The EU’s Council of Economic and Finance Ministers will start on Tuesday, 4 December at 11.00.
The European Commission will be represented by Olli Rehn, Vice President and Commissioner for Economic and Monetary Affairs and the Euro, Michel Barnier, Commissioner for Internal Market and Services and Algirdas Šemeta, Commissioner for Taxation and Customs Union, Audit and Anti-Fraud.
A press conference is expected to take place after the meeting.
Financial Transaction Tax
The Council is expected to hold a debate on the Commission’s proposal to authorise going forward with a common Financial Transaction Tax system in 11 Member States.
On 23 October, the Commission tabled a proposal for a Council Decision to authorise setting up a common system of financial transaction tax under the procedure of enhanced cooperation, which can be used in case no unanimity is achievable and at least 9 Member States want to go ahead in an area that is not yet covered by EU legislation (see IP/12/1138).
It will be based on the scope and objectives of the Commission proposal of 2011 (see IP/11/1085).
The objectives of the September 2011 proposal were essentially three-fold. First, an FTT would strengthen the EU Single Market and avoid distortions of competition by setting up a harmonised framework for an FTT.
Second, it would ensure that the financial sector makes a fair and substantial contribution to covering the cost of the financial crisis.
And finally, it would create appropriate disincentives for transactions that do not enhance the efficiency or stability of financial markets thereby complementing regulatory measures to avoid future crises.
The Council discussed latest developments concerning the introduction of a financial transaction tax (FTT) in a number of member states through the “enhanced cooperation” procedure.
On 30 November, the Permanent Representatives Committee decided to send a letter to the European Parliament requesting its consent on a draft decision that would authorise enhanced cooperation.
The Council will continue work on the text once the Parliament has given its consent, and in the light of comments made by delegations.
The Commission in October presented a proposal for a Council decision that would authorise Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia to introduce an FTT via enhanced cooperation (15390/12).
Progress on this dossier is reflected in a report on tax issues to be submitted to the European Council (16327/12). Based on article 329(1) of the Treaty on the Functioning of the European Union, the decision requires a qualified majority for adoption by the Council, with the consent of the European Parliament.
A legislative act defining the substance of the enhanced cooperation would be adopted subsequently, requiring unanimous agreement by the participating member states.
In 2011, the Commission proposed a directive aimed at introducing an FTT throughout the EU2, but Council discussions in June and July this year revealed support for the proposal to be insufficient.
In September and October, the (abovementioned) 11 member states wrote to the Commission requesting a proposal for enhanced cooperation, specifying that the scope and objective of the FTT be based on that of the Commission’s original proposal.
That proposal involved a harmonised minimum 0.1% tax rate for transactions in all types of financial instruments except derivatives (0.01% rate).
The aim was for the financial industry, which many consider as under-taxed, to make a fair contribution to tax revenues, whilst also creating a disincentive for transactions that do not enhance the efficiency of financial markets.
VAT Quick Reaction Mechanism
The Council will hold an orientation debate on the Commission’s proposal for a Quick Reaction Mechanism (QRM) that would enable Member States to respond more swiftly and efficiently to VAT fraud (see IP/12/868).
VAT fraud costs the EU and national budgets several billion euro every year. In some serious cases, vast sums are lost within a very short timeframe.
Under the QRM, a Member State faced with a serious case of sudden and massive VAT fraud would be able to implement certain emergency measures, in a way which they are currently not allowed to under VAT legislation.
In this context, the proposal provides that the Commission would be able to take within a month a decision authorising a Member State to apply a “reverse charge mechanism” which makes the recipient rather than the supplier of the goods or services liable for VAT.
Under the current derogation system, only the Council can do so upon a proposal from the Commission, according to a procedure which may take up to a year.
The proposed QRM would significantly improve the chances of Member States to effectively tackling complex fraud schemes, such as carrousel fraud, and to reducing otherwise irreparable financial losses.
The Council held a policy debate on a proposal for a directive aimed at enabling immediate measures to be taken in cases of sudden and massive VAT fraud (“quick reaction mechanism”).
The debate focused on whether implementing powers under the directive should be conferred on the Commission or on the Council. The Council asked the Permanent Representatives Committee to oversee further work on the proposal, exploring both alternatives, with a view to enabling it to reach an agreement as soon as possible.
Fraud schemes are evolving rapidly and situations arise that require a rapid response, for instance in cases of “carousel” fraud.
Until now, such situations have been tackled either by amendments to the VAT directive (2006/112/EC) or through individual derogations granted to member states under that directive, requiring a proposal from the Commission and a unanimous decision by the Council, a process that can take several months.
The Commission’s proposal is aimed at speeding up the procedure for authorizing member states to derogate from the provisions of the VAT directive, by providing for implementing powers to be conferred on the Commission under a “quick reaction mechanism”.
Based on article 113 of the Treaty on the Functioning of the European Union, the directive requires unanimity for adoption by the Council, after consulting the European Parliament.
- Preparation of Economic and Finance Ministers Council, Brussels, 4 December 2012
- PRESS RELEASE 3205th Council meeting Economic and Financial Affairs Brussels, 4 December 2012
- EU lawyers say financial transactions tax is illegal (telegraph.co.uk)
- EU finance tax illegal, say lawyers (themexicanpost.wordpress.com)
- Work on financial transaction tax to go on, EU executive says (news.yahoo.com)
- Leaked EU report queries legality of financial transaction tax plan (theguardian.com)
- EU institutions at war on ‘illegal’ finance tax (euobserver.com)