92001E1846

WRITTEN QUESTION E-1846/01

by Esko Seppänen (GUE/NGL) to the Commission

(26 June 2001)

Subject: Finnish system of tax credits on dividends

It is clear that the system of tax credits on dividends applicable in Finland disproportionately favours Finnish shareholders over foreign shareholders. Has the Commission considered this unusual system, and does it intend to take any action to ensure the equal taxation of national and foreign shareholders?

Answer given by Mr Bolkestein on behalf of the Commission

(3 September 2001)

The question posed by the Honourable Member on the Finnish system of tax credits on dividends raises the difficult issue of the compatibility of imputation systems with Community law.

In the light of recent case-law of the Court of Justice, there could be serious doubts about the compatibility of some such systems with Community law insofar as they may entail restrictions on the right of establishment and the free movement of capital. This would be the case where a domestic shareholder obtains full or partial relief, for instance by means of a tax credit for the tax paid at corporate level, whereas no corresponding relief is given to a foreign shareholder. The Commission is planning to discuss this general issue with all Member States at a meeting in the autumn of 2001. Based on the outcome of these discussions, the Commission will consider any further action to be taken, including, if necessary, the opening of proceedings under Article 226 (ex Article 169) of the EC Treaty.

In this context it should also be noted that the issue of dividend taxation in general is one of the topics to be covered in a study on company taxation which is currently being conducted by the Commission at the request of the Council, and which is scheduled to be published in autumn 2001