Explanatory Memorandum to COM(2011)706 - Action programme for customs and taxation in the EU for the period 2014-2020 (FISCUS) and repealing Decisions N° 1482/2007/EC and N° 624/2007/EC

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dossier COM(2011)706 - Action programme for customs and taxation in the EU for the period 2014-2020 (FISCUS) and repealing Decisions N° ...
source COM(2011)706 EN
date 09-11-2011
1. CONTEXT OF THE PROPOSAL

On 29 June 2011, the Commission adopted a proposal for the next Multi-Annual Financial Framework for the period 2014-2020: a budget for delivering the Europe 2020 Strategy proposing among others a new generation of Customs and Fiscalis programmes. In line with the simplification policy of the Commission and taking account of the existing parallels between the present Customs and Fiscalis programmes, a single future programme is proposed (FISCUS), safeguarding nevertheless the particularities of customs and taxation. This programme will contribute to the Europe 2020 Strategy for smart, sustainable and inclusive growth, by strengthening the functioning of the Union's Single Market and its Customs Union. By pushing technical progress and innovation in national tax administrations towards e-tax administrations, the new programme also contributes to the establishment of a digital Single Market ('Digital Agenda for Europe').

The Customs Union protects the financial interests of the Union and its Member States collecting duties, fees and taxes. It requires that goods originating from third countries comply with Union legislation before they can move around freely within the Union. This implies the management of large trade volumes on a daily basis – handling 7 customs declarations every second - requiring Customs to strike a balance between the facilitation of trade for business and the protection of citizens against risks to their safety and security. This can only be achieved through intense operational cooperation between customs administrations of the Member States, between them and other authorities, with trade and other third parties. The smooth functioning of taxation systems in the internal market is dependent on effective and efficient processing of cross-border transactions by national tax administrations, the prevention of and fight against tax fraud and protection of tax revenues. This implies exchange of large quantities of information between tax administrations, making the tax administrations working more efficiently but equally reducing the administrative, economic and time burden for tax payers involved in cross-border activities. This can only be achieved on the basis of intense cooperation between tax administrations of the Member States and third parties.

The proposed programme will support the cooperation between the customs and tax authorities and other parties concerned. It is the successor programme of both the Customs 2013 and Fiscalis 2013 programmes which end on 31 December 2013. The proposed FISCUS Programme will support customs and tax cooperation in the Union clustered around human networking and competency building, on the one hand, and IT capacity building on the other hand. The first cluster allows for the exchange of good practices and operational knowledge amongst the Member States and other countries participating in the programme. The latter enables the programme to fund cutting-edge IT infrastructure and systems that allow customs and tax administrations in the Union to evolve to fully-fledged e-administrations. The main added-value of the programme is generated by enhancing the capacity of Member States in raising revenue and managing increasingly complex trade flows, while cutting costs in developing the tools for these purposes.

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2. RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTS 2.1. Consultations and expertise


In the context of the midterm evaluation of the present programmes, a contractor analysed the effectiveness, efficiency, relevance and value added of the current Customs and Fiscalis 2013 programmes. Monitoring data available from the different activities was used. For the midterm evaluation of the Customs 2013 programme, consultations with trade representatives were carried out.

Another contractor carried out a study of the possible framework of the future Customs and Fiscalis programme: its challenges, objectives and possible policy options, including a comprehensive analysis of future challenges, structural problems and possible improvements to the functioning of the Customs Union. For the latter, consultations were carried out with Customs experts at different levels. Considering the importance of the activities related to the exchange of information, a separate study was carried out on the future implementation strategy for the exchange of information. This study was presented in workshops for Chief Information Officers of tax and customs administrations in June 2011.

The findings of the study on the future programmes were discussed with the representatives of the participating countries in workshops organised in June and July 2011. In preparation of this workshop, a roundtable was organised in spring 2011 in the relevant programme Committees meeting where participating countries were asked to identify the main strengths of the programme and how the efficiency of the programme could be improved.

Impact assessments were prepared analysing the continuation of the Customs and Fiscalis programmes. These were approved by the Impact Assessment Board.

