Tax dossiers will take pride of place at the Ecofin Council to be held in Luxembourg on Friday 22 June.
The European finance ministers will be called upon to reach a unanimous agreement on changes to the European rules on value-added tax (VAT), pending the replacement of the current 'transitional' VAT regime with a definitive one (see EUROPE 11874).
In October 2017, the European Commission proposed four short-term 'quick fixes', concerning: - simplified treatment for call-off stock regimes; - the identification number of the client to benefit from a VAT exemption for intra-Community deliveries; - standard criteria for chain transactions, and; - a common framework for the documentary evidence required to apply for a VAT exemption for intra-Community deliveries.
Although there is consensus on these four short-term solutions, the member states are divided over a fifth one, which was not included in the Commission's initial proposal: a VAT exemption for groups of taxpayers that pool services and share costs (article 137 a).
This new article reportedly consists essentially of a rule, together with guarantees to guard against competition distortions, that will allow member states to provide for independent groups of persons, which pool their services and share costs between their members, to benefit from a VAT exemption.
This article would be added to by a territoriality clause limiting the scope of application of this mechanism to groups established on the territory of the member state using this option alone. This is reflected in a compromise proposal of the Bulgarian Presidency of the Council of the EU, of which EUROPE has had sight.
However, hopes of an agreement on Friday are not high. “There's no chance”, a European source commented, referring to the blockage already coming into view.
Several countries - such as France - are apparently making their agreement on the four solutions conditional on support for the fifth, whilst several others categorically oppose the addition of the last solution. According to our information, the Commission may withdraw its proposal in the event of an agreement including the fifth solution.
Some consider that one possibility would be to ask the Commission to make a legislative proposal to deal with the question of cost-sharing.
The ministers are also expected to approve without debate a new compromise text on the proposed regulation on administrative cooperation in the fight against VAT fraud (see EUROPE 12038). The tax was put before the Ecofin Council in May, but France asked for it to be postponed (see EUROPE 11680).
A directive to make the minimum normal VAT rate of 15% currently in force permanent is also expected to be approved without discussion.
Banking Union. The ministers will be reported back to on progress made at the Council on work carried out a technical level on instituting a European deposit insurance system (EDIS).
We do not expect many discussions on this point, a diplomatic source said on Wednesday 20 June, anticipating a “factual stock-take” on the part of the Bulgarian Presidency.
Bulgaria's experts have submitted a note to the national delegations, reporting such things as details of the exploratory work on two models for the EDIS system: - a phase-in system, starting with a reinsurance phase, as proposed by the Commission in October 2017 (see EUROPE 11881); - a support system based on mandatory loans between national deposit insurance systems, as suggested by certain countries.
The Bulgarian document is available at: https://bit.ly/2JQU5ND .
European Semester 2018. The ministers are also expected to approve the country-specific recommendations proposed by the Commission at the end of May in the framework of the 2018 exercise of the 'European Semester' budgetary process (see EUROPE 12025).
The Council will decide to close the excessive deficit procedure in place against France since 2009. French government deficit stood at 2.6% of nominal GDP in 2017 and is expected to be 2.3% of GDP this year.
After this decision, Spain will be the only Eurozone country still under an infringement procedure of this kind. However, its budgetary trajectory for 2018 and 2019 is likely to allow it to to join the preventative arm of the Stability and Growth Pact next year.
Finally, opinions will be adopted on compliance with the government debt criteria for Italy and Belgium. (Original version in French by Marion Fontana, Lucas Tripoteau and Mathieu Bion)