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Brussels, 2 May 2014
Preparation of Economic and Finance Ministers Council, Brussels, 6 May
The EU's Council of Economic and Finance (ECOFIN) Ministers will take place in Brussels on 6 May at 11.00. The European Commission will be represented by Siim Kallas, Vice President and acting Commissioner for Economic and Monetary Affairs and the Euro, and Algirdas Šemeta, Commissioner responsible for Taxation and Customs Union, Audit and Anti-fraud. A press conference is expected to take place after the meeting.
Parent-Subsidiary Directive: closing loopholes in Company Taxation (ET)
The Council will try to reach political agreement on closing an important loophole in the Parent-Subsidiary Directive which has been used by some companies to escape taxation.
In November 2013, the Commission proposed amendments to the Parent-Subsidiary Directive, which included preventing specific tax planning arrangements (hybrid loan arrangements) from benefiting from tax exemptions (IP/13/1149). With this amendment, companies will no longer be able to exploit differences in the way Member States tax intra-group profit distributions, in order to avoid paying any tax at all. The result will be that the Parent-Subsidiary Directive can continue to ensure a level-playing field for businesses in the Single Market, without opening opportunities for aggressive tax planning.
This proposal was one of the actions announced by the Commission in its Action Plan to fight tax fraud and evasion (IP/12/1325).
Financial Transaction Tax (ET)
The Greek Presidency of the Council will present a state of play of work on the common Financial Transaction Tax. Eleven Member States decided in February 2014 to proceed with the Financial Transaction Tax (FTT) through enhanced cooperation (IP/13/115). The basis for their discussions has been the original Financial Transaction Tax proposal, put forward by the Commission in 2011. There are 3 core objectives to this Financial Transaction Tax (FTT) proposal. First, to strengthen the Single Market by reducing the number of divergent national approaches to financial taxation. Second, to ensure that the financial sector makes a fair contribution to public revenues. Third, to support regulatory measures in encouraging the financial sector to engage in more responsible activities, geared towards the real economy. Since enhanced cooperation was launched, there have been a number of technical working groups to discuss the proposal, involving all 28 Member States, as well as meetings between just the 11 Member States involved, at technical and political level.
Macroeconomic Imbalances Procedure: in-depth reviews (SOC)
The Council is expected to adopt conclusions that endorse the Commission's findings emerging from the In-Depth Reviews (IDR) carried out into 17 Member States' economies. These reviews were presented on 5 March in the context of the Macro-economic Imbalance Procedure (MIP) (IP/14/216 MEMO/14/158) and following the conclusions of the Alert Mechanism Report (AMR) published on November 14 2013.
From the examined countries the Commission found imbalances in fourteen Member States (Belgium, Bulgaria, Croatia, Germany, Ireland, Italy, Slovenia, Spain, France, Hungary, The Netherlands, Finland, Sweden and the United-Kingdom) while imbalances were not identified in three Member States (Denmark, Luxembourg and Malta). From the countries with imbalances, in three cases they were found to be excessive (Croatia, Italy and Slovenia). On 5 March, Vice-President Rehn said: "Overall, macroeconomic imbalances, which built up over many years, are gradually receding, but at the same time new concerns have arisen, which require closer attention. This is reflected in the Commission's conclusions on the 17 Member States under scrutiny."
The Commission will continue with the specific monitoring on policy implementation for countries with excessive imbalances and for euro area countries for which the imbalances require "decisive policy action". In particular, the Commission expects Member States with imbalances to respond to these findings in their National Reform Programmes (NRPs) and policy follow-up will take place in the forthcoming European Semester package in June.
Follow-up to the meetings of G20 Finance Ministers and Governors (10-11 April) and International Monetary Fund (IMF)/World Bank (13 April) in Washington (SOC)
The Commission will inform the Council of the main outcomes of the Spring Meetings that took place 10-13 April in Washington, where discussions focused on the global economy and G20 growth strategies, International Monetary Fund (IMF) reform, and financial regulation. Vice-President Kallas said: "We consider that further structured international cooperation in the financial regulatory areas is necessary, and we remain committed to working with our international partners in this respect."
There was broad consensus amongst Ministers and Governors in Washington that the global economy has been gradually improving, but at a differentiated pace. G20 members had in March provided first sketches of their growth strategies for the Brisbane summit. Ministers and Governors in Washington considered that these did not yet fully live up to the objective agreed in February of adding more than 2% GDP growth for the G20 as a whole over five years. G20 members therefore committed to add new measures to their growth strategies.
On International Monetary Fund reform, insufficient progress was made on the quota and governance reforms agreed to in 2010 and the 15th General Review of Quotas (GRQ) including a new quota formula. It was agreed to give the United States until the end of the year to ratify the 2010 reform.
As VP Kallas said: "Our priority continues to be for all IMF members to ratify the 2010 Quota and Governance Reform as soon as possible. We attach high importance to securing this objective. All 28 EU Member States have already fully ratified it. We encourage all IMF member countries that have not yet ratified it to do so expeditiously. The implementation of the IMF 2010 Quota and Governance Reform is key to the Fund's legitimacy and will result in a governance structure that better reflects the realities of the world economy. "
Progress was made on the Fund’s strengthened surveillance framework, including through the Financial Surveillance Strategy, enhanced analysis of macro-financial linkages in Article IV consultations, and tailored advice on promoting inclusive growth and job creation. The need to ensure a robust resource base for the International Monetary Fund was emphasised. The main issues discussed on financial regulatory reform were the adequacy of global systemically important banks' loss-absorbing capacity in case of resolution, and the Financial Stability Board (FSB) membership.
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