A4-0024/94

Resolution on the communication from the Commission to the Council and the European Parliament concerning the improvement of the fiscal environment of small and medium-sized enterprises, accompanied by a recommendation concerning the taxation of small and medium-sized enterprises

The European Parliament,

-having regard to the communication from the Commission to the Council and the European Parliament concerning the improvement of the fiscal environment of small and medium-sized enterprises (COM(94)0206 - C4-0021/94),

-having regard to the Commission recommendation of 25 May 1994 concerning the taxation of small and medium-sized enterprises (94/390/EC),

-having regard to the communication from the Commission concerning an integrated programme in favour of SMEs and the craft sector (COM(94)0207 - C4-0038/94),

-having regard to its opinions of 20 April 1993 on the proposals for Council Decisions on I. a multiannual programme (1993 to 1996) of Community measures to intensify the priority areas of policy for enterprise, in particular SMEs, in the Community, and II. a multiannual programme (1994 to 1997) of Community measures to ensure the continuity of policy for enterprise, in particular SMEs, in the Community,

-having regard to its resolution of 19 April 1994 on guidelines on company taxation linked to the further development of the internal market,

-having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy (A4-0024/94),

A.whereas SMEs are important for the socio-economic fabric of the European Union,

B.whereas SMEs encounter specific financing problems both as regards access to and the price of external funds and as regards self-financing assets,

C.whereas complex administrative and legal obligations impose an additional heavy burden on SMEs,

D.whereas it is as important to promote the continuity of enterprises as their initial establishment,

E.whereas tax treatment is an important aspect of the business environment of SMEs, influencing their ability to become integrated into the internal market and their position on external markets,

F.recalling the conclusions and recommendations of the Ruding Committee on company taxation,

G.whereas SMEs do not form a homogeneous group,

H.whereas the internal market's progress in the fiscal sphere may be hampered by the application of the procedure that requires unanimous decision-making in the Council,

I.whereas the European Parliament was not consulted on the abovementioned Commission recommendation of 25 May 1994,

J.whereas the Commission's communication mainly concerns direct taxes,

K.whereas measures designed to ensure the proper transfer of firms, and thus their survival, are of as much importance for the European economy as measures to stimulate the creation of new firms,

L.whereas there is a growing reluctance on the part of banks to lend to the SME sector, and when loans are made the interest rate charged is often higher than the rate charged to big business; whereas banks often choose to support SMEs in the light of the available collateral rather than consideration of the inherent business potential of a firm or entrepreneurial proposal,

1.Agrees, by and large, with the Commission's approach to the current problems;

2.Emphasizes that not only direct taxes but also indirect taxes and especially certain aspects of the VAT system pose problems for SMEs and calls for action to be taken on the definitive VAT system which has been announced and which must now be introduced;

3.Calls on the Commission to consider whether certain labour-intensive services (e.g. construction, footwear manufacture, vehicle maintenance, photography, gardening and the tourist sector) do not qualify for the reduced VAT rate;

4.Believes that the proposed measures will be fully effective only if they form part of a larger whole and therefore calls for work to be continued without delay on all the various initiatives announced in the past;

5.Hopes that the proposals and recommendations will provide appropriate solutions for very small, small and medium-sized enterprises; calls on the Commission to opt, where possible, for a generally applicable solution and to vary its approach where necessary;

6.Regrets that Article 100a(2) of the EC Treaty requires unanimity for harmonization measures in the fiscal sphere;

7.Endorses the Commission's pragmatic approach in proposing, on the basis of the subsidiarity principle, no more than minimum harmonization in the present circumstances;

8.Invites the Commission, however, to put forward a binding act if it should transpire that the Member States are not complying, or complying insufficiently, with the Commission's proposals;

9.Calls upon the Commission to coordinate the drive in Member States against black economies which flout relevant legislation and avoid payment of taxes;

10.Hopes that the measures to be taken by the Member States will not increase the administrative, fiscal or accounting burdens on SMEs;

11.Regrets that there was no prior consultation of Parliament on the recommendation and recalls its request in its abovementioned resolution of 19 April 1994 to be duly consulted on specific proposals concerning the taxation of enterprises;

12.Requests the Commission to address other areas of importance to SMEs as quickly as possible and to bring forward recommendations regarding:

-tax treatment of Euro economic interest groupings,

-taxation of partnerships,

-the Business Angel concept;

Financing

13.Reaffirms the need for a fiscally neutral way of converting sole proprietorships without legal personality or partnerships into incorporated enterprises; hopes that this facility may also apply to the conversion of sole proprietorships without legal personality into partnerships;

14.Maintains that, as incorporated enterprise is not the appropriate legal status for every enterprise, sole proprietorships without legal personality and partnerships need to be offered a proper and equivalent status;

15.Endorses the efforts to limit the taxation of profits reinvested by sole proprietorships and partnerships liable to personal income tax, insofar as these reinvested profits serve to secure and create jobs; endorses the Business Angel concept, whereby profits from investment in shares in unlisted enterprises remain untaxed provided that they are reinvested in similar shares;

16.Warns that incorporation will not automatically solve SMEs' problems and that they should also be assured of fair treatment where liable to corporation tax;

17.Shares the Commission's view that all venture capital should be encouraged through fiscal transparency and the limited liability of the investors;

18.Points out, however, that in practice the joint venture approach is not open to small undertakings and meets with psychological resistance among somewhat larger undertakings;

19.Urges the Commission to investigate possible financing arrangements which will serve to strengthen SMEs' own assets;

20.Calls for encouragement to be given to support for or the development of guarantee systems and the subordinated debt method;

21.Calls on the Commission to continue its research and to propose measures relating to the tax treatment of EEIGs;

22.Calls on the Commission to encourage Member States to adopt measures to guide savings towards investment in SMEs;

23.Calls on the Commission to coordinate exploration of the idea of establishing a European capital market for SMEs and to support appropriate measures at Member State level which might achieve this aim;

Complex administrative requirements

24.Calls on the Commission to consider whether and, if so, under what conditions it would be possible to have the tax legislation of the Member State in which the head office of an enterprise is located govern permanent establishments in other Member States;

25.Points out, however, that the wide differences in tax legislation among the Member States entails a risk of fiscal dumping, but that this risk is insignificant for the average small enterprise;

26.Feels, therefore, that consideration should be given to the possibility of restricting the application of the proposed measure to enterprises below a certain size;

27.Requests the Commission to bring forward proposals to reduce the loss of jobs associated with the administrative, fiscal and legal difficulties encountered at the time of transfer of ownership of successful SMEs;

Continuity

28.Endorses the approach chosen by the Commission of recommending to the Member States that succession duties and capital transfer taxes should be limited to strictly business assets provided there is a guarantee of continuity;

29.Considers it necessary for the network of bilateral double taxation agreements to be completed and calls for consideration also to be given to the possibility of recommending a generally applicable European solution to this problem; recommends also that a generally applicable European solution be sought to the problem of double taxation when the ownership of SMEs is transferred;

30.Urges that it be kept informed of the action taken by the Member States on the recommendation and invites the Commission to submit a progress report by January 1996;

31.Calls on the Commission to submit to it, as soon as possible and in a form such that it can be inserted into the integrated programme for SMEs, a plan of action for implementing the various measures proposed for improving the fiscal environment of SMEs;

32.Instructs its President to forward this resolution to the Commission, the Council and the governments of the Member States.