Ecofin Discusses Euro Crisis And Taxes

by Ulrika Lomas, Tax-News.com, Brussels

24 January 2011

Unveiling details of the latest European Union Economic and Financial Affairs Council (Ecofin) meeting, Luxembourg’s Prime Minister and Eurogroup President Jean-Claude Juncker underlined the fact that the crisis that exists is not a euro crisis but rather a sovereign debt crisis in some euro zone member states.

According to the Luxembourg administration, ministers discussed during the course of the meeting progress regarding implementation of the Greek and Irish adjustment programmes, to ensure that the relevant loan disbursements could take place as per schedule.

Regarding recent developments in the euro zone, it was noted that the prognosis for the actual economy remains positive, as confidence indicators continue to increase significantly and as the euro zone economy is due to continue to grow in the first quarter of 2011, as well as in subsequent quarters.

Although the situation remains volatile, measures taken by Portugal and Spain appear to have been very useful, the Luxembourg administration revealed. Eurogroup President Juncker qualified efforts made by Spain and Portugal in terms of budgetary consolidation and of implementing structural reforms as “exemplary”.

Following on from recommendations made during the last Ecofin meeting, held on December 16 and 17, Luxembourg’s administration stated that the Eurogroup had initiated discussions on a comprehensive response to the challenges facing the economic and financial stability of the euro zone. Here, Juncker confirmed Eurogroup plans to accelerate its works in order to present its conclusions to the European Council as quickly as possible.

During the course of the meeting, proposals expected to form the outline of the future European stability mechanism in March were examined. The future mechanism is designed to definitively replace the existing European Financial Stability Facility (FESF) from mid-2013. The administration pointed out that discussions would take place both within the Eurogroup as well as within an intergovernmental framework to include countries from outside of the euro zone. Both formats will be presided by the president of the Eurogroup, the administration added.

Other items on the agenda included the procedure concerning Malta’s excessive deficits, the introduction of the euro in Estonia, and national reform programmes.

Items approved by the Council during the meeting include the decision to allow the UK, by way of derogation from the value-added tax (VAT) directive, to continue restricting the right of VAT deduction on the hire or leasing of vehicles not entirely used for business purposes, and the decision authorizing France to apply reduced rates of taxation to unleaded petrol and gas oil used as fuel.

The Council also reached political agreement on a draft regulation laying down new implementing measures for the EU system of VAT. The draft regulation clarifies certain aspects of the VAT directive with the aim of ensuring better compliance with the objectives of the EU internal market. The regulation is due to be adopted without discussion at a forthcoming Council meeting.

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