While the Convention is putting the finishing touches to the draft Constitution for Europe, in a situation that is fart more favourable than a week ago (see this section 11 June), I would like to briefly comment on some legislative developments for the Union's economy.
The definitive approval of the provisions on savings taxation for non-residents. The decision of the Ecofin Council on this subject (see our bulletin on 4 June p 6) is a conclusion to a very long saga and allows for the elimination of one of the distortions already criticised in the "White Paper" of Jacques Delors, namely the excessive increase in tax at work in all Member States in order to partially rectify the reduction in taxes on savings interests. In practices, every Member State became a "tax haven" for savings in neighbouring countries. As from 2005, savings will be taxed even if it has fled (within the EU or elsewhere) the country of the saver's residence.
I can understand the disappointment of Member States that are fiscally more "virtuous" faced with the fact that in some countries (Luxembourg, Belgium, Austria and Switzerland), taxation will be done by a withholding tax that escapes an progressive taxation. But I believe that the agreement is positive for four reasons: a) deposits that current escape all taxation will be taxed. This will not be a tax that is morally ideal, as it ignores the progressivity but the tax will all the same be quite high. The solution decided on does not represent fiscal equity but progress in this direction, which is always better than nothing; b) our countries will receive tax returns that are currently unable to benefit from at all; c) in the case of countries outside the Community, like Switzerland, most of these tax receipts will be paid to EU countries, even if Switzerland is not a Member State; d) tax benefits contained in the transfer of savings, will in part disappear and it is possible that some savers will stop transferring their savings abroad, which will benefit the countries of residence.
"Open sky" agreements with third countries will become Community based. The Council has put the Commission in charge of negotiations with the USA and other third counties (Russia, China, Japan, Australia, Morocco etc) on EU agreements for the setting up of an open air space. In order to appreciate the importance of the decision in this case it is also necessary to go back several years to the era when Member States multiplied national "open sky" agreements with the Americans. Since then, the Commission has not ceased asserting that, as opposed to almost all the governments' opinions, supported by the Court of Justice, that the national bilateral agreements are illegal and that they should come under Community competence. I think that Commission Vice President, Loyola de Palacio, has not exaggerated when on 5 June, the day of the Council's decision, she spoke of a "historic day" for Europe. There are many political and economic implications and I refer to our bulletin on 6 June 8/9 for details. I insist on one point: that of the routes being served. In a bilateral agreement, routes between Member States (London-Rome, Paris-Berlin, Madrid-Amsterdam) are international routes and do no represent an equivalent for obtaining a flight between Chicago and Washington and New York and Los Angeles. In a Community agreement, the links mentioned are within the Union and the Commission could ask for the equivalent of internal links in the USA. there are many other aspects.
The energy market will become "European" in July 2007
A few years ago, this objective as considered as just a point of view, given the numerous technical and economic problems and wariness everywhere. But just the other week the European Parliament approved in second reading the package on the matter (vast and complex: see our bulletin on 5 June p 15) with the two other fundamental deadlines: total opening of the electricity and gas markets in July 2004 for commercial customers and July 2007 for everyone else. This now only requires that final formal act by the Council to made this definitive. Parliament obtained guarantees on the funds for dismantling nuclear plants (which should not be used for other ends and installations in other Member States should definitely not be bought), as well as improvements that have enabled it to approve the package with a more conformable majority. Italian business leaders complained about some of the provisions, pointing out that energy from electricity was more expensive for them than for their competitors but it is obvious that the creation of a single market facilitates the purchases in other Member States (which obliges national producers to reduce their costs).
Overall result: Community decisions mentioned above are good news for the competitiveness of the EU economy.