Brussels, 05/12/2014 (Agence Europe) - There is an unusually high number of items on the agenda of the final ECOFIN Council under the Italian Presidency on Tuesday 9 December.
Juncker Plan. The ministers will discuss the European Commission's investment plan that is expected to attract investment of €315 billion over three years (see EUROPE 11205). They are due to call for rapid implementation of the Juncker Plan because of its potential for stimulating demand in the current period of low growth and very low inflation.
The plan includes the creation of a European Fund for Strategic Investment (EFSI) under the aegis of the European Investment Bank. Guaranteed by the EU budget and with finance from the EIB, the fund will attract private investment by taking on board first-loss liability for losses made in the implementation of projects.
A special task force will be set up, including members from the European Commission, the EIB and the member states, which will identify an open list of more than 2,000 possible projects, such as for transport (see EUROPE 11211), which will then be published. Once the policy-makers decide to set up the EFSI (expected to take place at the European Summit in December), the legislative procedure will begin in order to give the fund legal foundations so that it can be started as soon as possible, hopefully in the summer of 2015.
An experts committee will be established at the EFSI to select from the task force's list of possible project the ones that are the most promising, based on criteria which have yet to be decided upon (European interest, rapid implementation, return on investment, for example). The Commission stresses the importance of not politicisng the project selection process by earmarking funds in advance to certain countries or sectors.
Banking Union. The Italian Presidency hopes that the ECOFIN Council will be able to reach agreement in principle on eurozone bank contributions to the Single Resolution Fund (SRF) that will be set up in 2016 and is due to have funding of €55 billion by 2024 (see EUROPE 11210). Some ten or so countries, includng Belgium, Malta, Slovenia and Portugal, are expected to oppose the Italian compromise deal (see EUROPE 11211) which includes a corrective mechanism that would give the French and Irish bank systems a discount of €1.7 billion and €327 million respectively according to European Commission calculations, which would force the banks of the countries due to vote against the measure to pay more. It is not certain that the countries that oppose this mechanism (arising from a prior agreement between Paris and Berlin) will be able to form a blocking minority to veto adoption by qualified majority of the document laying down the calculation methodology for bank contributions to the SRF.
The SRF is the financial arm of Banking Union and will be managed by the Single Resolution Board (SRB), a European authority the recruitment of whose personnel is currently under way (see related article).
The ECOFIN Council is expected to announce agreement on the question of fair treatment of euro and non-euro countries that decide to join Banking Union. The non-euro countries will not benefit from potential protection from the European Stability Mechanism (ESM) in the event of bank resolutions, but would be treated on an equal footing via possible aid from the EU's balance of payments system. The United Kingdom refuses to take part in Banking Union, and has managed to ensure that the EU budget will not provide aid in this connection.
The ministers will discuss implementation of the two-pack and six-pack of measures adjusting the Stability and Growth Pact (see EUROPE 11206 and 11209). They will discuss interpretation of flexibility under EU budget rules when assessing the countries' economic situation.
Financial Transaction Tax (FTT). Agreement on under what form the initial application of the FTT will be will not be reached this year, despite the promises made in May (see EUROPE 11208). The most that can be expected on Tuesday is a statement by the eleven countries involved in the enhanced FTT cooperation mechanism that they wish to progress as quickly as possible so that the FTT can come into force on 1 January 2016. The Council says that this timing is more significant. The difficulties are clear - the scope of application for derivatives, the principle underlying the FTT and how the tax will be collected. France doesn't see any problem with a first version of the FTT being available in time for the first application phase since it has already been decided that the tax will be phased in. This would have the advantage of an impact assessment of how the tax would affect the markets in each stage of its implementation, which would reassure countries that are not involved. Unsurprisingly, in a document for the Council on 3 December, the Italian Presidency encourages the next Presidency of the Council (Latvia, which is not part of the FTT) to continue this work in a transparent and inclusive manner, by giving the matter suitable political attention in order to facilitate agreement on the FTT on schedule. Along with the meeting of the eleven FTT nations, a progress report will be presented to the ECOFIN Council.
Patent boxes. The Council's workgroup on the code of conduct on damaging tax practices will present a six-monthly report. The main focus will be on its assessment of the patent box special tax regimes of a number of countries. No country actually carries out the study they are supposed to do on whether the patent box advantages are granted even if a company does not actually do any business in the country providing the benefits under the 'modified nexus approach.' In a draft conclusions document, the Council says the legislative process to change the patent box regimes needs to begin in 2015. The Netherlands fear that small businesses, which are the main beneficiaries of the patent box system, might be excluded from it under the new rules. The Dutch delegation has unsuccessfully attempted to alter the text to ensure that the 'modified nexus approach' also covers innovations arising from innovative technical development, scientific technical research or research into improving production software.
Parent-subsidiary directive. Agreement on the anti-abuse clause of the parent company/subsidiary directive 2011/96/EU required the lifting of a reservation by the Netherlands. The Dutch parliament examined the question during the week and gave the go-ahead on Friday 5 December. The 'de minimis' anti-abuse clause that the ministers will add to the directive will prevent misuses of the directive by requiring governments to refrain from granting the benefits of the directive to an arrangement, or a series of arrangements, that have been put in place to obtain a tax advantage, rather than for valid commercial reasons reflecting economic reality.
Belgium and the Netherlands are also demanding greater legal security and transparency for the application of the anti-abuse clause. The other member states back the compromise put on the table in November, which states that arrangements or series of arrangements will be deemed not genuine if they are not introduced for valid commercial reasons that reflect economic reality. Belgium and the Netherlands were not happy with this formulation and to allay their concerns, an example of application of this approach has been included. Upon request from Belgium, which wants to ensure coherence with the interest and royalties directive (2003/49/EC), a Council statement is foreseen, which says that countries will take into consideration in their future work whether an anti-abuse clause should be added to the interest and royalties directive. Finally, upon request from two delegations, a second statement will state that when it comes to application of the anti-abuse clause in the parent-subsidiary directive, that countries shall make an effort to mutually inform each other when this might be useful for another country.
Anti-BEPS directive. The question of damaging tax practices has not been formally added to the agenda, but it is expected that a minister of one of the three countries that asked the Commission to draw up an 'anti-BEPS directive' (Germany, Italy and France) will ask for the matter to be raised at the meeting (see EUROPE 11210). Taxation Commissioner Pierre Moscovici says the solution would be to continue work in this relation to the common consolidated corporate tax basis (CCCTB), which has been ongoing for years now. France says work on CCCTB should be carried out alongside the anti-BEPs directive. Ireland and Luxembourg feel that there should be renewed political will to move on this question internationally to ensure there is an even global playing field. Ireland said earlier this week that it favours the automatic exchange of information on tax rulings. (MB and EL)