Opinion of the European Economic and Social Committee on the Proposal for a Council Directive concerning the general arrangements for excise duty

COM(2008) 78 final/3 — 2008/0051 (CNS)

2009/C 100/27

On 4 March 2008 the Council decided to consult the European Economic and Social Committee, under Article 93 of the Treaty establishing the European Community, on the

Proposal for a Council Directive concerning the general arrangements for excise duty

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 2 October 2008. The rapporteur was Mr BURANI.

At its 448th plenary session, held on 22 - 23 October 2008 (meeting of 22 October), the European Economic and Social Committee adopted the following opinion by 107 votes to one with one abstention.

1.   Conclusions and recommendations

1.1.   The EESC supports the Commission's Decision to replace in its entirety the basic directive on the application of excise duty, 92/12/EEC, with a new text that takes account of the adoption of the electronic EMCS (Excise Movement and Control System) procedure and gives this a legal basis. The Commission has made use of the opportunity to introduce some changes and innovations that have been made necessary by the experiences of the authorities in the Member States and of traders. A number of procedures have also been streamlined. In general terms, the parts affected by changes or innovations do not give rise to specific objections, but the EESC intends to comment on some aspects as a contribution to the discussions that will follow.

1.2.   The Commission suggests a hypothetical date of 1 January 2009 for entry into force of the directive. However, conscious that the examination of the proposal will take much longer, it also proposes that the EMCS procedure could be adopted in the first instance only by the Member States that have adopted it, whilst the others would continue with the paper-based procedure for a certain period.

1.3.   The EESC, together with other stakeholders, has misgivings about this: a dual procedure would be confusing and expensive both for the authorities and for traders. However, the alternative, i.e. to launch EMCS only when everyone is ready, would similarly penalise traders and those who are already ready now. An interim solution, which is hardly satisfactory and would be likely to delay EMCS in Europe indefinitely, might consist in using EMCS only for internal transactions within those Member States able to adopt the electronic procedure. The paper procedure would be used by all Member States for international transactions until everyone was ready to move over to the electronic system.

1.4.   The most important part of the Commission document relates to the movement of goods under suspension of excise duty; the EESC supports the various innovations, aside from a few clarifications and proposals (see points 4.6 to 4.9) that are mainly to do with the concept, which is now more clearly defined, of ‘irretrievable loss’ of goods. With regard to distance selling, the wording of Article 34 (see point 4.9) could give rise to doubts of interpretation of a legal nature concerning the country in which excise duty is to be collected.

1.5.   The EESC also proposes that a clause be inserted into the new directive specifying the quantitative and value limits up to which purchases made by a member of the public in another Member State are considered to have been made by that person as a ‘private individual’. There is a risk of differences in interpretation and application by the various authorities.

2.   The Commission proposal

2.1.   Directive 92/12/EEC of 25 February 1992 lays down provisions on the general arrangements for products subject to excise duty, which are largely paper-based. On 16 June 2003, EP and Council Decision No 1152/2003/EC introduced a computerised procedure known as the EMCS (Excise Movement and Control System) which simplified traders’ obligations and enabled authorities to carry out integrated, more effective monitoring. The introduction of the EMCS requires the provisions on movements under suspension of excise duty to be amended.

2.2.   The Commission is taking this opportunity to replace Directive 92/12/EEC in its entirety. In addition to catering for the introduction of the EMCS, for which it provides a legal basis, it systematically changes the whole of the previous directive: it updates the language used taking into account new legislative standards; recasts the text to make its structure more logical; takes out obsolete provisions; takes account of new legal concepts; and simplifies procedures so as to reduce obligations for traders without compromising controls.

2.3.   The new text also incorporates (Chapter V) the essence of proposal COM(2004) 227 – set aside by the Council in 2005 – amending Articles 7 to 10 of Directive 92/12/EEC, on the intra-Community movement of products already placed on the market.

2.4.   The proposal was preceded by large-scale consultation of traders and was developed in close cooperation with a specialists working group under the auspices of the Excise Committee. This is an appropriate procedure which should allow the technical aspects of the document to be discussed without undue controversy.

3.   General comments

3.1.   The EESC congratulates the Commission on its initiative, which has produced a document which is better structured than the original, more thorough and reflects the need to cut red tape. In particular, it takes greater account of traders’ needs without reducing the level of controls, which should actually become more effective with the introduction of the EMCS procedures.