Numerous recommendations for design and further improvements of the programme were taken on board in the development of the future programme proposal, notably for the design of the programme activities and the formulation of the programme objectives. The main recommendations related to the introduction of new specific objectives or re-emphasis of existing ones. For the taxation sector they focused on reduction of administrative burdens on tax administrations and taxpayers and improving cooperation with third countries and third parties and reinforce the fight against fraud. For the customs sector the programme should put more emphasis on cooperation with third countries, business and trade associations as well as trade facilitation. In addition the mid-term evaluations recommended to introduce new tools to address new challenges, notably cooperation on specific operational tasks, the improvement of the distribution of the results of the programme activities taking advantage of online collaboration methods and defining a framework to better monitor the outputs of the programme.

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2.2. Impact assessment


Considering the overall policy context and problems ahead for customs and taxation in the next decade, a number of policy options have been analysed and compared in the impact assessment for each of the present programmes.

Common policy options:

Baseline: continuing the programmes with their current objectives and design.

No continuation of the programme: both programmes would be discontinued and EU funding will no longer be provided for IT tools, joint actions or training activities supporting cooperation in the customs and taxation area.

Specific policy options for the Customs area:

Increased support to EU legal obligations such as the Modernised Customs Code (MCC): This policy option would extend the baseline scenario tailoring the programme to the new needs deriving from the evolving Customs Union environment. This option covers the deployment of new IT systems as defined in EU customs legislation, gradually introducing a shared development model for the IT systems and modernising the underlying governance, architecture and technology.

Increased support to EU legal obligations and financial support for technical capacity building: Besides the components of the previous option, this option would include a financial support scheme allowing Member States to request support to acquire equipment to control land, sea or air borders, for instance scanners or laboratory equipment. This would support Member States to meet the demands for speeding up and streamlining controls in the context of evolving technologies.

Increased support to EU legal obligations with a maximised shared IT environment: Besides the components of option 3, this option supports EU customs to take the advantage of full scale shared development and operation of the European IT systems to implement EU customs legislation such as the MCC and other customs related legislations. This option would ensure enhanced support to the public authorities to develop and deploy all the systems necessary for a pan-European electronic customs environment and to business to connect to those systems.

Specific policy options for the taxation area:

Upgrade the baseline: This option would encompass the baseline scenario tailoring the specific objectives to the future challenges. It puts additional focus on the fight against tax fraud, avoidance and evasion compared to the present programme, addressing the high administrative burden for taxpayers and tax administrations and considering the cooperation with third countries and third parties. This policy option would require only a marginally higher budget compared to the present Fiscalis programme.

Upgrade and cater for new policies: Besides addressing the problems described under the option 'upgrading the baseline scenario', this policy option would offer the means to extend cooperation to new areas that may follow from policy evolution and notably enable programmes to have the means to facilitate coherent application and implementation of this new legislation and to implement the related exchange of information and administrative cooperation.

The impact assessments lead to the following recommendation: For Customs the 'Increased support to EU legal obligations such as the Modernised Customs Code (MCC)' option 3 is the preferred option while for taxation the 'Upgrade the baseline' option 6 is the preferred one. Both policy options are in line with the proposal for a new budget for Europe 2020 and score on acceptability by Member States. The option 'Increased support to EU legal obligations and financial support for technical capacity building' has not been retained for Customs since the acquisition of equipment expressed in the technical capacity building component could be co-funded through other programmes including Regional Structural Funds while ensuring coherence with the specific objectives of the proposed FISCUS Programme.

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3. LEGAL ELEMENTS OF THE PROPOSAL 3.1. Legal basis


The FISCUS proposal is based on a double legal basis. The customs related aspects of the proposal are based on article 33 of the Treaty on the Functioning of the European Union (TFEU) which calls for action by the European Union with regard to customs cooperation and the EU customs union.

Many aspects of tax policy implementation remain predominantly of national competence. The proposed programme however cannot be considered to be a tax policy measure falling under national competences. Indeed, the programme aims to improve cooperation between tax administrations providing mechanisms and means as well as the necessary funding. As such the programme will not, when implemented by the Commission, result in a further harmonisation of national tax systems but allow reducing the negative effects related to the co-existence of 27 different tax systems, such as distortions of competition, administrative burden for administrations and taxpayers, tax shopping, etc. The proposed measure is therefore a clear Internal Market support measure allowing the improvement of the functioning of the various tax systems within the Internal Market. The legal basis for the taxation related aspects of the proposed programme is therefore article 114 TFEU.

