Ecofin work program

28-08-2002

Ecofin work program

The Member States' common aim of achieving stable and sustainable economic development, with lasting growth and high employment, is the driving force behind the Danish ECOFIN Presidency's priorities for EU economic policy cooperation. The EU's prosperity depends on willingness to undertake economic reforms with a view to increasing employment. It must pay to work and put in an extra effort.

The main challenges now and in the years to come are therefore to improve the structures of the European economies in order to strengthen competition and increase efficiency, thereby enhancing the potential for sustainable growth and high employment. This requires an active political effort to strengthen the internal market and establish an efficient internal financial market, to promote cooperation on fiscal policy and to implement the Lisbon strategy. The challenge is to ensure an adequate supply of well-educated workers and to guarantee the sustainability of public finances in the light of the ageing of European populations.
 
In view of those challenges, the Danish Presidency's priorities for EU economic policy cooperation are as follows:

  • Taxation : The tax package forms an important part of the European reform process, which aims at increasing prosperity and employment at the same time as guaranteeing the financing of the European welfare society. It is therefore essential that Member States adhere to the agreement that the tax package as a whole is to be adopted before the end of 2002. The Presidency would also urge Member States to reach agreement on the adoption of an energy taxation directive by December 2002, in parallel with the agreement on the opening of the energy markets.
  • The internal market in financial services : Lower capital costs and improved allocation of capital for both large and small enterprises will have a positive effect on both growth and employment. The Danish Presidency will endeavour to obtain political agreement on common rules for prospectuses. It will also strengthen cooperation in the field of financial supervision in the EU and make the supervisory structure for the EU's financial markets more effective. Finally, the Danish Presidency will adopt rules prohibiting insider dealing and market manipulation, adopt rules on the supervision of conglomerates and seek a common position on occupational pension funds. 
  • Enhanced and more effective economic policy cooperation : Europe's prosperity now and in the future depends on Member States' efforts to increase employment. The supply of labour must be expanded to ensure the long-term sustainability of public finances so that welfare is assured in the future, when there will be an increasing number of elderly people in Europe. It is the responsibility of the Member States themselves to tackle the challenges, but since the Member States are to a large extent faced with the same challenges and are mutually dependent, all will benefit from enhanced and more effective economic policy cooperation in the EU. The Danish Presidency will therefore give priority to streamlining cooperation processes and focusing on Member States' implementation of economic policy recommendations and compliance with obligations.
  • Enlargement and the EU's global responsibility : The accession of candidate countries to the EU is a top priority for the Danish Presidency. ECOFIN has the important responsibility of creating a stable Europe with economic progress, and the Presidency will therefore strengthen economic and financial cooperation between the EU and the candidate countries. The Danish Presidency will also strengthen cooperation with the Asian countries in the financial markets; this will be a topic at the ASEM?finance ministerial meeting in Copenhagen July 2002.

1. TAX COOPERATION
It is essential that Member States comply with the conclusions of the Santa Maria da Feira European Council, which oblige them to ensure the final adoption of the tax package before the end of 2002.

The tax package
It is essential that Member States comply with the conclusions of the Santa Maria da Feira European Council, which oblige them to ensure the final adoption of the tax package before the end of 2002.

The tax package forms an important part of the European reform process, which aims at increasing prosperity and employment at the same time as guaranteeing the financing of the European welfare societies. The tax package will thus support an efficient internal market — in which companies are able to operate across borders under free and fair conditions of competition and in which citizens are free to carry out their financial transactions — minimizing distortions or discrimination, including double taxation and tax evasion. The tax package is also important in view of the fact that many Member States are aiming to establish an economic policy, which – in addition to guaranteeing the financing of the welfare society – also creates the necessary scope for reducing the tax burden on labour so as to increase employment.
 
The Directive on the taxation of savings will be based on the exchange of information. Such information exchange is essential in order to ensure that each individual Member State is able to tax its citizens' interest income correctly, regardless of whether savings are held there or in other countries. With regard to third countries, the information exchange relates to the savings of EU nationals. The exchange of information is also a key instrument in combating financial crime, such as money laundering, and the financing of terrorism. Exchange of information for tax purposes is increasingly in line with international developments.

