The Council took note of a report from a working group which, on the basis of a code of conduct, works on the elimination of situations of 'harmful tax competition' in the EU. The report summarised the group's work since the beginning of this year.

The code of conduct, which covers business taxation, concerns measures that affect (or may affect) in a significant way the location of business activity in the Community.

The so-called code of conduct group is responsible for assessing the "rollback" of tax measures deemed as "harmful" (where favourable tax treatment in one member state attracts businesses from other member states), and the monitoring of a "standstill" commitment by member states not to introduce new measures that are harmful.

According to a statement from the European Commission, the Council welcomed the progress achieved by the Code of Conduct Group (Business Taxation) as set out in its report, and has asked the Group to continue monitoring standstill and the implementation of rollback, and report to the Council before the end of the French Presidency.

The EU's Finance Ministers established the Code of Conduct Group (Business Taxation) at a Council meeting on 9th March 1998 to assess the tax measures that may fall within the scope of the Code of Conduct for business taxation.

In a report of November 1999, the Group identified 66 tax measures with harmful features (40 in EU Member States, 3 in Gibraltar and 23 in dependent or associated territories).

Member States and their dependent and associated territories have now introduced, or are in the process of introducing, revised or replacement measures in substitution for the 66 measures.

The Council also called on the incoming presidency to build on progress made on a proposal aimed at clarifying and updating the definitions and rules governing insurance and financial services – which are exempt from VAT.

This proposal is aimed at increasing legal certainty for economic operators and tax administrations, reducing administrative burdens and reducing the impact of hidden VAT in the costs of service providers.

The existing definitions were established in the 1970s, and have led to uneven interpretation by the member states. The proposal is intended to amend the directive on the common VAT system, and it is closely linked to a proposal for a regulation laying down implementation measures for this directive as regards insurance and other financial services.

In addition, the Council acknowledged a progress report from the presidency on a proposal for a directive establishing general arrangements for excise duties.

This proposal is intended to provide the legal basis for a modernised movement and control system, with an electronic message to replace the accompanying paper document that currently enables the control of intra-Community movements of excise goods.