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3.2. Subsidiarity and Proportionality


Action at Union level rather than at national level is necessary for the following reasons:

· The customs union is an exclusive competence of the Union. By transferring their powers to the Union, Member States ipso facto agreed that actions in the customs area will be better implemented at Union level. However, the Union legal framework in itself does not ensure sufficiently the proper functioning of the Customs Union. It should be complemented by supporting measures as provided by the Customs Programme in order to ensure that EU customs legislation is applied in a convergent and harmonised way.

· Many of the activities in the customs area are of a cross-border nature, involving and affecting all 27 Member States, and therefore they cannot be effectively and efficiently delivered by individual Member States. EU action is needed to underpin the European dimension of customs work, to avoid internal market distortions and to support the effective protection of the EU external borders.

· In this regard, EU action is justified to ensure the proper functioning and further development of the Customs Union and its common regulatory framework, as it has been shown to be the most efficient and effective EU response to shortcomings and challenges in implementing the EU Customs Union and customs cooperation.

· Concerning taxation, it is not sufficient to adopt legislation at European level, taking it for granted that its implementation will run smoothly and if not, the infringement procedure will be sufficient. In order to efficiently implement EU and national tax law, cooperation and coordination at the European level are necessary.

· The challenges identified for taxation cannot be tackled without a steering role executed by the Commission and without encouraging Member States to look beyond the borders of their administrative territory. Without intense cooperation and coordination between Member States, unfair tax competition and tax shopping would increase, while fraudsters would exploit the lack of cooperation between national authorities.

· From an economic point of view, action at EU level is much more efficient. The backbone of the customs and taxation cooperation is a highly secured dedicated communication network. It interconnects national customs and tax administrations in approximately 5 000 connection points. This common IT network ensures that every national administration only needs to connect once to this common infrastructure to be able to exchange any kind of information. If such an infrastructure were not available Member States would have to link 26 times to the national systems of each of the other Member States.

The Commission shall, according to Article 17 TEU, exercise coordinating, executive and management functions, as laid down in the Treaties. Coordination by the Commission needs to be undertaken with national customs and tax authorities, with specialised representatives, at operational level and on a long term basis in view of existing and future challenges for the Union identified in the customs and tax fields. The various fora and tools of the Programme provide an appropriate framework for the Commission to take on its coordinating role in the customs and tax area. The FISCUS Programme is therefore in line with the principles of subsidiarity and proportionality (as set out in Art. 5 of the Treaty of the European Union (TEU).

6.

3.3. Instrument


In line with the conclusion of the relevant impact assessments, EU intervention by means of a funding programme is appropriate. Taking into account the positive feedback resulting from the midterm evaluation of the Customs 2013 and Fiscalis 2013 Programme, a successor FISCUS Programme is being proposed by the Commission.

Although the new programme remains primarily addressed to Member States and their authorities, it is intended that future programme actions will - more than in the past - involve external stakeholders. In view of this evolution the appropriate legal instrument for establishing the programme is a 'regulation' rather than a 'decision' as for previous programmes.

Contents

1.

BUDGETARY IMPLICATION



The timing of the review of EU funding Programmes is linked to the proposal for a new Multiannual Financial Framework, as contained in the Commission Work Programme. In accordance with this proposal, this Regulation on the FISCUS Programme contains a budgetary framework of EUR 777 600 000 (in current prices) for the period of 2014-2020.

The FISCUS Programme will be implemented by means of a direct central management mode and in a priority-based manner. Work programmes are established –together with the stakeholders- stipulating the priorities for a specific period.

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5. OPTIONAL ELEMENTS 5.1. Annotations to specific legal provisions 5.1.1. Chapter I: General Provisions


For customs related aspects, the scope of the programme is specifically oriented towards the functioning of the EU Customs Union. For the taxation related aspects, the programme has been brought in line with recent Union tax legislation meaning that it will not only cover VAT, excised duties and taxes on income and capital but also other taxes which are subject of EU tax legislation.

The FISCUS Programme will be open for participation to the Member States, Candidate Countries and potential Candidates. In line with the overall Union policy in this respect, countries of the European Neighbourhood Policy will also have the possibility to take part in the Programme under certain conditions. Finally, external experts might also participate in specific actions (e.g. representatives of other authorities, trade, national and international organisations, and possibly other experts).

