REPORT on the proposal for a Council decision authorising France to apply a reduced rate of certain indirect taxes on 'traditional' rum produced in Guadeloupe, French Guiana, Martinique and Réunion

EXPLANATORY STATEMENT

A. Legal background

Article 349 TFEU allows for derogations from EU rules in the outermost regions, in order to partly compensate for the permanence and combination of a large range of constraints affecting their economic and social development. This proposal applies specific measures in the area of rum taxation for the duration of the next Multiannual Financial Framework, i.e. 2021-2027.

B. Scope of the tax derogation

Articles 1 and 3 of the proposed decision would allow France to reduce the excise duty and social security contribution on ‘traditional’ rum produced in Guadeloupe, French Guiana, Martinique, and Réunion and sold in mainland France, by up to 50% compared to the normal rate. This derogation has existed in different forms since 1923, in order to partially compensate the local alcohol industry for the higher production costs. The competitive disadvantage faced by economic operators is triggered by the French outermost regions’ remoteness, insularity, small size, difficult topography and climate and economic dependence on a few products, notably the cane-sugar-rum value chain, which severely restrain their economic development.

C. Definition of the spirits covered

The rum covered by the derogation is defined in Article 2: the rum must have an alcoholic strength of at least 40%, and the sugar cane used as the raw ingredient must be of local origin. For this reason, the derogation applies only to the four outermost regions named. Mayotte and Saint Martin produce no sugar cane and thus no rum. Article 3 also sets an annual quota for the maximum production that can benefit from the derogation.

D. Reporting

The decision creates an obligation for France to report on the implementation and impact of the derogation.

E. Assessment of the rapporteur

Your rapporteur considers that this derogation from taxation rules is justified by its extremely limited scope, and by the economic difficulties inherent in production in the outermost regions, and fully complies with Article 349. He therefore suggests that this proposed decision should be approved by Parliament without amendment, under the simplified procedure set out in Rule 52(1) of the Rules of Procedure.

PROCEDURE – COMMITTEE RESPONSIBLE