2.2.3 The Own Resources Decision and the Sixth Directive

A substantial incentive for further harmonisation of the common VAT system came from the Council’s Decision of 21 April 1970.1 This Decision entailed that from an agreed date, the budget of the Communities would be financed entirely from the Communities’ ‘own resources’. These own resources were to also include those accruing from the value added tax, obtained by applying a specific rate to an assessment basis, which is determined in a uniform manner for Member States according to Union rules.2

This uniformly determined assessment basis was first introduced in the Sixth Directive, officially called the ‘Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment’. This Directive replaced the Second Directive. It must, however, be noted that from the preambles to the Sixth Directive it is clear that there were other reasons for drafting this Directive as well. In these preambles it is stated that progress should be made in the effective removal of restrictions on the movement of goods and services and the integration of national economies and it should be ensured that the common system of turnover taxes is non-discriminatory as regards the origin of goods and services, so that a common market permitting fair competition and resembling a real internal market may ultimately be achieved.3

The Sixth Directive took away some of the shortcomings of the Second Directive as mentioned above. It broadened the basis of assessment by removing the option for Member States to exclude the retail stage from the scope of the tax and by including all services in the scope of taxation. The Sixth Directive also provided for a list of exemptions and established rules for the taxation of transactions regarding immovable property and financial services. The Directive also introduced detailed rules for determining the place where transactions are deemed to be provided and special schemes were introduced for small undertakings, farmers and travel agents. By introducing these detailed provisions, the Sixth Directive introduced a method for determining a uniform basis of assessment.