The objectives of the FISCUS Programme have been re-oriented in function of the identified and expected problems and challenges for customs and tax policy and customs and tax authorities in the next decade. The overarching objective of the programme is to support the functioning of the Customs Union and to strengthen the internal market by improving the operation of the taxation systems through cooperation between participating countries, their customs and tax administrations, their officials and external experts.

To provide an adequate answer to the future challenges in the customs and tax area in the Union, the following specific objectives have been defined for the programme:

1. to support the preparation, coherent application and effective implementation of Union law in the fields of customs and taxation,

2. to contribute to the efficient functioning of customs and tax authorities by improving their administrative capacity and reducing the administrative burden,

3. to prevent fraud and tax evasion and to enhance competitiveness, safety and security by enhancing cooperation with international organisations, other governmental authorities, third countries, economic operators and their organisations,

4. to strengthen the competitiveness of European businesses through the facilitation of trade and the reduction of compliance costs,

5. to protect the financial and economic interests of the European Union and its Member States through the fight against fraud and tax evasion,

6. (for the Customs Sector) to support customs in protecting citizens and the economy in terms of safety and security, and in protecting the environment.

Operational objectives have been added concentrating on outputs to be delivered by the Programme and are available in annex 1 of the Regulation.

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5.1.2. Chapter II: Eligible actions


The types of actions considered eligible for programme funding are similar to the ones under the current programmes, namely:

· Joint Actions pursuing the exchange of knowledge and good practice between customs and tax officials of the participating countries

· European Information Systems[7] facilitating the exchange of information and access to common data and finally

· Training activities leading to human competency building for customs and tax officials across Europe

Modifications have been introduced in certain categories of actions.

· The FISCUS programme will include some new joint action tools:

· Steering groups (only new for taxation) will perform activities of a coordinating nature and be usually composed of all interested Participating Countries. They differ from project groups, which are usually composed of a limited number of countries, operational during a limited period of time and are working on the realisation of a predefined objective with a precisely described outcome.

· Expert teams are structured forms of cooperation, pooling expertise and/or addressing specific operational activities. They can be set up with a non-permanent or permanent character and could possibly receive support such as online collaboration services, administrative assistance and infrastructure and equipment facilities to underpin the realisation and success of an action.

· Actions for public administration capacity building will support customs and tax authorities that face particular difficulties, be it lacking knowledge, expertise, organisational or any other deficiencies which can be overcome through tailor-made support actions provided by fellow countries and or Commission officials.

· As regards the European Information Systems, the new programme defines 'Union components' as IT assets and services which concern some or all of the Member States and are owned or acquired by the Commission. These Union components are described in Annex 2 point 4 of the proposed legal act. The 'national components' are all components which are not 'Union components'. They are developed, installed and operated by Member States, and thus subject to the funding and responsibility of Member States.

The redefinition of Union components should be seen in the light of the changing practice of IT systems development. Currently each Member State is responsible for the implementation of its national systems according to common specifications, resulting in 27 developments for each system, 27 trader interfaces, 27 schedules of development, 27 sets of project related or operational difficulties, etc. In particular in the light of the financial crisis, the Commission considers that the development of IT systems should be done more efficiently; including an increased number of central resources and an increased involvement of Member States in common projects.

This simplification aims at reducing overall IT costs and improving the consistency of data and application of rules by gradually moving towards more shared IT development (knowledge, data, IT components). It will bring improved working methods for instance through business process modelling, better quality specifications but also will bring more standardisation for instance harmonising interfaces for traders. The new approach towards Union components will limit the risk for divergent development and deployment plans. It also provides additional means to control the finalisation of the project as common plans avoid that the slowest member in the development chain determines the entry in operation of the entire project. This increased Commission responsibility will require more specialised support and personnel at Commission level.

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5.1.3. Chapter IV: Implementation


In order to ensure uniform conditions for the implementation of this Regulation, implementing powers should be conferred on the Commission. As such an annual work programme will be adopted in accordance with the examination procedure referred to in Article 5 of Regulation (EU) No 182/2011 of the European Parliament and the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by the Member States of the Commission's exercise of implementing powers[8].

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5.2. Simplification 5.2.1. How did the proposal contribute to simplification?


(a) Coherence with the financial regulation

The programme proposal is fully coherent with the financial regulation and its implementing provisions. Grants and procurement are the main financial instruments used to implement the programme. The programme incorporates the simplification measures proposed in the Commission proposal for the revision of the financial regulation, notably the recourse to lump sums, flat rates and unit costs. In view of the importance of the processing of subsistence and travel costs paid under the programme, the programme will introduce simplification measures offered by the new Financial Regulation in this area.

