Tax chief orders probe into treaty unanimity ‘loophole’

Date: 22/02/01

SINGLE market chief Frits Bolkestein is planning to examine ways to circumvent EU rules requiring unanimity on tax legislation by allowing groups of member states to agree multilateral treaties.

"The decision at Nice will enable as small a group as eight member states to decide to cooperate more closely after approval within the Council by qualified majority," he wrote in a paper on the future of EU tax policy.

The Commissioner confirms that he has instructed officials working in the taxation and customs directorate to "identify areas of taxation where the use of enhanced cooperation may be appropriate".

Under the Nice Treaty provisions for enhanced cooperation, a minimum of eight member states can agree common rules among themselves - provided the deal does not breach existing single market law or distort competition and trade in the EU as a whole.

Bolkestein says that despite the difficulties posed by these conditions enhanced cooperation could be used in a number of areas.

"Applying the principles of the Nice Treaty would mean that if a sub-group of member states can agree on a multilateral tax treaty or on a certain tax measure that would facilitate the activities of [small and medium-sized enterprises] operating between those countries, this should in principle be permitted," he states.

But he admits that the safeguards for the single market and competition mean that it will be very difficult to find areas where enhanced cooperation could be used. "The enhanced cooperation could be targeted so as to produce benefits for the participating countries that non-participants would be motivated to become involved," the paper states. "But it should not be allowed...to remove tax distortions where non-participating member states would obtain a clear disadvantage."

Gerhard Huemer, tax expert at the European Small Business Federation, said the proposal "would really be a step forward because double taxation agreements are a general barrier to SMEs. It would make it a lot easier to do cross-border business".

Member states will be able to take advantage of the new rules on enhanced cooperation when the Nice Treaty is ratified by all 15 member states, which is expected in the next 12 to 18 months.

Environment Commissioner Margot Wallström and Budget chief Michaele Schreyer have recently called for enhanced cooperation to be used to agree an energy tax which has been blocked for four years by fierce opposition from Spain, Greece and other states.

Single market chief, Frits Bolkestein, is planning to examine ways to circumvent EU rules requiring unanimity on tax legislation by allowing groups of member states to agree multilateral treaties.