of promoting entrepreneurship and entrepreneurship training. The themes were:
The Commission issued a brief pre-Forum Press Release. Further information within European Sources Online: European Sources Online: Topic Guides [Note: Topic Guides are periodically updated: if the specific links shown above do not work, you can find the updated version by linking to Topic Guides: The Single Market and Competition Policy, Business, Industry and Trade, Employment] European Sources Online: European Voice: The Penguin Companion to European Union (Penguin, 1998): Further information can be seen in these external links: European Commission: Enterprise DG Internal Market DG Federation of Small Businesses: Union of Industrial and Employers' Confederations of Europe (UNICE): FT.com: Further and subsequent information on the subject of this week's In Focus can be found by an 'Advanced Search' in European Sources Online by inserting appropriate terms in the keyword field and selecting 'All News and current awareness: 'from the 'Publication title' section. Eric Davies A number of initiatives affecting Small and Medium Sized Enterprises (SMEs) were announced in October 2000, including the adoption of a Directive simplifying VAT legislation, a review of Community financial instruments intended to support SMEs and a European Commission consultative document on the patenting of computer software. |
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| Subject Categories | Business and Industry |