(b) Coherence between the Customs and Fiscalis 2013 programmes

The management of the previous Customs and Fiscalis programmes had been fully aligned based upon identical procurement rules and grant models, common management guides and IT based systems. The management model includes clear and simple procedures for organising programme activities. The programme management team of the Commission is assisted by programme management teams in the different customs and tax administrations acting as facilitator and first point of contact for customs, respectively taxation officials in Member States. The management model allows the deployment of activities in a short time span, some weeks at the most, reacting quickly to newly emerging needs, while at the same time guarding coherence between the different activities. The Member States have expressed their satisfaction with the management model of the programme in the midterm evaluation[9]. Considering the already close alignment between the Customs and Fiscalis programme as well as the Commission policy of simplification, it has been decided to propose a single Programme (FISCUS) in the framework of the 2014-2020 multiannual financial framework.

(c) Did the programme consider externalisation?

The possibility to implement the future Programme through an executive agency was considered. An agency could be empowered to execute tasks such as the selection of the activities under the programme, the administrative preparation and follow-up of the activities, monitoring of the activities, grants and procurement of IT systems. However, such an executive agency would add an additional layer to the governance structure, increasing the cost of coordination and checks, complicating and lengthening decision making by adding new administrative procedures. Also, it would have a negative impact on the level of know-how within the Commission and increase the risk of a fragmentation of content versus administrative aspects. This option would not bring the expected business benefits and has therefore been discarded.

In an alternative scenario, it was also considered to transfer all relevant IT activities to national administrations with the exception of the CCN/CSI network and its related services. In this scenario the risk is very high that gradually there would be needs and initiatives to set-up more central governance structures. The resulting impact would be similar to the effects of the discontinuation of the programmes which would put at risk the efficiency and effectiveness of customs and tax administrations, challenge the uniformity of the Customs Union and thus the treatment of traders, and reduce the ability to prevent and detect fraud. Considering the negative impacts on results and performance, this scenario was also discarded.

(d) Does the programme use common IT tools to reduce the administrative burden on beneficiaries and contractors?

The Customs 2013 and Fiscalis 2013 programmes already deploy tools to facilitate the management for grants through a common Activity Reporting Tool (ART).

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5.2.2. Performance measurement of the proposal


The performance of the programme will be measured using a coherent set of performance, impact, result and output indicators linked to the general, specific and operational objectives of the programme and building the link with the Commission Management Plan. The detailed list of impact, result and output indicators is available in the Impact Assessments of the relevant programmes. The Commission has identified targets for some operational objectives of the programme, others will be completed through actions within the current programmes. The targets of all operational objectives will be identified before the start of the 2020 programme by the Commission and presented to the Programme Committee for endorsement in the framework of the Annual Work Programme procedure.

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5.2.3. Is the programme proposal coherent with overall Commission policy


The programme will contribute towards the objectives of the Europe 2020 Strategy by strengthening the Single Market, enhancing the productivity of the public sector and sustain technical progress and innovation in administrations, and by promoting employment. It will support flagships on the digital agenda for Europe[10], the flagship initiative on the Innovation Union[11], the flagship on the Agenda for New Skills and Jobs[12] and the flagship initiative on an industrial policy for the globalisation era[13]. The programme will also support the Single Market Act[14] and promote growth and innovation by enforcing intellectual property rights (IPR) at the border in line with the recent comprehensive IPR strategy.[15] As concerns the protection of the financial interests of the Union and Member States, the programme will support the collection of duties and various fees and taxes on trade, and collaborative efforts to fight fraud. The Customs Union is the operational arm of EU trade policy, and the programme will therefore help implementing bilateral and multilateral trade agreements, collecting duties, and applying trade measures (such as rules of origin), embargoes and other restrictions in line with the EU trade strategy[16]. More recently, customs have been entrusted a role in protecting the environment (related inter alia to illegal waste export, chemicals, ozone depleting substances, illegal logging and the CITES convention). Finally, customs action and cooperation between customs, police and other enforcement authorities increasingly contributes to internal security of the EU as reflected in the action plan for the Internal Security Strategy[17] and in the Stockholm Programme Action Plan.[18].