Brussels, 15/11/2010 (Agence Europe) - European finance ministers will be meeting on Wednesday 17 November 2010 with an agenda topped by the rising concerns about the Irish economy. At the end of last week, the acting President of the ECOFIN Council, Didier Reynders, said that they would have a clear view of the situation and would know whether it was necessary to take action at EU level. The ministers will also discuss a proposal to improve tax cooperation and draft legislation on value-added tax (VAT) on financial services and insurance.
On Tuesday evening, Eurogroup ministers will discuss the situation in Ireland (see EUROPE 10255 and related article in this newsletter). The markets are speculating about Irish activation of the European Financial Stability Facility (EFSF). Facing a deficit for 2010 of 32% of its GDP, Ireland will announce a five-year austerity programme at the end of the month with a view to bringing its deficit back below the 3% cut-off point by 2014. It has not made any official request for aid. Vice-President of the European Central Bank Vitor Constancio says that the EFSF could give aid to the Irish government to absorb the losses incurred by the publicly bailed-out Irish banks.
The Eurogroup meeting will examine progress in the peer review of macro-economic imbalances in the eurozone. Following Spain, Finland and Portugal, Tuesday's meeting will focus on Germany and Italy.
VAT. At present, financial services and insurance are mostly exempt from VAT, but this is not applied uniformly across the European Union, which gives rise to legal uncertainty and an uneven playing field. The European Court of Justice is regularly asked to rule on the correct interpretation of European legislation. The European Commission has drafted new proposals to clarify exactly which financial services are VAT-exempt and to enable financial operators, rather than member states as at present, to register for tax in order to reclaim VAT before handing it over. Their VAT-registered clients would therefore be able to deduct the VAT they have paid on financial services and insurance, which will enable operators in this industry to carry out VAT-exempt investment together and therefore facilitate the accounting for VAT before it is paid, putting large and small suppliers on the same footing.
Few delegations, however, support the measures on the latter two issues. The delegations consider most of the suggested definitions for the VAT-exempt services are acceptable, but they feel they should be seen against the backdrop of the adjustments to the tax burden of the financial industry and changes in the rules since the onset of the economic crisis. Work will therefore continue on this issue in the next few months at expert group level.
Good tax governance. The Belgian Presidency will take stock of progress on administrative tax cooperation (see EUROPE 10237). No decisions are expected at this stage because the ministers have not yet had time to examine the matter in any depth. The Council is expected to approve the good tax governance document at its 7 December 2010 meeting.
The ministers will discuss the outcome of the recent European Council that endorsed the recommendations of the taskforce on European economic governance and decided to set up (after 2013) a permanent eurozone sovereign debt crisis management mechanism (see EUROPE 10247). A diplomat commented that the ministers would try to make headway because the timetable is very tight. The Commission will unveil a draft version the mechanism next month prior to making a decision at the European Council in December on how the new system would work and also on changes to the EU Treaty. Following the G20 in Seoul, South Korea (see EUROPE 10255), ministers will try to keep up the momentum on a next tax on bank transactions or finance.
Conclusions. The ECOFIN Council will adopt a conclusions document on fast-track financial aid for tackling climate change in developing countries. The above-quoted diplomat said that they would publish the European funding country-by-country and project-by-project. The conclusions document on EU statistics will call for the code of good practice to be made binding. On pensions, the ministers will endorse the need for national reform processes currently being implemented to increase the percentage of women and older people in employment. The ECOFIN Council will hear a presentation of the recent European Court of Auditors report on implementation of the EU's 2009 Budget (see EUROPE 10253). Finally, the ministers will meet with their counterparts in the European Free Trade Association (EFTA) and will meet with European trade unions and employers (the “social partners”). (F.G./M.B./transl.fl)