EU Finance Ministers will try, on Tuesday 5 April in Luxembourg, to reach a unanimous agreement on the proposed directive introducing the OECD agreement on minimum taxation of multinationals (pillar II) in the European Union. They will also review the impact of the Russian invasion of Ukraine on the European economy.
The proposed directive on minimum taxation of multinationals is still under debate. “Intensive technical work has been carried out since January to be able to move forward on an agreement”, said a European diplomat on Friday 1 April. However, the diplomat added, although “almost all member states are in agreement”, “there is still some work to do between now and Tuesday” to find solutions to other countries’ difficulties.
The two countries that are still reluctant are Poland, because of the link between Pillar I and Pillar II (see EUROPE 12922/13), and Estonia, because of the income inclusion rule.
In its latest compromise proposal, the French Presidency envisages adjusting the modalities of the transitional optionality by extending the period of application of this rule to 6 years. “We can’t go further than 6 years, in principle the countries will be satisfied”, the diplomat added.
As for Pillar I, the Commission and the EU Council’s Legal Service have confirmed the legal difficulties of linking the entry into force of the two pillars by making the entry into force of Pillar II conditional on the entry into force of the multilateral convention implementing Pillar I.
Moreover, this request by Poland is “not acceptable to the majority of Member States”. According to another EU diplomat, the Commission wants a work programme on Pillar I “before the summer”.
Also in the area of taxation, the Ecofin Council will formally adopt the reform of reduced VAT rates (see EUROPE 12907/18).
Ukraine. On Tuesday morning, the ministers will take stock of the economic impact on the European Union of the Russian invasion of Ukraine and the effects of the political and economic sanctions that the Europeans have imposed on Russia.
An additional package of sanctions targeting Russian and Belarusian individuals and companies is under preparation and will aim to prevent circumvention of these sanctions and close possible loopholes.
“It is a question of steering the scheme so that it has the desired impact. This also concerns Belarus”, said this first European source.
Joined by Ukrainian Finance Minister Serhiy Marchenko, the ministers will discuss possible further EU assistance to Ukraine.
On Friday, the European Commission proposed a coordination of national measures that will facilitate the convertibility of the Ukrainian hryvnia into European currencies (see other news). It is of the opinion that at this stage, European cohesion policy funds are sufficient to support Member States in managing mass arrivals of refugees.
In addition, the Presidents of the EIB and the EBRD will present to the ministers the actions undertaken to respond to the needs expressed by Ukraine. They will inform them about initiatives taken to strengthen their coordination in order to streamline the financial architecture for development, in line with the EU Council conclusions adopted in spring 2021 (see EUROPE 12741/23).
And in anticipation of the spring meetings of the international financial organisations and the G20 Finance, the Europeans will adopt a common language. The question of Russia’s participation in these organisations is being raised. “Work is being done in Washington to ensure that the benefits of Russia’s participation (in these organisations) are as limited as possible in this period”, the EU source said.
Finally, the Ecofin Council will adopt conclusions on the strategic autonomy of the economic and financial sector. “It is an interesting text, the relevance of which is further reinforced by the changing geopolitical context”, the EU source said, citing the importance of “ resilient market infrastructures”. (Original version in French by Mathieu Bion and Anne Damiani)