With regard to the Directive, the EU must reach a state of negotiations with the third countries named in the Santa Maria da Feira conclusions and of the discussions between the Member States concerned and all relevant dependent or associated territories that will ensure that the Council can discuss and take note of the finalisation of the negotiations and reach agreement, on the basis of a report, that sufficient reassurances have been obtained with regard to the application of equivalent measures in the named third countries and the same measures in the relevant dependent or associated territories.

With regard to the code of conduct for business taxation, the Council will finalise its discussions in order to reach agreement on the adequacy of the legislative or administrative measures to rollback the harmful aspects of the tax measures and on the possible extension of some of these measures beyond the phasing?out deadline of 2005.

Energy taxation and the opening of the energy marketsThe Danish Presidency gives high priority to Member States complying with the conclusions of the Barcelona European Council, confirmed by the Seville European Council, reaching an agreement on the adoption of a directive on energy taxation before the end of 2002, in parallel with the agreement on the opening of the energy markets.

It is the Presidency's intention that Member States should reach agreement on the adoption of an energy taxation directive providing for an increase in minimum tax rates on mineral oils and the introduction of minimum tax rates on electricity, gas and coal. 

Such a Directive will contribute towards reducing distortions in the internal market and enable companies in the EU to compete at a more level playing field. It will also ensure better correspondence between prices on energy products and their external environmental costs and hence economically efficient progress in terms of the EU's objectives and international environmental commitments. Environmental problems have cross?border effects and environmental taxes should therefore be agreed at EU level so that we get the best possible environmental improvements for our money.

On the basis of the great efforts and progress made during the Spanish Presidency, the Danish Presidency will endeavour to find solutions to unresolved issues.

Other tax matters
ECOFIN will have an orientation debate during the Danish Presidency on further work to follow up the Commission's communication on company taxation entitled "Towards an Internal Market without tax obstacles".

To follow up the ECOFIN conclusions of 16 October 2001 on the elimination of tax obstacles to the cross?border provision of occupational pensions, ECOFIN will be receiving a report on the exchange of information in the area of pensions as a means of safeguarding Member States' tax revenues and on improving coordination of Member States' different systems for the taxation of occupational pensions.

The Danish Presidency gives priority to improved administrative cooperation between the Member States' tax administrations with a view to achieving better exchange of information, making administration more efficient and combating tax evasion etc.

The Presidency will therefore continue the work on the proposal for a Decision on the Fiscalis 2007 Programme with a view to its adoption before the end of 2002.
 
The proposal for a Regulation aimed at strengthening and modernising administrative cooperation in the field of VAT, especially in order to improve measures against VAT fraud, will be taken forward with a view to its adoption before 1 April 2003, and a progress report will be submitted to ECOFIN during the Danish Presidency.

During the Danish Presidency work will be continued on the double proposal on the cross?border right to deduct VAT and on the harmonisation of VAT deduction, inter alia with the aim of simplifying EU VAT rules for the benefit of businesses, while the Commission will prioritise work on revising the provisions on the place of taxation in the 6th VAT Directive. Before the end of 2002 the Presidency and the Commission will be presenting reports on progress made in these areas to enable the Council to evaluate the situation, in particular in respect of VAT on the cross?border leasing of motor vehicles.
 

2. THE INTERNAL MARKET FOR FINANCIAL SERVICES

Consumers and enterprises must be able to benefit from a well?functioning internal market for credit, pensions, securities and other financial services across borders. Increased competition will result in lower capital costs for undertakings, greater returns for investors and hence better pensions. At the same time tighter supervision and the modernisation of regulations in the EU will contribute towards a more secure financial system.

Consumers and enterprises must be able to benefit from a well?functioning internal market for credit, pensions, securities and other financial services across borders. Increased competition will result in lower capital costs for undertakings, greater returns for investors and hence better pensions. At the same time tighter supervision and the modernisation of regulations in the EU will contribute towards a more secure financial system.

The Financial Services Action Plan is one of the means of implementing an effective internal market. The aim is to create an integrated market for financial services by 2005 at the latest and an integrated securities market before the end of 2003. The European Council in Barcelona requested that the Directives on Collateral, Market Abuse, Prospectuses, Financial Conglomerates and Occupational Pension Funds and the International Accounting Standards Regulation be adopted as soon as possible in 2002. The Directive on Collateral and the International Accounting Standards Regulation have already been adopted.
 
The Danish Presidency will seek to advance as far as possible towards the adoption of the following Directives:

The Directive on Market Abuse, which brings existing legislation in that area into line with rapid developments in the securities markets and creates uniform rules for insider dealing and market manipulation;

The Directive on Prudential Rules for Financial Conglomerates, which ensures the stability of financial markets by laying down common rules for the supervision of groups of undertakings operating across financial sectors;

The Directive on Occupational Pension Funds, which ensures the protection of members of such schemes and places suppliers thereof on an equal footing.

In order to attain the benefits of the internal financial services market, issuers of securities must be able to raise capital easily in all EU countries. Investors must have ready access to information on enterprises. The Danish Presidency will therefore seek to reach political agreement on the Directive on the prospectus that is to be published when securities are offered to the public. The introduction of common rules for prospectuses in connection with the issue of securities will both contribute towards lowering capital costs for undertakings and make it easier to invest across national borders within the EU.

The Danish Presidency also hopes to start work on the following Directives:

œ modernisation of the rules in the Information Directive, which regulates the information to be published by issuers of securities and will give investors access to better information for decision?making and hence help to improve the allocation of capital;

œ the Investment Services Directive, which lays down common rules for consumer protection so that investors in the EU are protected in the same way throughout the Union, thus contributing towards the integration of European financial markets for the benefit of both private and professional investors.
 
Evaluation of the new Directives on the regulation of securities
It is important that the Financial Services Action Plan leads to a more efficient internal market for financial services. The Danish Presidency wants to put into effect the Resolution of the Stockholm European Council on a more effective regulation of securities markets in the EU by setting up an interinstitutional monitoring committee with the participation of the Council, the European Parliament and the Commission. The monitoring committee is to evaluate the progress made in implementing the Lamfalussy procedure to ensure a more effective system of regulating securities markets and identifying bottlenecks. Regular reports shall be made to the institutions.

Increased cooperation on financial supervision in the EU
A pre-requisite for achieving an efficient internal market for financial services in the EU is that the existing cooperation on supervision and regulation of financial markets be extended and made more effective. It is important that the legislation is kept continuously up to date in order to keep pace with rapid developments on the financial markets if the competitiveness of the EU's financial markets is to be improved.

The Danish Presidency intends to give priority to the work of modernising structures for the regulation and supervision of the financial sector. During the Presidency, both the Economic and Financial Committee and the Commission will report on how the financial legislation and supervision structure can most usefully contribute to efficient and integrated financial markets in the EU. This work is expected to result in a reform of the committees responsible for supervision and regulation of these markets.

Improved corporate governance in the EU
The collapse of Enron at the end of 2001 made it clear that reliable accounts and proper auditing of accounts are of major importance for confidence in the financial markets. The Danish Presidency intends to continue work on examining whether there is a need for specific action to ensure good corporate governance in the EU on the basis of the final report from the EU's High-Level Working Party of Experts on Company Law.


3. ENHANCED AND MORE EFFECTIVE ECONOMIC POLICY COOPERATION

Prosperity in Europe now and in the future depends on the Member States' efforts to increase employment. Economic reforms that increase the effective labour supply in Europe, inter alia by ensuring that it pays to work and put in an extra effort, are necessary to create a sustained rise in employment and strengthen the growth potential of the European economies as well as to ensure the sustainability of public finances so that welfare is assured in the future, when there will be an increasing number of elderly people in Europe.

SOUND FISCAL POLICY AND ECONOMIC REFORMS TO INCREASE EMPLOYMENT AND ENSURE FUTURE WELFARE IN EUROPE
Prosperity in Europe now and in the future depends on the Member States' efforts to increase employment. Economic reforms that increase the effective labour supply in Europe, inter alia by ensuring that it pays to work and put in an extra effort, are necessary to create a sustained rise in employment and strengthen the growth potential of the European economies as well as to ensure the sustainability of public finances so that welfare is assured in the future, when there will be an increasing number of elderly people in Europe.

It is the responsibility of the Member States themselves to tackle the challenges of increasing employment and guaranteeing a sustainable economy, but since the Member States are to a large extent faced with the same challenges and are mutually dependent, all will benefit from enhanced and more effective economic policy cooperation in the EU.

The Danish Presidency accordingly gives priority to an effective follow-up to the conclusions of the Barcelona European Council, which urged the Council and the Commission to streamline the relevant processes so that there will be greater focus on Member States' implementation rather than on the annual elaboration of guidelines, and decided furthermore that the timetables for adoption of the Broad Economic Policy Guidelines and the annual Employment Package should be synchronised as soon as feasible. In the course of the Danish Presidency ECOFIN will examine the streamlining of processes.
 
Streamlining of cooperation processes should mean that the Broad Economic Policy Guidelines continue to cover the policy areas dealt with under other processes, including the Luxembourg process for employment and the Cardiff process for reforms of product and capital markets, and dealt with under the Lisbon strategy and at the European Council's spring meetings. It is important, for the sake of effective cooperation, to have a single unifying and guiding instrument, since Member States' common objectives, including those for employment and sustainable public finances, require a broad economic policy strategy involving reforms in various areas, which have to be approached as a whole and cannot be seen in isolation.

Streamlining of cooperation processes should also improve consistency and increase synchronisation of the broad economic policy guidelines and the other processes, which should thus concentrate on the main economic reforms within their respective policy areas.

In dealing with the streamlining of processes, the ECOFIN Council is to discuss the review of the European employment strategy, in order to help ensure the synchronisation of the Broad Economic Policy Guidelines and the Employment Package. The synchronisation of the timetables should mean that in the future the Broad Guidelines and the Employment Package are adopted at the same time.

The Danish Presidency will endeavour to ensure that streamlining of processes also will imply a greater focus on Member States' actual implementation of economic policy recommendations, especially those concerning sound fiscal policies and economic reforms of labour, product and capital markets.

The Danish Presidency will see the first steps taken to follow up the Barcelona European Council conclusions regarding the need to make further progress in economic policy coordination, including by reinforcing existing fiscal policy coordination mechanisms, and the submission by the Commission of proposals to reinforce economic policy coordination in time for the Spring European Council in 2003.
 
The Danish Presidency attaches importance to effective cooperation in ensuring the longterm sustainability of public finances in the light of the ageing population in Europe.

It is one of the ECOFIN Council's major tasks to monitor and encourage Member States' efforts to address the economic and budgetary challenges arising from demographic change, in the light of the EU's three?pronged strategy focussing on reduction of public debt, expansion of the labour supply, with the inclusion of women and older people, and, if necessary, reform of pension systems and system of health care and care of the elderly, so as to make them financially robust. It is crucial for our future welfare that individual countries implement the strategy in the light of their own particular circumstances and adjustment needs and that all countries implement the strategy now and for the next decade.


4. ENLARGEMENT AND THE EU´S GLOBAL RESPONSIBILITY

EU enlargement is the top priority for the Danish Presidency. It was in Copenhagen in 1993 that the conditions for accession to the EU were defined, and the negotiations for enlargement can now be completed in Copenhagen in 2002. Enlargement is in the interests of Europe as a whole. Together we can create economic prosperity and welfare for the benefit of all Europeans.

EU enlargement is the top priority for the Danish Presidency. It was in Copenhagen in 1993 that the conditions for accession to the EU were defined, and the negotiations for enlargement can now be completed in Copenhagen in 2002. Enlargement is in the interests of Europe as a whole. Together we can create economic prosperity and welfare for the benefit of all Europeans.

Increasing candidate countries' expertise in order for them to participate in EU economic cooperation
In the economic and financial sphere, it is important for the candidate countries to be both technically and administratively prepared to participate in economic policy coordination. The dialogue with the candidate countries on monitoring fiscal policy developments is designed to build up their technical expertise and administrative capacity, so that they are able to participate in the multilateral monitoring procedure as from their accession to the EU.
 
The dialogue should help acquaint the candidate countries with the methods used, such as exchange of information, discussion of good practices and joint assessment of economic developments and policy in individual countries. The Danish Presidency will therefore endeavour to have the preparation and evaluation of candidate countries' pre?accession economic programmes based to an even larger extent on the same tools as for existing Member States, so as to ensure their best possible preparation for participation in EU economic policy cooperation.

Further integration of financial markets and resultant changes in rules and supervision will affect not just present but also future Member States. There is thus a need to develop financial markets and supervision in candidate countries not only in order to underpin economic development but also so that they can compete in increasingly competitive financial markets. The Presidency will therefore attach great importance to ensuring productive discussion of macroeconomic and financial stability with candidate countries.

In November 2002 the ECOFIN Council is to hold a meeting with the candidate countries' Ministers for Economic Affairs and Finance, at which these issues will be discussed.

Closer cooperation with Asian countries concerning financial markets
The ASEM Finance Ministers' meeting in July 2002 will provide an opportunity to discuss international cooperation with Asian countries concerning financial markets, including action to combat abuse of financial markets for purposes such as money laundering and financing of terrorism, as well as international cooperation in preventing and resolving financial crises, so as to bring greater stability to the international financial system. The meeting will also provide an opportunity for mutual exchange of experience between the EU and Asian countries regarding structural reform and regional economic cooperation.

Global financial issuesGlobalisation and greater interdependence between economies increase the need for a stronger international financial system. The EU is therefore to continue efforts in a number of international fora, especially the IMF, to strengthen the international financial system, including work on ensuring better handling of financial crises by involving private creditors. In the short term, this means in particular clearer rules for IMF loans in excess of the usual loan limits and for IMF lending to countries, which have ceased payments. Consideration will also have to be given to the possibility of an international debt restructuring mechanism with the incorporation of clauses enabling a majority of creditors to reach a debt rescheduling agreement binding upon all creditors. The EU's role at the IMF should also continue to be stepped up, in particular by arriving at common understandings on IMF issues.

Sound EU financial management
The scale of irregularities under the EU budget remains too large. For this reason, among others, there is a need for further improvements in EU budgetary management, control and possible use of sanctions.

The Danish Presidency will in particular have to complete discussion of the Commission's annual report on action to combat fraud etc., as well as making a start on Council follow?up to the Commission's three?yearly assessment of the European Anti?Fraud Office. Here, as elsewhere, the emphasis will be on strengthening the basis for practical cooperation between the Commission and Member States regarding sound financial management of the budget.


5. BUDGET
In Seville in June 2002 the European Council decided to alter the division of tasks between individual Council configurations, with the abolition of the Budget Council. The Council’s budgetary work will in future be handled by the ECOFIN Council.

In Seville in June 2002 the European Council decided to alter the division of tasks between individual Council configurations, with the abolition of the Budget Council. The Council’s budgetary work will in future be handled by the ECOFIN Council.

As is the custom, the Danish Presidency would like to see agreement reached between the Council and Parliament on the budget in November. It is a very important overall priority that any such agreement should provide the financial basis for achieving the Union's aims within the limits of the financial perspectives and in line with the principle of realistic budgeting for both commitment and payment appropriations.

A special priority for 2003 is the adaptation of the EU institutions so as to prepare them administratively for enlargement, while ensuring that total administrative expenditure still remains below the ceiling agreed in Berlin.

It will also be necessary to allow a suitable margin within the budget in order to cover unforeseen needs which experience shows may arise during the financial year, not least as a result of occurrences outside the EU which call for a political and economic commitment on the EU's part.