THE COMMISSION TIGHTENS ITS GRIP

By - CHRISTOPHER ARKELL, Tax Consultant

from "Freedom Today" - Apr/May, 1999

Corpus Juriscomes closer. Inland Revenue to become a tax agent for France and Germany.
Christopher Arkell describes how apparently minor steps already taken are preliminary moves
which will lead to a firm EU grip on the regulation of Britain's tax affairs.

 On 12 February 1999, in a sparsely attended Friday morning session of the European Parliament, an amendment to the 1976 Directive on Mutual Assistance for recovering tax was passed on a show of hands [press release, Graham Mather 12.2.'99].

 This amendment, under a misleading title which suggested that it concerned only the European Agricultural Guidance and Guarantee Fund, was introduced as a single market measure requiring only a qualified majority, not as a taxation measure, for which unanimity would have been demanded by Art 93 (new numbering) of The Treaty. The amendment deals with the collection of EC funds which have been expended on Common Agricultural Policy guarantee payments, customs duties, VAT and some excise duties.

 The amendment introduces four new principles into the laws of the member states:

  1. EC claims to have superior ranking to member state claims in the event of the bankruptcy of the debtor
    (Amendment 7);
  2. EC claims to be preferred over member state claims where there is competition for the funds from a debtor
    (Amendment 7);
  3. Identical treatment of EC claims in member state law, as if they were the member state's own claims
    (Amendments 3 and 7);
  4. Direct enforcement of EC legal instruments specifying claims in all member state law
    (Amendment 6, unaltered from that drafted by the European Commission).

 The amended directive is aimed at fraud and tax evasion, and covers both national claims and claims payable to the Community budget (Amendment 2). Its rapporteur, Otto Bardong, states that under the amended directive, "no recalcitrant taxpayer should be able to find shelter in a tax haven which protects him from pursuit" [Explanatory Statement B 2.5].

 "Taxpayer," explains Bardong, now includes "the payer of any and all taxes, whether indirect or direct."

 The Commission proposes to widen the scope of the directive to cover direct taxes, thus bringing it into line with the 1977 directive on mutual assistance between the member states in the field of direct taxes. Bardong heartily approves of this extension: "Quite obviously, member states must co-operate fully in combating all forms of tax evasion and tax fraud, and it would be unacceptable for havens allowing tax evasion to continue to exist within the single market" (Amendment 5).

 Many of the implications in this amendment of the 1976 Directive are plain to see, and Graham Mather points them out in his press release. The Channel Islands and Isle of Man will find it extremely hard to maintain their present tax structures for non-residents, and with the advent of withholding tax on interest paid across member state borders, either at 20 per cent or 15 per cent, there will certainly be a flight of capital deposits from the islands to jurisdictions outside the reach of the Commission.

 In addition, the UK Inland Revenue will become merely a tax collecting agent for France and Germany, where high tax rates have forced nationals to deposit funds in the UK. In some cases, French and German nationals living in the UK will be targeted by their native tax collectors, even though they may in the meantime have become resident for tax in the UK. French tax rules, for example, are much more opaque even than UK ones, and investigations are often continued into a tax payer's affairs long after he has settled in another tax jurisdiction - by means of telephone taps and analyses of credit card transactions if necessary.

 Yet, however damaging the amended 1976 directive will prove to British fiscal independence, it is when its powers and scope are looked at through the medium of the draft laws and procedures known as Corpus Juris that the real import of the amended directive becomes clear. Corpus Juris, for advance knowledge of which the UK owes an undying debt of gratitude to Torquil Dick-Erikson, is a set of penal provisions for the purpose of the financial interests of the European Union [Corpus Juris, publ Economica 1997, p.146]. The first 8 of its 34 Articles set out the crimes within its scope, the next 9 deal with the penalties to be inflicted on those convicted of these crimes and who such people might be, and Articles 18 to 34 recount the procedures to be adopted for investigations and trials under the Corpus Juris criminal code.

 The crimes listed in Articles 2 to 6 are those that EC officials and contractors have been committing for many years, and which are the subject of the Van Buitenen affair - market rigging, corruption, abuse of office etc.

 Article 1 attacks fraud in the Community budget, and specifically, in subsection (a):