Brussels, 4th December 2002
Results of Council of Economics and Finance Ministers, Brussels, 3 December 2002 taxation and financial services
The Council considered the package of three measures to tackle harmful tax competition and eliminate some of the remaining tax distortions in the Internal Market which was established by the EU's Council of Finance Ministers on 1 December 1997. The Feira European Council in June 2000 set a deadline of the end of 2002 for agreement to be reached on the tax package. The tax package consists of:
Taxation Commissioner Frits Bolkestein presented the report adopted by the Commission on 27 November on the progress to date of negotiations with six non-EU countries, the United States, Switzerland, Liechtenstein, Monaco, Andorra and San Marino, with a view to them applying "equivalent" measures to those to be applied within the EU under the Directive on the taxation of savings (see IP/02/1759). For his part, UK Chancellor of the Exchequer Gordon Brown reported to the Council on his discussions with the UK's dependent and associated territories concerning their application of the "same" measures as are due to be applied within the EU under the savings tax Directive.
In the case of Switzerland, Mr Bolkestein reported that the Swiss authorities had offered a package meeting three and a half out of the four objectives sought by the Commission. The Commission considers that the latest Swiss offer is satisfactory as regards applying a withholding tax to EU residents' income from savings in Switzerland and sharing the revenue with EU tax authorities, voluntary disclosure of information and a regular review of the arrangements. However, the Swiss offer to disclose information upon demand in the case of "tax fraud and the like" is not totally satisfactory.
The Council supported the approach adopted by the Commission in its negotiations with Switzerland and invited Mr Bolkestein to pursue these negotiations, notably as regards the scope of information to be provided by the Swiss authorities in response to requests from Member States' authorities. The Presidency said that it would organise a further extraordinary meeting of the Council of Finance Ministers to consider the result of these negotiations once they had taken place.
On the Code of Conduct, the Council took note of a report by UK Paymaster General Dawn Primarolo on the Code of Conduct Group that she chairs. This report covered the work achieved on standstill and rollback of harmful business taxation schemes since June 2002. The forthcoming extraordinary meeting of the Council will consider whether the work on the Code of Conduct to date is sufficient to allow a political agreement on this part of the package. This forthcoming Council will also consider the draft Directive on interest and royalties.
The Council did not reach a final agreement on the draft Directive on a Community framework for the taxation of energy products. Instead it decided to return to the issue at the forthcoming extraordinary Council of Finance Ministers before the end of December. The European Council in Barcelona in March 2002 set a deadline of the end of 2002 for an agreement on the Directive and this deadline was reaffirmed by the Seville European Council in June. There are still three main outstanding points:
VAT on labour-intensive services
The Council adopted without discussion the Commission proposal to allow Member States to apply for an additional year (i.e. until 31 December 2003) a reduced rate of Value Added Tax (VAT) to specified labour-intensive services such as renovation of private dwellings, hairdressing, window-cleaning and small repairs (see IP/02/1367). Directive 1999/85/EC allowed those Member States that so chose (9 in total) to apply a reduction of VAT on these services for an experimental period from 1 January 2000 to 31 December 2002. The aim was to test the impact of such a reduction in terms of job creation and of combating the black economy. The Commission proposed the extension so as to allow the present arrangements to continue until the Commission makes an overall assessment and proposals regarding all reduced VAT rates, including the treatment of labour-intensive services, in 2003.
Administrative co-operation in the field of VAT
The Council decided to postpone to the forthcoming extraordinary Council of Finance Ministers the political adoption of a Regulation which would both strengthen co-operation between Member States' tax authorities to combat fraud relating to value added tax (VAT) and extend the scope of the Mutual Assistance Directive (77/799/EEC) to allow Member States to exchange information concerning taxes levied on insurance premiums. The two legal texts are based on the Commission proposal of 19 June 2001 (see IP/01/857).
The Council adopted definitively, without discussion, the Directive on insider dealing and market manipulation (market abuse see IP/02/1789). Commissioner Frits Bolkestein commented afterwards that "this is a concrete demonstration that we will not tolerate fraud or manipulation of European capital markets. This Directive will serve to build the investor confidence that is essential for sustained economic growth and wealth creation." The Directive is due to be implemented by Member States by mid-2004.
Financial regulation, supervision and stability
The Council endorsed a report by the EU's Economic and Finance Committee (EFC) on Financial Regulation, Supervision and Stability and adopted conclusions. The report concentrates on a revision of the committee structure intended to underpin a more efficient system for EU institutions to prepare, adopt and implement financial services legislation (on banking, insurance and pension funds, and financial conglomerates). The new committee structure would be based on the framework already agreed with the European Parliament specifically for securities legislation on the basis of the report from a Group of Wise Men chaired by Baron Alexandre Lamfalussy (see IP/02/195).
The conclusions reaffirm the Council's clear preference for implementing arrangements based upon the Lamfalussy framework to all financial sectors according to existing inter-institutional agreements, incorporating all accountability measures to the European Parliament and the Council already adopted for securities - including the 'sunset clause' with a full and open review in 2004 - and recognising sectoral specificities. The Council agreed to continue discussions with the European Parliament.
The Council also noted that the Presidency will invite the representatives of the governments of the Member States meeting within the General Affairs Council on 9-10 December 2002 to state that they will draw the attention of their Heads of State and Government to:
As regards the delegation of powers to the Commission to adopt implementing measures, the Council conclusions note that the issue is left open pending further contacts with the European Parliament. The Council noted that the other aspects of the envisaged new structure could be implemented and invited the Commission to establish as soon as possible the committees of Member States' representatives for each financial services sector (so-called level 2 committees) in an advisory capacity only, and the independent committees of Member State regulators to promote consistent implementation of EU Directives, supervisory convergence and best practices (so-called level 3 committees).
The Council's conclusions also indicated that the Council was willing to take a decision as soon as possible on the establishment of a reconfigured Financial Services Policy Group (FSPG - possibly re-named Financial Services Committee, or FSC) with a Member State chair as soon as possible. The role of the new Committee will be to provide advice and oversight for the Council and Commission on the range of financial market issues set out in the EFC report. The Ministers meeting in the Council will each nominate one senior representative to the new committee.
The reconfigured FSPG should fully respect existing institutional prerogatives. It should report to the EFC in order to prepare advice to the Council of Economics and Finance Ministers, taking into account the established role of the Committee of Member States' Permanent Representatives (COREPER).