The Treaty provisions which apply to the French outermost regions in principle do not authorise any difference between the taxation of local products and the taxation of products from metropolitan France or the other Member States. However, Article 349 of the Treaty provides for the possibility of introducing specific measures for outermost regions because of permanent constraints affecting their economic and social situation.
(2)
Specific measures should be adopted, in particular to lay down the conditions for the application of the Treaties to those regions. Such specific measures are to take into account the special characteristics and constraints of those regions, without undermining the integrity and coherence of the Union legal order, including the internal market and common policies. The competitive disadvantages faced by the French outermost regions are referred to in Article 349 of the Treaty: remoteness, insularity, small size, difficult topography and climate, and economic dependence on a few products. Those permanent constraints result in the French outermost regions depending on imports for raw materials and energy, an obligation to build up larger stocks, and a small local market combined with a low level of export activity, etc. The combination of those competitive disadvantages increases production costs and, therefore, the cost price of goods produced locally, without specific measures, would be less competitive than equivalent goods produced elsewhere, even taking into account the cost of transporting such goods to the French outermost regions. This would make it harder to maintain local production. For this reason, specific measures need to be taken in order to strengthen local industry by making it more competitive.
(3)
With a view to restoring the competitiveness of goods produced locally, Council Decision No 940/2014/EU (2) authorises France to apply, until 30 June 2021, exemptions or reductions to dock dues in respect of certain products for which local production exists in the outermost regions of Guadeloupe, French Guiana, Martinique, Mayotte and Réunion, given that the significant importation of those products could jeopardise the continuation of local production and that additional costs could increase the cost price of local production in comparison with products produced elsewhere. The Annex to that Decision contains the list of products to which the tax exemptions or reductions may be applied. The difference between the taxation of locally produced products and that of other products may not exceed 10, 20 or 30 percentage points, depending on the product.
(4)
France has requested that a system similar to that contained in Decision No 940/2014/EU continue to apply after 1 July 2021. France explained that although the competitive disadvantages referred to above continue to exist, the tax arrangements established by Decision No 940/2014/EU has made it possible to maintain and, in certain cases, develop local production, and that those arrangements have not disrupted external trade and have not resulted in overcompensation for the additional costs borne by the enterprises.
(5)
For each of the five outermost regions concerned (Guadeloupe, French Guiana, Martinique, Mayotte and Réunion), France sent the Commission a set of lists of products for which it intends to apply a tax differential of no more than 20 or 30 percentage points, depending on whether or not the products are produced locally. The French outermost region of Saint Martin is not covered by the request.
(6)
This Decision implements the provisions of Article 349 of the Treaty and authorises France to apply differentiated taxation to the products for which it has been proven, firstly, that local production exists, secondly, that the significant importation of those products (including from metropolitan France and other Member States) that could jeopardise the continuation of local production exists, and lastly, that additional costs exist which increase the cost price of local production in comparison with products produced elsewhere, compromising the competitiveness of products produced locally. The authorised tax differential should not exceed the proven additional costs.
(7)
In cases where local production has a market share of less than 5 % or where the share of imports is less than 10 %, additional evidence was requested as proof of all or some of the following circumstances: the existence of labour-intensive production; new or complementary production designed to diversify a company’s product range; production that is strategic for local development (e.g. in sectors relating to the circular economy, harnessing biodiversity or environmental protection); innovative or high-added-value production; production for which the disruption of supply from elsewhere could jeopardise the local economy or population; production which can only exist with a dominant market position as a result of the small size of the markets in the outermost regions; and the production of medical products and personal protective equipment required to tackle public health crises. Applying those principles allows the provisions of Article 349 of the Treaty to be implemented without going beyond what is necessary and without creating an unjustified advantage for local production so as not to undermine the integrity and the coherence of the Union legal order, including safeguarding undistorted competition in the internal market and State aid policies.
(8)
With a view to simplifying and reducing the obligations of small enterprises and to supporting their growth, the tax exemptions or reductions should apply to operators with an annual turnover of at least EUR 550 000. Operators whose annual turnover is below that threshold should not be subject to dock dues but also should not be able to deduct the amount of those dock dues borne upstream.
(9)
Similarly, consistency with Union law means ruling out the application of a tax differential for food products benefiting from aid under Chapter III of Regulation (EU) No 228/2013 of the European Parliament and of the Council (3). That provision prevents the effect of the financial aid to agriculture granted under the specific supply arrangements from being cancelled out or reduced by the higher taxation of the subsidised products by means of dock dues.
(10)
The objectives of supporting the social and economic development of the French outermost regions, already provided for in Decision No 940/2014/EU, are confirmed by the requirements regarding the purpose of the dock dues. It is a legal obligation for the revenue from those dock dues to be incorporated into the tax resources of the French outermost regions and to be allocated to an economic and social development strategy involving the promotion of local activities.
(11)
It is necessary to amend Decision No 940/2014/EU in order to extend the period of application of the derogation authorised by it by six months, until 31 December 2021. That period should enable France to take implementing measures.
(12)
The duration of the scheme should be set at six years, until 31 December 2027. In order to enable the Commission to determine whether the grounds for the derogation still apply, France should submit an evaluation report to the Commission by 30 September 2025.
(13)
To avoid any legal uncertainty, this Decision should apply from 1 January 2022, while the extension of the period of application of the derogation authorised by Decision No 940/2014/EU should take effect on 1 July 2021.
(14)
This Decision is without prejudice to the possible application of Articles 107 and 108 of the Treaty,
