52000PC0891

Proposal for a COUNCIL REGULATION on the application of the provisions of Community law to the Canary Islands

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. Article 5(1) of Council Regulation (EEC) No 1911/91 of 26 June 1991 [1] states that the tax on production and imports (APIM), which had been gradually reduced up to 31 December 1996 in accordance with Article 5(2) of the Regulation and Commission Decision No 96/34/EC of 20 December 1995, [2] would be phased out by 31 December 2000.

[1] OJ L 171, 29.06.1991, p. 1.

[2] OJ L 10, 13.01.1996, p. 38.

2. Council Regulation (EC) No 2674/1999 of 13 December 1999 [3] amending Regulation (EEC) No 1911/91 suspended the phasing out of the tax from 1 January to 30 June 2000 for certain sensitive products, as the withdrawal of the tax could have led to the virtual disappearance of the sectors in question.

[3] OJ L 326, 18.12.1999, p. 3.

3. On 14 March 2000 the Commission adopted a report on measures to implement Article 299(2) of the EC Treaty in respect of the outermost regions of the European Union. [4] The report states that Article 299(2) authorises specific tax measures to help the outermost areas provided requests are justified by the handicaps faced by these regions. Future tax measures for such regions must be considered on the basis of requests from the Member States concerned. The Commission considers that in each case it is essential to find the most appropriate instruments to achieve the objective of regional development and support for the regions concerned. This would include derogating tax measures, which could be applied on a long-term basis.

[4] COM (2000) 147 final

4. The memorandum submitted by Spain to the Commission on 23 November 1999 envisages the introduction of a neutral tax which would take account of the need to achieve a certain level of development of production of goods in the Canary Islands.

By letter of 25 July 2000 Spain provided the Commission with data on the socio-economic conditions in the Canary Islands and a new tax called the "Arbitrio sobre los Importaciones y Entregas de Mercancias en las islas Canarias (AIEM)". This tax would implement Article 299(2) of the EC Treaty and replace the APIM, which expires on 31 December 2000. On 25 October 2000 Spain forwarded further information to the Commission on the proposed rates of this future tax. The Commission has begun its discussion and assessment on the basis of this information. Its evaluation considers the impact of tax measures on sensitive products in the most vulnerable sectors and is based on the criteria of necessity, proportionality and the exact nature of the measures. Its aim is to identify the most appropriate specific measures which can be taken to offset the handicaps referred to in Article 299(2) of the EC Treaty. This Article also requires that the measures must not undermine the integrity and the coherence of the Community legal order, including the internal market and common policies. At this stage the Commission considers that the measures notified do not comply with all these criteria and it must therefore continue discussions with the Spanish authorities.

5. Consequently, by letter of 31 October 2000, the Spanish authorities applied for the transitional period provided for in Article 5 of Regulation (EEC) No 1911/91 to be extended in order to safeguard economic activities in the Canary Islands and to ensure a smooth transition up to the introduction of the new tax measures for the Canary Islands under Article 299(2) of the EC Treaty.

6. In the above report the Commission undertook to ensure continuity with existing measures. It is therefore appropriate to temporarily extend, for a short period, the rates and exemptions relating to the APIM tax at the level applying at 31 December 2000.

Comments on the Articles

Article 1

This provision authorises for a short period, from 1 January 2001 until the entry into force of the new tax ("Arbitrio sobre los Importaciones y Entregas de Mercancias en las islas Canarias (AIEM)") or until 31 December 2001 at the latest, the effects of the APIM as at 31 December 2000. The rates applying at 31 December 2000 under Article 5(2) and (3) of Regulation (EEC) No 1911/91 are as follows. The tax was originally set at between 0.1% and 5% according to the category of product, and at 15% for tobacco. The rates were increased by 15% in 1996, and gradually reduced by 20% a year from 31 December 1996. However, this phased reduction was suspended for categories of sensitive products defined by Council Regulation (EC) No 2674/99 of 13 December 1999 for the period from 1 January to 30 June 2000. Consequently tax now stands at no more than 20% of the initial applicable rate. Exemptions are authorised for local production under Article 5(4), (5) and (6) of Regulation (EEC) No 1191/91.

Article 2

This Article governs the entry into force and applicability of the Regulation. The Regulation will apply from 1 January 2001 to ensure continuity.

Proposal for a COUNCIL REGULATION on the application of the provisions of Community law to the Canary Islands

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 299(2) thereof,

Having regard to the proposal from the Commission, [5]

[5] OJ C , , p. .

Having regard to the opinion of the European Parliament, [6]

[6] OJ C , , p. .

Having regard to the opinion of the Economic and Social Committee, [7]

[7] OJ C , , p. .

Having regard to the Committee of the Regions, [8]

[8] OJ C , , p. .

Whereas:

(1) Article 5(1) of Council Regulation (EEC) No 1911/91 of 26 June 1991 [9] authorises the levying of a tax on production and imports (APIM) up to 31 December 2000.

[9] OJ L 171, 29.06.1991, p. 1.

(2) The Commission must ensure that Article 299(2) of the EC Treaty is applied in various areas including tax policy; in its report of 14 March 2000 to the Council and the European Parliament [10] it undertook to do so in partnership with the Member States concerned on the basis of requests from them.

[10] COM (2000) 147 final

(3) The new tax which the Spanish authorities intend to introduce in the Canary Islands to offset the handicaps referred to in Article 299(2) of the EC Treaty must be assessed in the light of the principle laid down by Article 299 that the measures adopted must not undermine the integrity and the coherence of the Community legal order, including the internal market and common policies. The process of evaluation will continue after 31 December 2000. The Commission finds that the measures notified do not satisfy these criteria and discussions must therefore be continued with the Spanish authorities.

(4) However the Spanish authorities have asked for the APIM to continue at the level as at 31 December 2000, in order to safeguard economic activity in the sectors concerned in the Canary Islands and to ensure a transition up to the introduction of the new tax measure implementing Article 299(2) of the EC Treaty.

(5) In order to ensure continuity with existing measures, in terms of current exemptions and the applicable rates of the APIM, the level applying at 31 December 2000 should therefore be authorised for a short period,

HAS ADOPTED THIS REGULATION:

Article 1

1. For a transitional period which not extend beyond 31 December 2001, the Spanish authorities are hereby authorised to impose a tax on production and import on all products entering or produced in the Canary Islands at rates which shall not exceed those in force on 31 December 2000 as a result of the application of Article 5 of Council Regulation (EEC) No 1911/91 of 26 June 1991.

2. During this period and in respect of the products and categories of products to which paragraph 1 applies, total or partial exemption from tax may be applied in respect of locally produced products.

Article 2

This Regulation shall enter into force on the day of its publication in the Official Journal of the European Communities.

This Regulation shall be applicable from 1 January 2001.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels,

For the Council

The President