The EU Finance Ministers will meet, once again by videoconference, on Tuesday 16 March, for discussions that will focus on digital taxation and the post-Covid-19 economic recovery.
A physical meeting of the ministers is nevertheless in sight. The Portuguese Presidency of the EU Council decided to postpone the informal Ecofin Council meeting, initially scheduled for 16–17 April, to 21–22 May, in the hope that it can be held in Lisbon.
Digital taxation. The ministers will exchange views on the state of discussions on digital taxation (see EUROPE 12670/12), as the subject is on the agenda of the European Council on 25–26 March.
According to the guidelines prepared for the EU Heads of State and Government meeting, dated 8 March and copied to EUROPE, the European Council is expected to reaffirm, in its conclusions, its “strong preference for and commitment to a global solution on international digital taxation” and strive “to reach a consensus-based solution by mid-2021 within the framework of the OECD”, while confirming its “readiness to move forward if a global solution is not forthcoming”.
At the Ecofin Council, the European Commission will reportedly be asked to outline its plans in this area, including its proposal for a new own resource based on the digital sector, which it has undertaken to present by June.
Without going into detail, the Commission has reportedly already indicated to Member States that this proposal would be technically different from the Pillar I on digital taxation currently under discussion at the OECD, as it would target businesses with a lower turnover than the threshold envisaged by the OECD (750 million euros).
According to a diplomat, the discussion on Tuesday is not expected to reveal any major surprises, except to point out that the change in attitude of the new US administration, notably the abandonment of the request for a voluntary scheme (see EUROPE 12667/4), strengthens the chances of an agreement at the OECD.
According to another European source, all Member States are convinced of the need for this reform, but not all Member States are convinced that it is necessary to start preparing for its implementation at European level or to develop a plan B in case international negotiations fail.
“It is not yet known what kind of agreement might be adopted at the OECD: a minimum standard, a common approach or just a principle of good practice”, the source said.
A number of Member States are said to prefer that the Commission waits until mid-2021 before proposing initiatives while others reportedly want the EU to prepare itself now.
In a note prepared for the meeting and seen by EUROPE, the Portuguese Presidency recalls that any international agreement on international tax reform will require several legislative adjustments.
“At the EU level, it still has to be ascertained which elements of the future international consensus on ‘digital taxation’ will require an amendment of current national legislation or international agreements, or new legislative proposals by the European Commission”, the document says.
Economic recovery. Similar to the Eurogroup meeting the day before (see EUROPE 12675/26), the ministers will also take stock of the economic situation and the uncertainties linked to the Covid-19 pandemic, in the presence of representatives of the European Banking Authority and the ECB. On Thursday, the latter decided to significantly increase the pace of repurchases of mainly sovereign securities in the next quarter in order to limit the rise in interest rates observed on the markets (see EUROPE 12676/28).
On Tuesday, the Ecofin Council will have an exchange of views on the recent European Commission communication setting out guidelines for the national stability and reform plans due in April (see EUROPE 12670/1). It also suggests that the general escape clause of the Stability and Growth Pact should remain in place until the end of 2022, as the EU is not expected to return to its pre-crisis growth level before mid-2022.
The Member States welcomed the Communication rather positively. Any decision on whether to continue, or end, the freeze on European budget rules will have to be taken in May or June on the basis of updated economic data and criteria which will be available in May.
At this stage, given the uncertainties of the Covid-19 pandemic, the officially shared line is to maintain public support for the economy and to move gradually from emergency measures to growth-enhancing measures in line with the objectives of the ecological and digital transitions.
The ministers will also take stock of the preparations for the national recovery plans since the entry into force in mid-February of the Recovery and Resilience Facility , the budgetary instrument at the heart of the Next Generation EU Recovery Plan (see EUROPE 12654/1).
Greece, Belgium and Lithuania will present their draft plans, while all EU27 plans should be transmitted to the European level by the end of April. The Commission will stress the importance of planning investments and structural reforms on the basis of the 2019 country-specific recommendations.
The Portuguese Presidency of the EU Council is confident that Member States, with one or two exceptions, will be able to ratify the ‘new own resource for the EU budget’ decision by early April so that it is operational by the summer. This is a prerequisite for the Commission to be able to pre-finance, from the beginning of the summer, the national recovery plans by borrowing on the markets on behalf of the EU27.
Payments. The Portuguese Presidency will also take stock of the draft EU Council conclusions on the retail payments strategy, presented by the Commission in September (see EUROPE 12567/1).
In the text, Member States support the main pillars of the new strategy, in particular the promotion of the widespread use of instant payments (see EUROPE 12673/19).
The conclusions, which have already been agreed at technical level, are expected to be formally adopted, without discussion, at the Agriculture and Fisheries Council of the EU on 22–23 March. (Original version in French by Marion Fontana and Mathieu Bion)