WRITTEN QUESTION P-3995/97 by Karla Peijs (PPE) to the Commission (11 December 1997)

Subject: Double taxation

Can the Commission indicate what takes precedence pursuant to European Directives: goods or services supplied exempt from turnover tax or goods or services supplied at VAT zero-rating because an intra-Community transaction is involved? Why?

Does the Commission acknowledge that tax accumulates if a firm in one Member State exports goods or services, exempt from turnover tax, to another Member State where such goods or services are not exempt from turnover tax? Can the Commission indicate whether this is based on a European decision - and, if so, which one - or whether these are simply powers exercised by national authorities?

Answer given by Mr Monti on behalf of the Commission (14 January 1998)

The Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment ((OJ L 145, 13.6.1977. )) rules out in principle any double taxation of transactions exempted within the country on the basis of Article 13 of that Directive. Uniform application of Article 13 prevents any such double taxation while Article 28c(B)(a) exempts 'the intra-Community acquisition of goods the supply of which by taxable persons would in all circumstances be exempt within the territory of the country'.

However, continued application by Member States of the transitional provisions based on Article 28(3) may lead to the accumulation of tax owing to the option given to Member States to continue to tax transactions which are normally exempt or to exempt transactions which are normally taxed. In exceptional cases, this lack of harmonisation may lead to a Member State taxing transactions on which the seller has been unable to deduct input tax in his own Member State.

The Commission has proposed ((OJ C 205, 13.8.1992. )) on a number of occasions that these temporary derogations be abolished. Except for the adoption of the Eighteenth Directive (89/465/EEC) of 18 July 1989 on the harmonisation of the laws of the Member States relating to turnover taxes - Abolition of certain derogations provided for in Article 28(3) of the Sixth Directive (77/388/EEC) ((OJ L 226, 3.8.1989. )), which abolished a number of those derogations, the Council has failed to reach unanimous agreement on their total abolition.

It was for that reason that the Commission clearly indicated in its work programme for the introduction of a common system of VAT ((COM(96) 328 final. )) that it intended to re-examine all the options and derogations authorised under the current arrangements with a view to ensuring that the tax is applied uniformly.