The European Council of Finance Ministers (Ecofin) on Wednesday adopted the
conclusions of a report on 'harmful tax competition in the European Union, and
discussed the clarification of rules of VAT on financial services.
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.
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