3.2.   The most important part of the new provisions concerns movements of products under suspension of excise duty, with procedures based on the EMCS. According to Decision 1152/2003 the EMCS should be introduced in April 2009; while there are grounds for suspecting that this deadline might not be respected by certain countries, it is practically certain that not all will comply. A period of collective adjustment to the system will therefore be needed, entailing close cooperation between national administrations and therefore harmonisation of internal procedures: a rather complex matter in administrative, technical and operational terms. The Commission is aware of this and, while it proposes that the directive enter into force on 1 April 2010, it provides for an additional, intermediate period for Member States during which the relevant part of the original directive would continue to apply.

3.3.   The Member States have now committed to introducing the EMCS, but there is no guarantee that they will all do so willingly and it is quite possible that barriers to its full implementation might still arise. Resistance is to be expected, maybe ostensibly on technical grounds but essentially for other kinds of reasons. The precedent of the proposal for a Directive COM(2004) 227, mentioned in point 2.3, on the intra-Community movement of products already released for consumption, does not bode well: after tough negotiations it was decided to ‘suspend’ the matter pending a full review of the subject, but the present proposal is in essence a reproduction of the previous one.

3.4.   The most sensitive issues are political and economic in nature. Each Member State applies different excise duties to different products, which leads to the well-known phenomenon of cross-border purchases based on cost savings. Under the principles of the single market, each individual should be able to benefit from price differences not only at national level but also and above all in their cross-border purchases, but these principles are called into question when tax becomes a consideration. In reality it is clear that each Member State disapproves of this practice when it is to its detriment but ignores it when it is to its advantage. No type of product subject to excise duty is unaffected by this situation and the recent discussions on tobacco, alcohol and diesel are evidence of this (1): the grounds given were health, law and order, respect for the environment and harm to the economy. However, there are underlying reasons which are not always explicitly mentioned, related to tax considerations. The different viewpoints therefore derive from the social, economic and fiscal policies adopted by each Member State: at Community level the issue becomes purely political.

3.5.   The EESC is aware of the sensitive nature of the matter and the difficulties that could be encountered by each Member State in the negotiations awaiting it; their success depends on the degree of flexibility that will be needed to reach collective decisions. Each government will have to strike a balance between meeting its own needs and the excise concessions it has to make to others. In other words, it will have to find a way of pursuing its own social and budgetary goals and reconciling them with a joint excise system, not the other way round.

4.   Specific comments

4.1.   In this section the EESC will look at the main new elements and changes introduced by the Commission proposal with respect to current legislation. It will not comment on aspects which do not seem controversial, which are intended to streamline the text or which derive from common sense or natural developments in the field.

4.2.   As mentioned in point 3.2 above, although the proposed directive will repeal directive 92/12/EEC, movements in paper form will not be stopped immediately it enters into force: for a transitional period it will allow movements to take place under cover of accompanying documents in paper form. No one can predict how long this period will last: certainly, until the EMCS is adopted by all the Member States the system could run into serious problems. The EESC points out the burdens placed on traders – but also on Member States’ administrations – which are forced to work with both electronic and paper-based systems according to the destination countries.

4.2.1.   The alternative of making the system operative only when it is functional in all the Member States gives rise to the danger of postponing the project until a possibly distant future. Moreover, it would force those Member States that are ready to go with the electronic procedure to wait for the others to catch up: an unacceptable situation that penalises those who have fulfilled their obligations on time, but also, more importantly, traders.

4.2.2.   The Committee draws attention to a proposal from some experts which, though it may not be a perfect solution, appears to offer an acceptable if not optimal compromise: those Member States who are ready could use the electronic procedure for domestic movements, keeping the paper-based procedure in place for international trade. The system would thus be tried and tested at national level before being rolled out at Community level when all the Member States are ready.

4.3.   Chapter I (General provisions) makes no substantial changes in respect of Directive 92/12: it merely provides a better framework for the subject with a few adjustments, new definitions and minor changes.

