Brussels, 06/11/2001 (Agence Europe) - The Ministers of the Economy and Finance, who met in Brussels on Tuesday under the chairmanship of Didier Reynders, confirmed the political agreement on tobacco excise and discussed the Commission's study on company taxation. The Ecofin Council also adopted conclusions on the follow-up to the recommendation addressed to Ireland calling on it to bring its economic and budgetary policies into line with the Broad Economic Policy Guidelines (BEPG). The main results of the Council were:
Excise on tobacco: The Council endorsed the political agreement harmonising the minimum rate of tobacco excise (specific duty plus ad valorem duty other than VAT) at 60 euros for one thousand cigarettes as of July 2002 and 64 euros from 2006, with derogation for Spain and Greece until 2007. The total incidence of excise is fixed at 57% of the retail sales price all taxes included, except for States which levy a total minimum excise of at least 95 euros for 1000 cigarettes in the category most in demand (see EUROPE of 1 November, p.6). Several ministers, including Spanish Secretary of State José Folgado, felt that harmonisation would not have a major impact on inflation. Commissioner Fritz Bolkestein naturally welcomed the "unanimous" agreement reached in just eight months and felt that the draft directive will ensure a fair and reasonable level of tobacco tax in the EU and, to a certain extent, will allow fraud and smuggling between Member States to be countered, by narrowing the difference between the various national excise levels. Definitive adoption of the directive will come after the European Parliament has given its advisory opinion on 14 November. The Commissioner hoped the EP would adopt a "pragmatic and constructive" approach.
Company taxation: The Commission presented its communication and its voluminous study in this connection (see EUROPE of 24 October, p;8). Mr Bolkestein pointed out during a final press conference that he hoped to organise a high level conference next year to "launch the debate", mainly on the ways to reach a harmonised method of calculating the tax base for cross-border operations.
Taxation on audio-visual products and music recordings: Mr Bolkestein pointed out that the question of taxation on audio-visual and musical products will be tackled in the context of a general review of the reduced rates in the context of the 6th Directive on VAT, that the Commission is to present in 2002, and that the points of view of the audio-visual sector will be taken into account at the same time as those of the other sectors concerned.
Cross-border payments: Council President Didier Reynders welcomed the proposal from the Commission aimed at bringing the cost of cross-border transfers into line with domestic transfers, and noted that the Internal Market Council should adopt this proposal on 26 November.
Ageing population: The Council adopted conclusions confirming that the Commission and the Economic Policy Committee must continue their work on the development of indicators allowing the impact that ageing would have on public finance to be included in the elaboration of convergence programmes. In a report to be forwarded to the Laeken and Barcelona summits, the Economic Policy Committee notes that the ageing of the population should entail an increase in public spending by way of 3 to 5% of GDP by 2050 for retirement, and by way of 1 to 2% for health spending. At the next meeting of the Economic and Financial Policy Committee, the Commission will present a document on the methodology to be followed for including the question of sustainability of public finance in the current exercise of assessment of stability and convergence programmes.
Venture capital action plan: The Member States noted the last report by the Commission on implementation of the Venture Capital Action Plan.
Compliance with the Recommendation addressed to Ireland. In its conclusions, the ECOFIN Council said it "shared the main conclusions" of the European Commission's report on the 12 February Recommendation "which aimed at ending the inconsistency with the broad guidelines of economic policy" (BEPG: Broad Economic Policy Guidelines, see EUROPE of 29/30 October, p.14). "While agreeing on the importance of taking into account the changing economic situation, the Council stresses the need for continued vigilance on the fiscal stance in Ireland given the experience of overheating. In this connection the Council notes that its recommendations have been to some extent adhered to.
Taking note of the need to plan for a broadly neutral fiscal stance in Ireland, the Council considers that a budget for 2002 along these lines would provide further evidence that fiscal policy in Ireland is being directed towards stability and therefore in compliance with the Council Recommendation. The Council will assess the budgetary stance for 2002 when the forthcoming update of the Irish stability programme will be (sic) discussed."
Statistics in the context of EMU. The Council approved the fourth report by the Economic and Finance Committee (EFC) on progress in meeting the information obligation in the context of the Economic and Monetary Union. The Council noted that progress had been made in the Action Plan adopted by the September 2000 ECOFIN Council (quarterly national accounts; quarterly public sector accounts; statistics on the labour market; economic statistics about companies and foreign trade). The EFC report notes that there are now sufficient resources for the plan to be implemented. The Council noted that much still remained to be achieved in France, Italy and Spain to meet the target in the recommended time period, viz. covering 80% of the data in order to be in a position to get aggregate figures for the eurozone. Greece, Ireland, Luxembourg and Portugal are asked to make greater efforts to meet the analysis requirements for their countries. In terms of the Monetary Committee's report on information obligations under EMU (adopted by the January 1999 ECOFIN Council), improvements need to be made in terms of the time it takes to supply key indicators to ensure that EMU statistics are brought closer in line with US standards in the next five years. The report highlights the need to have a wider statistical basis in terms of services; strike a more satisfactory balance between different priorities (speed, high quality and accuracy of the statistics); and gather data in such a manner as to be rapidly produce European aggregates. The report also stresses that eurozone countries must change the way they collect balance of payments, which has become the remit of companies rather than banks as in the past.
Production gaps. The Council took note of an Economic Policy Committee (EPC) report into the work carried out by the EFC on methods of assessing production gaps. In its conclusions, the Council showed itself willing to use a new approach from 2002/2003 onwards (rather than making a statistical adjustment to eliminate the effects of cyclical fluctuations) that should make it possible to make a more accurate assessment of economic prospects in the medium-term and define policies for maintaining close-to-equilibrium budgets. According to the EPC report, the new method is more reliable than using purely statistical techniques and should cater for structural changes and the impact of labour market reforms.