At their monthly meeting on Tuesday 21 March, the European finance ministers will mainly discuss taxation matters.
In reduced format on Monday evening, the ten countries that are negotiating the creation of a financial transactions tax (FTT) will meet, theoretically to choose one of the three options to be put before them to mollify Belgian and Slovakian concerns regarding the impact of the tax on pension funds.
According to our information, first option presented to the ministers will be to tax everything. This option includes possible compensation for individuals or companies whose pensions would be affected by the tax. The outlines of such compensation may take the form of an allowance or tax reductions.
The second option would be to set in place an exemption for pension funds. The third option would grant an exemption to pension funds and life assurance companies. A second draft of options is largely about how an exoneration would be implemented. Should the directive decide not to deal with the matter of pension funds ('out of scope')? Or should it deal with these funds by providing opt-outs for countries not wishing to tax these activities? These questions will also be put to the European ministers.
According to several sources, Slovakia is prepared to back a consensus based on an exemption for pension funds alone, whereas a governmental agreement obliges the Belgian delegation to protect additional activities, such as life assurance. Belgium is therefore running the risk of finding itself out on a limb on Monday evening, unless it manages to find a new ally in Germany.
According to our information, the German Presidency of the G20 was planning to hold a discussion on an FTT at international level at the G20 finance to be held in Baden-Baden on Saturday. At the most recent ministerial meeting, the German minister, Wolfgang Schäuble, called for a time out in the discussions between the Ten to see what happens at international level, particularly with regard to Brexit.
Belgium is also reported to want international developments to be taken into account in the negotiations, so that the countries wishing to act on a voluntary basis do not end up shooting themselves in the foot. It will therefore be necessary to wait and see what the German delegation has to say after the G20, even though the discussion, on the basis of the document prepared by the OECD, is expected to be entirely preliminary.
VAT. The 28 finance ministers will discuss two VAT dossiers on the table, which the Maltese Presidency of the Council is intentionally linking together. The fate of each does indeed appear to depend on that of the other, as France and the Czech Republic each have misgivings about the legislative proposal supported by the other. France would like to be able to apply reduced rates to e-books, to put an end to the discrimination that exists with printed books, and the Czech Republic hopes to be able to carry out a pilot project for a reverse-charge VAT mechanism. Several countries, including France and Belgium, have asked for the opinion of the legal services of the Council on the reverse-charge proposal. These countries have concerns that this principle could damage the principle of harmonisation in the single market.
At the end of the year, the Commission is to present proposals for a definitive fraud-proof VAT regime. “By authorising a pilot of a different system, it would be tantamount to arranging the coexistence of two regimes”, a European source explained, voicing concerns for the integrity of the single market.
However, Austria and the Czech Republic, which are the principal delegations wishing to carry out a pilot reverse-charge project, are not blown away by the idea of reduced rates on electronic publications, which naturally gives them leverage on the dossier that is important to them.
Lastly, at the meeting of the permanent representatives of the member states to EU, in the framework of the text on reduced rates for e-books, the United Kingdom raised the question of women's sanitary products and the Hungarians and Slovakians raised that of Internet services. The Commission told them that this matter will be dealt with at the end of the year in the framework of the broader reform of VAT rates. The Danes are calling for a report from the legal services on the judgement returned on 7 March of this year by the CJEU, which upheld the legality of the VAT directive, prohibiting the application of reduced VAT rates to books, newspapers and periodicals made available digitally (case C-390/15) (see EUROPE 11740). The Maltese Presidency is planning to hold a guideline debate on these two dossiers.
Any other business. In the framework of the 'European Semester' budgetary process for 2017, the ministers will discuss reports outlining the main socio-economic challenges facing the member states (see EUROPE 11731). They will adopt without debate a recommendation on the budgetary orientation at Eurozone level (see EUROPE 11740). They will also discuss the results of the 'G20 Finance' meeting to take place in Baden-Baden on Friday 17 and Saturday 18 March. (Original version in French by Élodie Lamer)