Brussels 18/03/2003 (Agence Europe) - Italy, Spain and Belgium may once more block agreement on savings tax and energy tax at the extraordinary ECOFIN Council in Brussels on Wednesday afternoon. In theory the EU should reach agreement on the tax package, including energy tax, the Code of Conduct on company taxation and the directive on taxing interest and dividends, in order to forward it to the European Council on Friday. Ministers are also expected to strike a deal on energy taxation, but since the breakdown of the last ECOFIN Council (see Europe of 11 March, p.8), views do not appear to have changed on either dossier; together they make up a de facto package. The Commission is hoping for agreement but a spokesperson for the Taxation Commissioner commented on Tuesday that it could not be ruled out that some Member States would continue to raise problems.
Italy wants unlimited derogation from the energy tax directive for refunds of diesel duty granted to road transport firms. Minister Giulio Termonti argued at the last ECOFIN Council that the derogation would make up for the handicap suffered by Italian lorry drivers from the closure of the Mont Blanc tunnels and the extension of the Ecopoint system for transiting through Austria. The other Member States and the Commission oppose this, but seem willing to grant a two-year derogation. The Greek Presidency said Italy hadn't changed its position, and Frits Bolkestein's spokesperson, Jonathan Todd, said there was little likelihood of agreement on energy taxation, which would be regrettable because the Barcelona Summit had set the target of reaching agreement at the end of 2002.
Italy is linking the tax package with milk quotas, trying to win agreement on the reduction of the EUR 648 million fines levied on some 24,000 Italy dairy farmers for overshooting quotas between 1995 and 2001. Italy is calling on the Council to decide on the basis of Treaty Article 88 that this aid is compatible with the Treaty (unanimous decision-making). The European Commission argues that Article 88 does not apply.
Spain is opposed to the idea of Switzerland benefitting from the parent-subsidiary and interests and dividends directives that aim to avoid double taxation of transfers between related companies. Berne wants to benefit from these directives in return for agreeing to the savings tax at the beginning of the month with the Commission and the Presidency of the Council (see Europe of 7 March, p.7). A bilateral meeting was held on Friday between the Spanish and Swiss governments, the results of which were rather "confused" according to the Commission. Switzerland was expected to endorse the entire agreement on Tuesday.
Belgium has a "differing interpretation" of the agreement of the 15 Member States on the Code of Conduct on company taxation. Like other Member States, Belgium was granted a derogation in order to continue its tax scheme favouring the location of international coordination centres in the country until 2010. According to the Belgian economics minister Didier Reynders the ten year contracts for such centres signed in 2003 and 2004 can run for the full ten years (in other words, beyond 2010). The European Commission is challenging this interpretation.