Explanatory Memorandum to COM(2020)240 - Authorisation of Portugal to apply a reduced rate of excise duty on certain alcoholic products produced in the autonomous regions of Madeira and the Azores - Main contents
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| dossier | COM(2020)240 - Authorisation of Portugal to apply a reduced rate of excise duty on certain alcoholic products produced in the autonomous ... |
|---|---|
| source | COM(2020)240  |
| date | 18-06-2020 |
1. CONTEXT OF THE PROPOSAL
Reasons for and objectives of the proposal
The proposal concerns a Council Decision to replace the current Council Decision No 376/2014/EU of 12 June 2014 1 , adopted on the basis of Article 349 of the Treaty on the Functioning of the European Union (TFEU). This article allows for specific measures for the EU outermost regions to be taken as it acknowledges that permanent and combined constraints severely restrain their development and affect their economic and social situation. It permits such measures provided that they do not undermine the integrity and the coherence of the Union legal order, including the internal market and common policies. The current decision authorises Portugal to apply excise duty rates reduced by up to 75% of the standard Portuguese rates to rum and liqueurs produced and consumed in Madeira and liqueurs and eaux-de-vie produced and consumed in the Azores. The current decision expires on 31 December 2020.
The objective of this measure is to compensate the producers of the Portuguese outermost regions for their competitive disadvantage triggered by the Portuguese outermost regions’ remoteness, insularity, small size, difficult topography and climate and economic dependence on a few products, which severely restrain their development. As a result of these characteristics, producers in the outermost regions face higher production costs than their counterparts in the mainland.
In view of the expiry date of the Decision, the European Commission launched an external study in order to assess the current regime as well as the potential impacts of possible options for the period after 2020, including the option on which the current proposal is built.
This proposal entails renewing the derogation until 2027, extending it to cover sales on the Azores of locally produced rum with the rate of reduction maintained at 75%, and also extending it to provide a 50% reduction in the rate of excise duty on sales on the Portuguese mainland of all products covered.
Consistency with existing policy provisions in the policy area
The 2017 Communication on a strategic Partnership with the EU’s Outermost Regions 2 noted that the outermost regions continue to face serious challenges, many of which are permanent. This Communication presents the Commission’s approach in terms of supporting these regions in building on their unique assets and outermost regions identifying new sectors of growth to enable growth and job creation.
In this context, the aim of this proposal is to support the Portuguese outermost regions in building on their assets in order to enable local growth and job creation in a specific sector - alcohol. This proposal supplements the Programme of Options Specifically Relating to Remoteness and Insularity (POSEI) 3 which is targeted at supporting the primary sector and the production of raw materials.
Consistency with other Union policies
The proposal is consistent with the 2015 Single Market Strategy 4 , where the Commission sets out to deliver a deeper and fairer Single Market that will benefit all stakeholders. One of the objectives of the proposed measure is to mitigate the additional costs faced by companies in the outermost regions, which impedes their full participation in the Single Market. Due to the limited volumes of production involved, no negative impact on the smooth functioning of the Single Market is envisaged.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
Legal basis
The legal basis is Article 349 TFEU. This provision enables the Council to adopt specific provisions adjusting the application of the Treaties to the EU outermost regions.
Subsidiarity principle
Only the Council is authorised, on the basis of Article 349 TFEU, to adopt specific measures to adjust the application of the Treaties to the EU outermost regions, including the common policies, due to the permanent constraints which affect the economic and social situation of those regions. This also holds for authorising derogations to Article 110 TFEU. The proposal for a Council Decision therefore complies with the subsidiarity principle.
Proportionality principle
This proposal complies with the principles of proportionality as set out in Article 5 i of the Treaty on European Union. The proposed amendments do not go beyond what is necessary to address the issues at stake and, in that way, to achieve the Treaty objectives of ensuring that the internal market functions properly and effectively.
In particular, the proposed extension of reduced rates to mainland Portugal, would enhance the competitiveness of producers in the Portuguese outermost regions with limited adverse effects in terms of foregone revenues and administrative burdens and would put them on an equal footing with producers of similar products on the Portuguese mainland.
Choice of instrument
A Council Decision is proposed to replace Council Decision No 376/2014/EU.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
Ex-post evaluation of existing legislation
The external study found that producers of the outermost regions continue to face higher production costs than counterparts in the mainland, which are currently compensated by the excise reduction. Moreover the study identified the following two issues that emerged since the adoption of the current decision.
Firstly, the external study notes rum is now being produced in the Azores, but is not included in the current regime. However, the regime covers rum produced in Madeira, which leads to an uneven playing field amongst rum producers of the two outermost regions. Secondly, the study notes that further to the added rum production in the Azores, rum production in Madeira is increasing and due to the limited market in the outermost regions, not all rum can be sold locally. The additional costs of accessing the mainland Portuguese market act as a barrier for these producers and as a result rum is being stored at a cost.
Stakeholder consultations
As part of the external study supporting the analysis of the current regime, responses via questionnaires, interviews and discussions were received from the relevant services of the European Commission, the Portuguese authorities, the producers of the two outermost regions and the Portuguese distributors. Although special efforts were made by the external contractor no replies were received from the mainland producers or civil society.
Impact assessment
This initiative is prepared as a back-to-back exercise: an ex-post evaluation of the current regime closely followed by a forward-looking assessment. Such an assessment, of the potential impacts of continuing and possibly changing the existing regime, has been laid down in an analytical document, including an evaluation annex. This document is based on an external study and the information provided by the Member State.
4. BUDGETARY IMPLICATION
The proposal has no impact on the budget of the European Union, as revenue from excise duties goes entirely to the Member States.
5. OTHER ELEMENTS
Implementation plans and monitoring, evaluation and reporting arrangements
The monitoring of the implementation and functioning of the derogation will be the role of the Portuguese authorities and the Commission, as it has been to date.
Portugal will be asked to submit a monitoring report by 30 September 2025 for the period from 2019 to 2024. This monitoring report will include the following:
·information on additional costs involved in production
·economic distortions and market impacts
·information for the evaluation of the effectiveness, efficiency, coherence with other EU policies
·information on continued relevance and EU added value of the new legislation.
The reporting exercise should also seek to collect input from all relevant stakeholders as regards the level and evolution of their additional production costs, compliance costs and any instances of market distortions.
To make sure that the information collected by the Portuguese authorities contains the necessary data for the Commission to take an informed decision on the validity and viability of the scheme in the future, the Commission will draw up specific guidelines on the required information. Such guidelines will be, to the extent possible, common to other similar schemes to the EU’s outermost regions, governed by similar legislation.
This will enable the Commission to assess whether the reasons justifying the derogation still exist, whether the fiscal advantage granted by Portugal is still proportionate and whether alternative measures to a tax derogation system are possible, taking into account their international dimension.
The structure and data required in the monitoring report are annexed to the proposal in Annex 1.
Detailed explanation of the specific provisions of the proposal
This part is not applicable as articles are self-explanatory.