Brussels, 05/11/2014 (Agence Europe) - On Friday 7 November, the Ecofin Council will discuss the taxation dossiers (financial transactions tax, parent/subsidiary directive) and the question of the 2014 budget.
FTT. The open letter by the French minister published on Tuesday by the French daily newspaper Les Echos, in which Michel Sapin lays out his vision of the ideal compromise for the FTT, did not go down well with the 'small' countries of the EU (EUROPE 11190). One source said that “pressure” was “increasingly coming from France and Italy to have something along the lines” of the tax that these countries have already implemented. The 'large' countries are pushing in favour of the principle of taxation which uses the principle of the country of issuance, a major stumbling block of the talks. Under this principle, financial instruments issued in the FTT zone are taxed when they are traded, even if the selling party is established outside the FTT. In order to satisfy the small countries, which fear that they could lose out on revenue, the division of resources would be defined on the basis of the principle of residence. Spain is reported to favour the Franco-Italian position, and Germany is open to it. In the opposite corner, all of the 'small' countries want to return to the Commission's initial proposal, which makes the principle of residence the underlying principle for the FTT. As a last resort, this principle would be supported by the principle of issuance.
In October, the Italian Presidency of the Council argued that this proposal could lead to a transfer of the activities of financial institutions outside the FTT zone (EUROPE 11180). However, the small countries take the view that the initial proposal would be effective in preventing the delocalisation of activities and as regards the issues of yield. Additionally, the system would have the advantage of preventing distinctions between the rules for shares and derivative products falling within the scope of the FTT. By basing taxation on the principle of issuance alone, “we cut off a proportion of the taxation potential”, a source from among the 'small' countries explained. These countries tend towards the view that the system of rebalancing, already brought up by the Italian Presidency and referred to in Sapin's open letter, is missing a few elements.
Discussions on the scope of application for derivative products in the first application phase of the FTT (anticipated for 1 January 2016) also remain at stalemate. On the scope for shares, questions remain on a possible threshold to be applied in order to avoid taxing transactions in shares in SMEs.
Ecofin will therefore go no further than to take stock of the situation, on the basis of an Italian Presidency document (EUROPE 11186). The chances of an agreement on the outlines of a first application phase by the end of the year currently seem compromised.
Parent/subsidiary directive. The Italian Presidency is confident that an agreement will be reached on the anti-abuse clause of the parent/subsidiary directive. The states agree on a 'de minimis' rule, which they would be able to go beyond. Six countries expressed reservations on the legal security of the text (EUROPE 11187). The proposed compromise on the table “complies with EU law and the treaties”, one diplomat said. The countries not in favour have put forward their options, some of which were felt to be likely to delay the entry into force of the anti-abuse clause and to increase the administrative burden without doing anything to increase the legal security. Only one of the recitals of the text was amended, as shown by the most recent compromise on the table.
VAT. The planned standardised VAT declaration, which aims to replace the 28 highly disparate declarations by 2017 and guarantee that companies supply the same basic information within the same deadlines throughout the EU, will also be discussed. In view of the ongoing problems (EUROPE 11187), it is “likely that the Commission will have to withdraw its proposal”, said a source close to the discussions.
Budget 2014. The ministers will take stock of the discussions seeking a solution to the 'British rebate' (EUROPE 11190). The aim is to agree on a “sequencing” on how certain countries will contribute more to the EU budget following the revision of the balances of own VAT resources and GNI.
Banking union. Following the realisation of the 'single supervision' plank of banking union in the Eurozone (EUROPE 11190), the ministers will discuss the issue of the banks' contributions to the European and national resolution funds. One of the subjects discussed will also be the equivalence of treatment for non-Eurozone countries deciding to join the venture. (EL and MB)