Brussels, 06/03/2003 (Agence Europe) - Are negotiations on energy taxation finally reaching completion after four years of discussion and a multitude of different developments? This Friday, the Ecofin Council will be seeking to reach an agreement on the "tax package" as a whole, but the Greek Presidency does not rule out the fact that an extraordinary Ecofin session may be held on 19 March, before the European Summit.
The result of the Council depends partly on the success of Thursday's meeting between the Ecofin Council President, Nikos Christodoulakis, Taxation Commissioner Frits Bolkestein, and Swiss Federal Councillor for Finance Kaspar Villiger (see other article).
The agreement also depends on the good will shown by Italy, which, officially, is asking to see the results of negotiations with Switzerland before taking a stance. In practice, it links the dossiers on "savings tax", energy tax and taxation of dairy quotas, adding new knots to the tax tangle. The Italian government hopes to ensure that the tax exemptions on diesel fuel granted to hauliers may be extended beyond 2005 in the context of the directive on savings tax. Germany is opposed to this. The Presidency, like the Commission, notes it will be difficult to reach an agreement during the Council. "In theory", it is possible to reach an agreement on savings tax, without it being linked to energy tax. In practice, however, "there is one delegation that will not budge", notes a Greek diplomat. If Italy is hoping for a derogation over and beyond 2005 for diesel fuel, "things could be difficult", he said.
Rome has also prepared the ground in "milk quota" dossiers calling for the matter to be included on the agenda of this Ecofin Council. Italy has adopted a decree-law allowing milk producers to only pay 25% of the fines imposed by the Commission for exceeding quotas between 1995 and 2001. This amnesty brings penalties down from EUR 648 million to 162 million (see EUROPE of 22 February, p.10 and 15 February, p.12).
There was also reserve from Belgium in order to ensure that derogation for its "coordination centres" will be maintained in the context of the "code of conduct" on corporate taxation.
With such reserve, the Permanent Representatives of the EU Fifteen reached an agreement on the text of the "savings tax" directive and on a suspension clause: the directive will take effect in principle on 1 January 2005 but the Commission is expected to present a report six months later on enforcement of "equivalent" measures adopted by third countries and associated territories. "If the Council considers that conditions have not been met, it may unanimously decide on a new date for enforcement on a Commission proposal", the text to ministers states. This date above all seems to take into account the concerns expressed by the European Banking Federation whereby the information exchange system could not be technically operational before 2005.
The savings taxation directive provides for the setting in place, between Member States, of an automatic information exchange system on income from savings placed by an EU resident in another Member State. Insurance and pension fund revenue is not concerned.
Luxembourg, Belgium and Austria have obtained derogation. They will only take part in the automatic information exchange system "if and when": 1) the third countries (Switzerland, Liechtenstein, Andorra, Monaco, San Marino) have set in place "equivalent measures" in the form of information exchange upon request (according to the model defined by the OECD agreement of April 2002), together with withholding on savings income; 2) the Council has unanimously agreed that the United States has undertaken to exchange information on request according to the OECD model. This commitment should be taken on the basis of bilateral agreements with the Member States.
Pending the end of the derogation, Luxembourg, Belgium, Austria and the five third countries should apply 15% withholding during the first three years, 20% during the next three years and 35% after that (that is, from 2011). 75% of this tax will be paid back to the countries of residence of the savers.
The tax package also includes the "code of conduct" that provides for the dismantling of 60 tax measures detrimental for competition, out of the 66 measures identified by the Primarolo Group. According to agreements concluded by the Council, five Member States (Belgium, Ireland, Luxembourg, Netherlands, Portugal) will be able to maintain their system until 2010 and 2011. The Primarolo Group is expected to report in 2003 on the dismantling of harmful regimes.
The directive on "interests and dividends" is the third element of the tax package. In order to avoid double taxation, it does away with withholding on the payment of interests and royalties between associate companies of different Member States.