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Eurogroup Drives Forward Fiscal Agenda

by Ulrika Lomas,, Brussels

07 December 2012

During the latest Eurogroup and European Union Economic and Financial Affairs Council (Ecofin) meeting in Brussels, eurozone finance ministers debated key current fiscal projects and evaluated the various adjustment programs for Greece, Cyprus, Spain and Portugal.

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" under a procedure known as the "quick reaction mechanism." The debate focused on whether implementing powers under the directive should be conferred on the Commission or on the Council.

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 the quick reaction mechanism. 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.

The Permanent Representatives Committee is responsible for preparing the work of the Council of the European Union. It consists of representatives from the Member States with the rank of Member States’ ambassadors to the European Union and is chaired by the Member State which holds the Council Presidency.

"Fraud schemes are evolving rapidly and situations arise that require a rapid response, for instance in cases of 'carousel' fraud," says an Ecofin statement. "Until now, such situations have been tackled either by amendments to the VAT directive 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 Council also endorsed a report reflecting the state of play of negotiations and setting out proposals for future work regarding a directive amending the existing energy taxation directive to bring it more closely in line with the EU's energy and climate change objectives. Under Commission proposals - intended to promote the use of alternative, environmentally-friendly fuel sources in the European Union - minimum levels of taxation on fuel sources would be imposed, calculated on two factors: a fuel's carbon emissions; and energy produced.

The Council also discussed latest developments concerning the introduction of a financial transaction tax (FTT) in a number of member states through the "enhanced cooperation" procedure.

On November 30, the Permanent Representatives Committee decided to send a letter to the European Parliament requesting its consent on a draft decision that would authorize 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 eurozone finance ministers also assessed implementation of the adjustment program for Greece, shortly after a political consensus was reached to disburse the next tranche of financial aid to Greece. Greek Finance Minister Yannis Stournaras informed the ministers of progress made as regards the buy-back of Greek debt. The Eurogroup decided to reconvene on December 13 in order to make a final decision on the instalment payment, once all the national procedures have been concluded and the results of the operation made known.

Also examined was a Troika report pertaining to negotiations with the Cypriot authorities regarding the modalities of a future adjustment program for the country. Eurogroup President Jean-Claude Juncker welcomed "the first important steps that Cyprus has made towards the implementation of measures already agreed with the Troika, including fiscal consolidation measures." While urging members of the Troika and the Cypriot authorities to unite on an adjustment program as swiftly as possible, the Eurogroup said that it would re-examine the file at its upcoming meeting on December 13.

In addition, the ministers examined implementation of the assistance program for the Spanish banking sector and welcomed the conclusion of the first program review, which they considered to be "on the right path." The Eurogroup also welcomed the decision of the European Stability Mechanism board of governors to authorize payment of the first tranche of the program, involving a sum of up to EUR39.5bn (USD51.6bn).

As regards the sixth Troika report on the implementation of Portugal’s assistance program, the Eurogroup noted that the program "remains on track despite headwinds." According to Juncker, the ministers welcomed Portugal’s reaffirmed political consensus for the program and the firm commitment of the Portuguese authorities.

Acknowledging that progress is being made as regards financial and structural reforms, Juncker highlighted the fact that these reforms "remain key" to strengthening the country’s growth potential. Juncker underlined Eurogroup’s commitment to supporting Portugal until it regains access to the financial markets. On this basis, the Eurogroup gave the green light to the disbursement in January 2013 of a new tranche of aid for Portugal amounting to around EUR2.5bn.

TAGS: environment | compliance | tax | European Commission | value added tax (VAT) | tax compliance | Portugal | tax avoidance | energy | law | banking | capital markets | tobin tax | Cyprus | Greece | Spain | Europe

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