Bolkestein attacks double tax whammy

Date: 11/01/01

By Peter Chapman

AGREEMENTS among member states are failing to keep citizens and firms from being taxed twice when they do business across the EU, Single Market Commissioner Frits Bolkestein has warned.

Union governments have all signed bilateral accords to ensure they use similar tax systems and prevent redundancy. These agreements set up procedures for ironing out problems which arise when different countries try to levy tax on the same transaction.

But Bolkestein claims the existing measures regularly fail to solve these headaches, leaving companies and cross-border workers to pick up the bill twice.

"Although the competent authorities are usually able to resolve disputes within a reasonable period of time, there are examples of mutual procedures which continue for a long period of time or do not result in a satisfactory outcome," Bolkestein said in a response to concerns from French MEPs.

The only answer to the problem, Bolkestein says, is for member states to agree to binding arbitration procedures to thrash out a solution within a pre-set time frame.

A pan-EU system of arbitration currently exists only for double taxation issues related to companies with units doing business across several member states. This would offset cases in which firms are forced by tax authorities in one country to charge market prices for these transactions. Such a situation would force up the profits of the 'selling' unit and lead to a higher levy that might not correspond to the lower tax burden in the 'buying' unit's member state.

EU business lobby UNICE has fought to end this double taxation but admits there is a lack of enthusiasm for change from member states, which are anxious to avoid any reduction in revenue.

With even moderate reforms requiring unanimous support, the result is that tax reform is the slowest moving ship in the EU policy convoy.

"The current tax agenda takes little or no account of real business needs for measures to remove such obstacles, given that its underlying objective is essentially to protect national revenue bases," said UNICE in a statement on the issue.

"Failure to address these problems will continue to generate inefficiencies in the operation of the single market, impose unnecessary costs on business and hold member states back in their attempts to deliver higher growth and employment in the EU."

Agreements among Member States are failing to keep citizens and firms from being taxed twice when they do business across the EU, Single Market Commissioner Frits Bolkestein has warned.