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PR(95)05: Surveillance Authority requests Iceland to change its commodity tax legislation


The EFTA Surveillance Authority today issued a "reasoned opinion" to Iceland, requesting necessary measures to comply with the EEA Agreement's provisions regarding commodity taxes. In Iceland a commodity tax is levied on certain products, both domestic and imported, but there is a difference in computing the tax base on domestic products on the one hand, and on imported products on the other. There is also a difference in tax payment terms depending on whether a product is imported or domestically produced.

Article 14 of the EEA Agreement states that no Contracting Party shall impose, directly or indirectly, on the products of other Contracting Parties any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products. The Authority has found that the Icelandic commodity tax is incompatible with Article 14 of the EEA Agreement as the tax base for products imported into Iceland, but not for domestic products, includes a 25% mark‑up. Furthermore, domestic products are favoured in respect of the deferred payment of commodity tax compared with imported products.

In the reasoned opinion reference is also made to Article 3 of the EEA Agreement which states in paragraph 1 that "the Contracting parties shall take all appropriate measures, whether general or particular, to ensure fulfilment of the obligations arising out of this Agreement".

The Icelandic Authorities indicated their intention to amend the commodity tax legislation during 1994 but failed to do so. The Authority therefore decided to act under Article 31 of the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice, by issuing a letter of formal notice on 20 March 1995 to Iceland regarding the matter. No observations on the content of the letter have been received so far.

"The Commodity tax legislation is obviously not in compliance with the EEA Agreement% says Björn Friðfinnsson, Member of the College of the EFTA Surveillance Authority responsible for the free movement of goods. "The legislation must therefore be amended or we may decide to bring the case to the EFTA Court"

The Authority has in recent months issued two reasoned opinions to Iceland regarding the abolishment of a special charge on imported beer and the Icelandic alcohol monopoly. In both cases Iceland has complied with the reasoned opinions and changed the pertinent legislation in accordance with the Authority's opinion.

As from 28 June 1995, the EFTA Surveillance Authority will change address: Rue de Trèves 74, B‑1040 Brussels; Tel. 286 18 11; Fax 286 18 00.

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