CONFIDENTIAL
Portuguese were conducting bilateral negotiations with
Japanese. They had asked the Community to let them
maintain 48 products on the Japan list. The Community
had offered 22 products. No doubt a compromise was
possible between the two. Under taxation, on VAT zero
rating the Commission had just proposed placing
agricultural inputs in Annex F of the VAT Sixth
Directive as a compromise.Should Portugal accept?
There was also a problem as regards Madeira and the
Azores in that they wanted to avoid fiscal barriers
between Portugal and the islands but the islands did
have a justification to be less heavily taxed than the
mainland. They hoped transport costs could be
exempted; and perhaps VAT in the islands could be
imposed on only 80% of the value of the goods. As
regards rights of establishment the Portuguese wished
to be able to select and establish priorities for
inward investment projects of a certain size. There
was ambiguity in the text agreed between the Community
and Portugal setting a financial limit. The Community
argued that the limit applied just to incoming
investment, whereas the Portuguese maintained it
applied to the global value of the project. They
preferred to sort the question out now rather than
later.
CONFIDENTIAL