Dáil Éireann debate -
Wednesday, 19 Nov 1997

Vol. 483 No. 1

Written Answers. - EU Taxation Policy.

Minister for Finance (Mr. McCreevy)

The ECOFIN Council has held discussions in recent months on Commissioner Monti's proposals for a tax package consisting of a code of conduct on business taxation and certain other measures aimed at removing tax-related distortions affecting the EU Single Market. No decisions have yet been taken on the matter. However, the proposals are due to be considered again at the ECOFIN meeting on 1 December 1997 at which it is expected that decisions will be taken.

The code of conduct is seen by the Commission and some member states as the key element of the package and is designed to tackle certain aspects of business taxation which may be harmful to the Community interest. What is envisaged is a voluntary agreement which would not amend or override Community law and which would fully respect the principle of subsidiarity whereby general taxation policy remains the prerogative of the member states. The focus would be on special measures or schemes which provide a low effective tax tate relative to the general business tax rate in the country in question and which involve other special features of a potentially distortionary nature.

There are two other elements of the package proposed by the Commission on which decisions may be taken at the December meeting of ECOFIN. First, the Commission will ask the Council to adopt broad principles which would form the basis of a common EU tax regime in respect of personal savings income. The purpose of such a regime, which would require EU legislation in due course, would be to ensure that individuals resident in a member state would be subject to a minimum level of tax in respect of interest earned on savings held in other member states. Second, the Commission will ask the Council to make a political commitment to work towards the early adoption of an EU Directive providing for the elimination of witholding taxes on cross-Border interest and royalty payments between companies. Such taxes are considered to be an impediment to business transactions and the smooth functioning of the Single Market.