7th November 2014

Economic Policy: ECOFIN Council discusses FTT, EU budget and more

cAt an ECOFIN Council meeting on 7 November in Brussels, the EU´s finance ministers discussed the anti-abuse amendment of the 2011 parent-subsidiary directive. This amendment is a step in the fight against tax evasion, it would ban abusive parent-subsidiary tax arrangements. As it touches taxation, the legal act has to be approved by the Council unanimously, after consulting the European Parliament. The ministers agreed in principle on the amendment and agreed to work constructively to reach a formal agreement at the December ECOFIN meeting. Mainly the Netherlands and the UK reserved some time to obtain ex ante parliamentary approval. Also Belgium reserved some time to study the technical details of the amendment. Once adopted, the amended rules will have to be transposed into national legislation by the end of 2015.

The ministers discussed also the EU budget. Following a routine yearly adjustments of GNI-based resource of the EU budget, corrections were announced for the Member State contributions. Some, such as France and Germany, have gained from this statistical exercise, which re-calculates Member State contributions based on their respective GNIs. But the UK, for example, was asked to pay €2 billion as a result of its good economic performance. This was instantaneously rejected by PM Cameron as an outrage. The Commission, on the other hand, pointed out that this a yearly routine and it has nothing to do with the UK specifically. The ministers discussed this sensitive issue and agreed to extend the deadline for the corrections payments to September 2015. Budget regulations will be adjusted accordingly in the following weeks. Normally, countries would have to pay their increased contributions by this December and would have to pay interests if they failed to do so. Although the re-calculation of GNI-based contributions is a yearly practice, last year´s corrections amounted to only €360 million, compared to €9.5 billion this year, which meant that last year went largely unnoticed, while this year caused political turmoil. The UK will profit the most from the extended deadline due to its “rabat” arrangement negotiated in the 1980s by PM Thatcher. Under this arrangement, the UK gets a “yearly discount” on its contributions. By deferring the corrections payment to the next year, the UK will practically save some €1 billion on EU contributions.

Members of the American Chamber of Commerce in the Czech Republic