The contribution of taxation and customs policies to the Lisbon Strategy

The Commission has launched a plan for EU-wide taxation and customs measures that would help the EU to achieve its Lisbon objectives. The co-existence of 25 national taxation systems makes it impossible to take full advantage of the single market. The proposed measures are aimed at reducing the negative effects these co-existing national tax systems can have on market integration

ACT

Communication from the Commission of 25 October 2005 to the Council and the European Parliament - The Contribution of Taxation and Customs Policies to the Lisbon Strategy [COM(2005) 532 final - Not published in the Official Journal].

SUMMARY

In 2005 the Commission proposed to reinvigorate the Lisbon Strategy. This communication describes the measures and initiatives taken by the European Community to reach the Lisbon Strategy's taxation and customs objectives.

These measures are aimed at:

• making the European Union a more attractive place to invest and work;
• boosting growth by increasing and improving knowledge and innovation.

INVESTMENT AND MARKET INTEGRATION

The taxation and customs measures proposed in the communication are aimed at making the EU a more attractive place to invest and work by:

• extending and deepening the internal market;
• ensuring open and competitive markets inside and outside the EU;
• improving European and national legislation.

Extending and deepening the Internal Market

National tax systems have a negative effect on EU market integration. Remaining obstacles should be lifted to take full advantage of the single market. The Commission proposes five categories of measures.

Because different company taxation systems co-exist, cross-border activities are treated differently to similar domestic activities. The first measure is to introduce a Common Consolidated Corporate Tax Base for EU businesses (CCCTB), a strategy the Commission has been working towards since 2001.

A second series of measures is aimed at simplifying the tax environment. In order to create a level playing field, corporate taxation obstacles have to be removed concerning:

VAT compliance obligations;

• experimental application of the Home State Taxation approach;
• VAT rules concerning international services;
• the VAT rules on financial services;
• the rules governing the exemptions of services in the public interest.

A third series of measures is aimed at removing cross-border tax barriers faced by EU businesses. Pending the introduction of the CCCTB, the Commission plans to put in place:

• a system of cross-border loss relief;
• a system to manage transfer pricing;
• measures to abolish a number of indirect taxes, such as capital duty.

The fourth measure is aimed at creating a new car taxation strategy to replace Member State registration taxes.

The fifth measure concerns a new policy to combat distortions due to fraud and tax evasion.

Open and competitive markets

Pirated and counterfeit products violate the industrial and intellectual property rights of EU businesses. That is why it action to protect intellectual property rights is necessary. In October 2005, the Commission adopted a communication on a customs response to latest trends in counterfeiting and piracy.

To improve customs legislation and promote eCustoms the Commission has adopted communications on:

• creating a simpler and paperless environment for customs and trade (eCustoms). This communication is part of the modernisation of the Community Customs Code and the eGovernment programme;
• the role of customs in the integrated management of external borders to simplify administrative formalities.

Improving European and national legislation

The modernisation of VAT rules contained in the 6th VAT Directive is necessary to provide clear rules to traders. A more uniform application of these rules in combination with binding provisions would help to eliminate the current divergences at the Community level. Thus, a more uniform application of the VAT system will help European businesses.

KNOWLEDGE AND INNOVATION

With a view to boosting growth by increasing and improving knowledge and innovation, this communication presents tax and customs measures aimed at:

• favouring investment in research and development (R&D);
• facilitating the sustainable use of resources.

Research and development (R&D)

The Commission proposes to adopt guidelines on R&D tax incentives to increase and improve R&D investment. These guidelines should:

• set out the key EU legal conditions for such tax incentives;
• highlight best practices as regards R&D tax treatment and incentives in some Member States;
• set out the political message and contents of possible future initiatives directed to Member States.

Sustainable use of resources

Indirect taxation can play a significant role in the sustainable use of resources, especially in the fields of energy, transport and the environment. The Directive on the taxation of energy products and taxation of commercial diesel, energy and cars are examples of this.

RELATED ACTS

COMPANY TAXATION

Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee - Implementing the Community Programme for improved growth and employment and the enhanced competitiveness of EU business: Further Progress during 2006 and next steps towards a proposal on the Common Consolidated Corporate Tax Base (CCCTB) [COM(2007) 223 final - Not published in the Official Journal].

Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee - Implementing the Community Lisbon Programme - Progress to date and next steps towards a Common Consolidated Corporate Tax Base (CCCTB) [COM(2006) 157 final - Not published in the Official Journal]]

Communication from the Commission to the Council, the European Parliament and the Economic and Social Committee - Tackling the corporation tax obstacles of small and medium-sized enterprises in the Internal Market - outline of a possible Home State Taxation pilot scheme […] [COM(2005) 702 final - Not published in the Official Journal]

Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee of 24 November 2003 - An Internal Market without company tax obstacles: achievements, ongoing initiatives and remaining challenges [COM(2003) 726 final - Not published in the Official Journal]

Communication from the Commission to the Council, the European Parliament and the Economic and Social Committee of 23 October 2001 - Towards an Internal Market without tax obstacles - A strategy for providing companies with a consolidated corporate tax base for their EU-wide activities [COM(2001) 582 final - Not published in the Official Journal]

CAR TAXATION

Proposal for a Council directive of 5 July 2005 on passenger car related taxes [COM(2005) 261 final - Not published in the Official Journal] [Procedure CNS/2005/0130]

Last updated: 24.05.2007