Brussels, 30/04/2014 (Agence Europe) - European Union finance ministers will focus on tax issues at the Ecofin Council on 6 May, their last meeting before the European elections. On Monday, the eleven countries that are introducing a financial transactions tax (FTT) will try to make speedier progress. On Tuesday, the 28 ministers will make a procedural assessment of the FTT before trying to reach a far-from-likely agreement on the parent-subsidiary directive. They will adopt conclusions by the European Commission on macroeconomic imbalances found in 14 member states (Belgium, Bulgaria, Germany, Ireland, Spain, France, Croatia, Italy, Hungary, the Netherlands, Slovenia, Finland, Sweden and the United Kingdom, see EUROPE 11032).
Uncertain outcome on tax matters. The Greek Presidency of the EU Council of Ministers hopes that a general approach will emerge for the updating of the parent-subsidiary directive, 2011/96/EU, unveiled on 26 November 2013 as part of the EU's toolbox for tackling tax evasion (see EUROPE 10970). The idea is to remove loopholes that allow companies to subvert the aim of the directive (avoiding double taxation) and not pay tax at all by shopping around among member states for the most advantageous tax regime for inter-group payments.
The great unknown on Wednesday 30 April was the line that Sweden would take because it believes that the directive could stand in the way of a type of investment company found in Sweden and therefore wants the scope of the directive to be slimmed down. Other delegations say that it would not be acceptable to shave more off the directive simply to suit the situation in a single member state. A source said they would try to get round Sweden's problem without altering the scope. At Coreper on Wednesday, the European Commission provided additional explanations to try to allay Sweden's technical and legal concerns. The Presidency says other countries, Cyprus for instance, also have reservations. The Swedish authorities explained that they would be holding internal consultations to see whether their minister would back the proposal at Ecofin. Unanimous voting is required on tax issues.
Next, the 28 ministers will be briefed by the eleven countries involved in introducing a financial transactions tax (FTT), which will provide an opportunity to calm the fears raised by countries not involved in the enhanced cooperation mechanism that is being used to introduce the new tax. The talks at Coreper on Wednesday did not look at the question in any detail, focussing on the ruling by the European Court of Justice on the United Kingdom's court case over the legality of the enhanced cooperation mechanism (see related article).
The eleven FTT countries, Germany, France, Belgium, Austria, Slovenia, Portugal, Greece, Italy, Spain, Estonia and Slovakia, will meet on Monday afternoon and may issue a statement on areas where consensus has been reached. The FTT is popular among public opinion in France and Germany and the two delegations want a clear signal to be made ahead of the European elections. At the moment, the eleven agree on the need to get the ball rolling after the delays due to elections in some of the FTT countries, such as Germany. A source said they had to make up for the lost time. The countries are also aware that they are pioneers in the introduction of an FTT and other countries will join them if it proves successful. The main thing that is expected is that the ministers will confirm that the FTT will be introduced in stages, but they have not yet decided what the various stages will consist of. A source said that there was no outright disagreement, and a pilot scheme may introduce the tax for share dealings and some derivatives.
How the income generated is to be used is not being discussed at the moment. The eleven countries seem to be plumping for issuance (the tax applying to transactions on securities issued by an institution with headquarters in one of the FTT countries) rather than residence (the tax applying if at least one of the parties has its headquarters in one of the eleven FTT countries).
Macroeconomic imbalances. The European Union finance ministers will discuss issues in the portfolio of Olli Rehn, European Economic and Monetary Affairs Commissioner, who is being replaced by Commissioner Siim Kallas at the moment because Rehn is standing in the European elections. The EU28 will endorse the European Commission's conclusions on its in-depth assessments of macroeconomic imbalances in fourteen countries. In three of the fourteen countries, the imbalances are described as excessive (Italy, Croatia and Slovenia) and the three countries have been given until midnight on Wednesday to submit reform and stability programmes (or convergence programmes for the non-eurozone countries). In the light of these documents and the macroeconomic forecasts to be published by the European Commission on 5 May, it will draw up country-specific recommendations by 2 June. The Commission has already warned that it will not hesitate to make use of corrective mechanisms if the countries where there are excessive macroeconomic imbalances do not do enough in the Commission's view to remedy them. Italy is expected to ask the Commission to explain why exactly it now finds the country to be in excessive imbalance, whereas last year it did not even though the indictors were worse last year.
The ministers will also discuss the G20 in Washington in April and the countries that have applied to join the EU.
EIB. At a meeting of the European Investment Bank governors on Tuesday morning chaired by Maltese Finance Minister Edward Scicluna, the ministers will endorse the bank's capital increase. The EIB will take advantage of the opportunity to explain what it is planning to do with the extra cash and a source said it would provide an opportunity for the EIB, headed by Werner Hoyer, to explain and indicate the political way ahead for its work. Coreper approved the capital increase on Wednesday.
See EUROPE 11068 for the agenda of the Eurogroup meeting of eurozone finance ministers on Monday 5 May. (EL)