EU finance ministers will try to reach a political agreement on Tuesday 7 December on a proposed directive reforming the system of reduced rates of value added tax (VAT). They will discuss the recent legislative package to boost the Capital Markets Union (CMU) and take stock of the European Recovery Plan as well as many unfinished dossiers, such as the banking union and the anti-money laundering package, which will be handed over to the upcoming French Presidency of the EU Council.
Reduced VAT rates. The Ecofin Council could reach a unanimous political agreement on the proposal for a directive reforming the system of reduced VAT rates.
“I expect an agreement” as the member states’ ambassadors to the EU (Coreper) have all signalled their countries’ support, an EU source said on Monday 6 December.
Member States will have more flexibility to choose which products are subject to reduced, super-reduced or zero tax rates, but they will not have the full flexibility originally proposed by the European Commission in 2017. A timetable has also been inserted to review the scope of future rules in line with the objectives of the ‘European Green Deal’, including the possibility of introducing a reduced VAT rate for gas supplies until 2030.
See the Slovenian compromise proposal: https://bit.ly/3Ex57zE
Code of conduct. The Slovenian Council Presidency will submit to the Ministers a draft revision of the 1997 Code of Conduct, which aims to limit harmful business taxation practices in the European Union.
Taking into account the agreement on international business tax reform within the OECD (see EUROPE 12808/2), this draft extends the Code of Conduct to generally applicable tax features of a Member State which create opportunities for double non-taxation or which may lead to the multiple use of tax advantages (see EUROPE 12843/16).
Hungary and Estonia maintain their reservations about the proposed text, but the Slovenian Presidency hopes that both countries will be able to approve the compromise on Tuesday. Among the reasons given by Budapest and Tallinn are the role of the EU institutions in the governance of the revised code and the competitiveness of their territory.
Capital Markets Union. The ministers will have a first exchange of views on the package of four legislative texts aimed at strengthening capital markets in the EU (see EUROPE 12840/6).
A legislative proposal suggests that the European Securities and Markets Authority(ESMA) should set up a European Single Access Point (ESAP) by the end of 2024, which will centralise a range of regulatory financial information. Another, which amends the MiFIR regulation on markets in financial instruments, proposes the creation of a consolidated tape to provide financial actors with an overview of market conditions (prices and volumes of securities traded) within a reasonable timeframe in order to make informed choices.
Next Generation EU. The European Commission will inform Member States on the implementation of the Next Generation EU Recovery Plan. No new validated stimulus package will be approved on Tuesday.
At this stage, the plans of four countries - Bulgaria, Hungary, Poland and Sweden - are still under discussion, while the Netherlands has still not officially submitted its document to the European level.
Of the countries that have already received pre-financing for their recovery plan, Spain and France have requested a first official payment of €10 billion and €7.4 billion respectively.
European Semester. The Ecofin Council will discuss the budgetary process of the ‘European Semester’, which was launched by the European Commission at the end of November (see EUROPE 12839/1).
It recommends that the euro area maintain a moderately expansionary fiscal stance next year in order to continue targeted support to the sectors of activity that have suffered most from the Covid-19 pandemic and to continue to stimulate public investment, while bearing in mind the importance of having sustainable public finances in the long term.
Regarding the euro area countries’ draft budget plans for 2022, the EU institution is not asking any country to reconsider its plans, but only giving qualitative opinions as long as the European fiscal rules remain frozen.
On the reform of the European economic governance framework, ministers will be briefed on the recommendations of the European Fiscal Board, which proposes a simplification of the rules and a long-term anchor for public debt reduction combined with expenditure restraint by each member state (see EUROPE 12833/23).
2022 budget. Ministers will adopt the agreement on the EU budget for next year (see EUROPE 12833/12).
Miscellaneous. Finally, the Slovenian Presidency will submit a series of progress reports to the Member States on several dossiers:
(1) banking union in the euro area, through the creation of a European Deposit Insurance Scheme (EDIS), the day after a dinner of the 27 ministers devoted to this project (see EUROPE 12846/9): https://bit.ly/3oqWQrp
(2) the anti-money laundering package presented in July (see EUROPE 12766/4): https://bit.ly/3dn3qsX (Original version in French by Mathieu Bion)