2.2 Initiative of EC on EFP – The PEPPER Reports

2.2.1 Results on the EU level. Positive dynamic of EFP

The PEPPER Reports underline the continuing importance of this subject for European policy. PEPPER-IV notes the significant rise in EFP in the EU-27 over the last decade.[1] In the period 1999-2005 the proportion of firms which offered employee share ownership schemes open to all employees grew by five points, from an average of 13% to 18%. In the case of profit-sharing schemes it grew by six points, from an average of 29% to 35%. In the same period the number of employees actually participating in these schemes also grew, although less rapidly.

The PEPPER IV Report calls for a European Council Recommendation on a European platform for EFP. The basis for a common framework is the Building Block Approach, a perspective promoted with a study sustained by the EC to link the many and varied EFP models which exist across member states, including profit-sharing (cash, either deferred or in shares), individual share ownership (employee shares or stock options), and ESOP (Employee Stock Ownership Plan) concept (collective employee share ownership model financed from a profit share additional to remuneration).

While tax incentives are not a precondition for EFP, they have proved in the past to be a positive and important leverage in those countries which offer them. Without prejudice to Member States’ competence on taxation, coordination, streamlining and mutual recognition may help to stimulate EFP in cross-border operating companies. The calculation of “effective tax rates” for standardised scenarios could permit direct comparison between the EU-27 and thus ensure further harmonisation. As long as European measures remain optional, conflicts with national law should not arise.

[1] The PEPPER IV Report: Benchmarking of Employee Participation in Profits and Enterprise Results in the Member and Candidate Countries of the European Union, Jens Lowitzsch, 2009