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EC tax commissioner sets priorities.

EC TAX COMMISSIONER SETS PRIORITIES

The European Community's priorities for harmonizing members' tax systems were discussed by Christiane Scrivener, the EC commissioner for tax and financial policy, at an American Enterprise Institute conference. Acknowledging that resolving differences in member nations' tax policies "remains one of the thorniest issues left on the table," she listed three top priorities.

The first is to reduce differences in indirect tax rates, such as value-added taxes, to eliminate customs checkpoints, border controls and other barriers to active trade between member states. The Commission is trying to bring current VAT rates into two bands, one ranging from 14% to 16% and the other from 4% to 9%. In its deliberations, it has been influenced by the U.S. state sales tax system, in which differences of several percentage points sometimes exist between neighboring states. Scrivener noted that the U.S. system "suggests that some differences can be accommodated, but they need to be limited in scale."

A second priority is to guard against tax evasion stemming from liberalizing capital flows from one member state to another. In some cases, income from the capital might not be reported to the member state of residence. Says Scrivener, "There is a risk that investment decisions would not be based on economic considerations, but solely, or to a large extent, upon the possibility of tax evasion."

To offset this possibility, the Commission has proposed a common minimum witholding tax of 15% on interest along with measures to strengthen mutual assistance among tax authorities of different states.

The third priority involves eliminating tax obstacles to cooperation between companies in different member states. To this end, the Commission intends to eliminate all forms of double taxation that result from differences in national tax systems. For instance, it has proposed abolishing witholding tax on dividends paid by a subsidiary located in one member state with a parent company in another. It also has proposed allowing companies to deduct losses incurred by subsidiaries or permanent establishments of a company located in various EC member states.
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Title Annotation:Christiane Scrivener
Publication:Journal of Accountancy
Date:Jun 1, 1990
Words:341
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