4.4.   In Chapter II (Incurrence of excise duty), the change introduced by Article 7(4) provides for the ‘irretrievable loss’ of a product under suspension of excise duty to be exempt from taxation. The new term ‘irretrievable loss’ refers to a product which has become unusable by anyone, irrespective of the circumstances of the loss. The genuinely new element is the fact that the directive no longer requires proof to be given of ‘force majeure’, but the EESC points out that each Member State is still free to establish rules on the subject.

4.5.   Chapter III (Production, processing and holding) introduces one major new element: ‘tax warehouses’ can be authorised for persons resident in another Member State. Although this ties in with the principles of the single market, restrictions have been imposed in the past.

4.6.   Chapter IV (Movement of excise goods under suspension of excise duty) lays down new provisions: Article 16 states that products can be moved not just to tax warehouses but also to authorised individuals or businesses (‘registered consignees’), and, subject to authorisation, to a ‘place of direct delivery’ specified by an authorised consignee. The EESC endorses this and calls for the monitoring procedures to be sufficiently effective to prevent abuse. However, it would be desirable to have a precise definition of the professionals to whom the terms used in the directive apply.

4.7.   The following provisions (Articles 17-19) concern guarantees for covering the risks inherent in movement under suspension of excise duty and do not call for specific comment. However, the provisions of Section 2 (Articles 20-27) are especially significant, concerning the procedures to be followed on a movement of goods under suspension of excise duty. Experts believe that the adoption of these procedures should be carefully scrutinised to ensure that they allow for effective monitoring and are consistent with administrations’ resources. However, the EESC points out that Article 20(1)(2) and (3) stipulates that a movement of excise goods may take place only under cover of an electronic administrative document. This rule will need to be adapted to reflect the system adopted for the transition from paper to electronic means.

4.8.   Chapter V concerns the movement and taxation of excise goods after release for consumption and does not include any essentially new provisions. It reiterates the principle that goods should be taxed in the country in which they were acquired if they are held by private individuals (Article 30), and in the country of consumption if they are held for commercial purposes (Article 31), and confirms the existing rules on identification of the person liable to pay the duty and on goods in transit.

4.9.   The provision laid down in Article 34 on distance selling is particularly important: by derogation from Article 30 it provides that goods purchased by private individuals and dispatched or transported to another Member State directly or indirectly by the vendor or on his behalf are to be subject to excise duty in the Member State of destination. It is to be inferred, therefore, that if the goods purchased by the buyer are sent by the buyer to their address, they are to be subject to excise duty in the Member State in which they were purchased.

4.9.1.   The EESC is concerned that the provision might give rise to problems of interpretation: in distance selling the purchase takes effect in the place of residence of the seller when payment is made. The purchaser, who is the owner of the goods, is therefore legally entitled to instruct anyone they like (including the seller) to send them the goods on their orders or behalf. From a legal point of view, and contrary to the principle of taxation at the point of actual consumption, the goods could therefore always be deemed to have been purchased by a private individual and sent or transported on their behalf and therefore subject to excise duty in the Member State in which they were purchased, even if dispatch was effected by the seller.

4.10.   The EESC also considers that it is worth pointing out what appears to be a loophole in Article 34: the article does not specify the quantitative and value limits up to which purchases by a person are considered to have been made in their capacity as a ‘private individual’. To avoid discrepancies between measures applied by each Member State within the single market, it is necessary to specify unambiguous criteria. In the light of these and other concerns, the EESC calls on the Commission and the Member States to draw up clearer and more transparent rules; this would make life simpler for citizens and businesses.

4.11.   The provisions of Chapter VI (Miscellaneous) concern affixing of markings and preserve existing provisions on stores for boats and aircraft. Article 38 concerns small wine producers (up to 1 000 hl), who benefit from simplified procedures relating to production and holding of excise goods.

4.12.   Chapter VII (Final provisions) confirms the role of the existing Committee on Excise Duty and sets out the implementing provisions; Directive 92/112/EEC is to be repealed on a date (1 April 2009) which the Commission wisely flags as open to discussion; the same applies to the transitional period (with a hypothetical end date of 31 December 200...) during which Member States can continue to operate under the previous directive. Together with other institutions and experts, the EESC believes that these dates are purely indicative and should be put back to make the timeframes realistic, particularly given the practical difficulties surrounding full implementation of the EMCS.

(1)  See the most recent proposals for directives: