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Ecofin Council to discuss reduced rates of VAT

Ministry of Finance 2.12.2005 10.15
Press release 142/2005

The Economic and Finance Ministers of the European Union will convene in Brussels on Tuesday 6 December 2005. Finance Minister Eero Heinäluoma will represent Finland at the meeting. The agenda will include matters such as value added tax and economic reform.

The Eurogroup meeting, which will be held on 5 December, will address issues related to the economic situation and the budget outlook in the light of the latest economic projection released by the Commission. In addition, Michael Deppler, Director of the European Department in the International Monetary Fund will give a presentation on the macroeconomic analysis of the euro area.

Reduced VAT rates

The Ecofin Council aims to reach political agreement on reduced VAT rates as proposed in the new compromise drawn up by the Presidency. This proposes that all goods and services subject to reduced rates would be listed in Annex H to the VAT Directive, which would be expanded to include certain labour-intensive services.

Finland supports the UK compromise proposal and emphasises the need to reach a permanent agreement on the issue. This would allow Finland to levy a reduced rate of VAT on restaurant services and would also allow continued application of a zero VAT rate to the printing of member publications of non-profit organisations.

Economic reform

The Ecofin Council is due to adopt conclusions on the political challenges of globalisation. According to the proposed conclusions, globalisation offers significant opportunities, including opportunities for both business and consumers from lower prices, broader choice of products and higher disposable incomes. The opportunities of globalisation should outweigh the challenges provided the right policies are in place. Finland is able to endorse the conclusions.

The Council will also adopt conclusions on the national action plans for the relaunch of the Lisbon strategy. Member States had until mid-October to forward their national reform programmes to the Commission, based on the economic policy and employment guidelines, setting out their most important challenges in the area of growth and jobs, and the action proposed to meet these challenges. The Council's draft conclusions are acceptable, and Finland will continue to support the pursuit of structural reforms within the multilateral framework.

Regulatory reform

The ministers will discuss regulatory reform on the basis of a discussion paper drawn up jointly by the UK, Austria and Finland. This contains up-to-date information on the current phase of existing reform projects and on new projects underway. Finland, as the country to hold the Presidency during the latter part of 2006, emphasises the importance of a long-term and horizontal approach in ensuring effective regulatory reform. Practical means must be found to take this work forward, and closer cooperation achieved between Member States and the Commission in improving regulation in this area.

Code of Conduct for Business Taxation

The Ecofin Council is due to endorse the report of the Code of Conduct Group on the progress achieved in the latter half of 2005. Over the past six months the Group has concentrated on rolling back existing tax measures that constitute harmful tax competition and monitoringthe standstill process. Finland is able to endorse the report.

Financial Services

The Commission is due to present the Council with a white paper on the Union's financial services strategy for 2005-2010. The Commission's orientation corresponds broadly with Finland's views on the development of financial services in the immediate years ahead.

At the last Ecofin Council, the Commission presented its review of obstacles to cross-border consolidation in the banking and insurance sector. The proposed change to the relevant directive is aimed at preventing use of the 'shareholder control regulation' to protect national markets against external competition. The conclusions are due to be adopted at this meeting of the Council. Finland supports adoption of the proposed conclusions.

Plan of Action on Combating Terrorism

The Ecofin Council is due to endorse a general approach on a proposal for a regulation to combat terrorist financing. The proposal extends the scope of reporting obligations on the transfer of funds. Finland welcomes the general approach.

A six-month progress report by Gijs De Vries, EU Counter-terrorism Coordinator, will also be presented to the ministers on the implementation of the EU plan of action on combating terrorism and on the fight against terrorist financing. One of this autumn's most significant achievements was the final ratification of the third money laundering directive. The ministers will also be informed of the EU anti-terrorism strategy currently in progress. Finland welcomes the Presidency's draft for the EU anti-terrorism strategy.

Oil market and related energy issues

Drawing on the Commission's report, the Ecofin Council will discuss developments in the oil market and related energy markets. Recent developments show that the price pressure on oil and energy has eased, owing to a drop in demand and increased oil refining capacity. The decision by the International Energy Agency (IEA) to start drawing on national oil reserves has also played a part in price developments. However, the market is still vulnerable, and production stoppages could cause considerable fluctuation in oil prices. Finland's view is that all measures conducive to greater market transparency and better dialogue between producers and consumers are important.

For further information, please contact Mr Sami Yläoutinen, Financial Counsellor,

mobile phone no. +358 (0)40 735 1778.