Wed. Sep 18th, 2024

Main results of the EU Economic and Financial Affairs Council, 14 May 2024

May 15, 2024

Brussels, 14 May 2024

Withholding taxes

The Council reached an agreement (general approach) on the Council Directive on faster and safer relief of excess withholding taxes (FASTER).

Aligning our tax relief procedures is essential if we want to improve the functioning of the capital markets union. I’m glad we have found an agreement on this important proposal, which will also help to fight tax fraud much more efficiently. It will make investing in other countries easier and hopefully encourage retail investors in particular to invest on European financial markets, which will eventually benefit the whole economy.

Vincent Van Peteghem, deputy prime minister and minister of finance of Belgium

VAT in the digital age

The Council exchanged views, making progress towards an agreement, on the value added tax (VAT) in the digital age package, which aims to tackle VAT fraud, support businesses and promote digitalisation.

The package sets out to modernise reporting obligations for VAT purposes by standardising the information that needs to be submitted by taxable persons on each transaction and by imposing the use of e-invoicing for cross-border transactions, which would contribute to the fight against VAT fraud.

It seeks to address the challenges of the platform economy by enhancing the role of platforms in the collection of VAT when they facilitate the supply of short-term accommodation rental or passenger transport services.

The package also aims to make it possible to register for VAT purposes only once for all EU member states, by expanding and improving the functioning of the existing one-stop shop systems and reverse charge mechanisms.

Recovery and Resilience Facility

Ministers exchanged views on the state of play of the implementation of the Recovery and Resilience Facility (RRF).

The Council adopted implementing decisions approving the modified recovery and resilience plans submitted by Italy and Spain.

The RRF is the EU’s large-scale financial support programme in response to the challenges the pandemic has posed to the European economy.

It is the centrepiece of NextGenerationEU, a temporary recovery instrument that allows the Commission to raise funds to help repair the immediate economic and social damage caused by the COVID-19 pandemic.

Russia’s aggression against Ukraine

Ministers discussed the state of play of the economic and financial impact of Russia’s aggression against Ukraine.

Sergii Marchenko, the Minister of Finance of Ukraine participated in the discussion via video-link.

Ministers discussed the state of advancement of the implementation of the Ukraine Facility.

Ministers took note of the progress made by the Council with regard to extraordinary windfall profits emanating from immobilized Russian assets.

Under items without discussion, the Council adopted a Council implementing decision on the assessment of the Ukraine plan.

Based on the Commission’s assessment, the Council concluded that Ukraine fulfils the precondition for support under the Ukraine Facility. This paves the way for regular and predictable financial support to Ukraine’s recovery, reconstruction, and modernisation over the next four years.

The Ukraine Facility will provide predictable financial support of a total of € 50 billion for Ukraine over the 2024-2027 period.

Ageing

The Council approved conclusions on the fiscal sustainability challenges arising from ageing.

The conclusions draw on the main findings of the 2024 ageing report prepared by the European Commission and the Economic Policy Committee (EPC). The report covers age-related public expenditure (e.g. pensions and health care).

The Council in its conclusions reaffirmed the need to further address the economic and budgetary consequences of ageing, including by adopting sound public finances, raising employment rates, and adapting pension and health care systems to these challenges.

G20

The presidency and the Commission informed ministers about the outcome of the G20 finance ministers’ and central bank governors’ meeting that took place on 17-18 April 2024 and the spring meetings of the International Monetary Fund (IMF).

Financial literacy

The Council approved conclusions on financial literacy that aim to contribute to delivering the capital markets union.

Strengthening people’s financial literacy is of utmost importance for building a more ambitious, inclusive and resilient Capital Markets Union. I am pleased that the process we started at our informal ECOFIN in Ghent in February 2024 has now resulted in Council conclusions. Financial literacy is of utmost importance if we wish to channel dormant savings towards productive investment projects. The better educated people are about their personal finances, the more likely they are to make the best financial decisions for themselves and for society at large.

Vincent Van Peteghem, deputy prime minister and minister of finance of Belgium

The conclusions give guidance to the Commission and the member states on how to improve citizens’ knowledge and understanding of finance, in order to help them make more informed financial choices and encourage them to invest on European financial markets.

The conclusions follow-up on ministers’ discussions in the informal ECOFIN meeting in Ghent in February 2024.

Financial services

The presidency presented the state of play of legislative proposals in the field of financial services. This is a recurrent item on the ECOFIN agenda.

Climate coalition

Under other business, the presidency and the Dutch finance minister presented the 2024-2025 strategic work programme of the Coalition of Finance Ministers for Climate Action and informed ministers about the outcome of the 11th ministerial meeting of the coalition that took place on 17 April during the IMF Spring meeting.

Asylum and migration pact

The Council adopted a landmark reform of the European asylum and migration system. The Council adopted 10 legislative acts, which establish a rulebook that will help to orderly manage arrivals of irregular migrants, create efficient and uniform asylum procedures and ensure a fair burden sharing between member states.

Macroeconomic dialogue at political level (MEDPOL)

The current and two incoming presidencies (Belgium, Hungary and Poland) brought together the social partners, the European Central Bank, the President of the Eurogroup and the Commission for the twice-yearly macro-economic dialogue at political level on 13 May.

The meeting offered the opportunity for social partners to express their views on:

  • the review of current economic conditions, outlook and appropriate policy responses
  • strengthening the economic base: challenges and opportunities, in particular with a focus on competitiveness aspects
Economic and financial dialogue

An economic and financial dialogue took place in the margins of the meeting on 14 May.

The current and two incoming presidencies (Belgium, Hungary and Poland) brought together the finance ministers and central bank governors of Albania, Bosnia and Herzegovina, Georgia, Kosovo1, Moldova, Montenegro, North Macedonia, Serbia, Türkiye and Ukraine, as well as representatives of the Commission and the European Central Bank.

For the first time, Georgia, Moldova and Ukraine participated in this meeting. Ukraine participated as an observer in order to avoid the duplication of work already carried out in the context of the Ukraine Facility.

The aim of the dialogue is to familiarise participants with the close coordination of economic policies among EU member states through the European Semester.

Ministers aprroved joint conclusions of the Economic and Financial Dialogue between the EU and the Western Balkans Partners, Türkiye, Georgia, Republic of Moldova and Ukraine.

1 This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of independence

 

Preparatory documents
Outcome documents
Press releases

 

Remarks by Executive Vice-President Dombrovskis at the ECOFIN Press conference

Brussels, 14 May 2024

Thank you Vincent. Good afternoon, everyone.

I will start with taxation. We have taken a significant step in our fair taxation agenda with today’s general approach on new rules to make withholding tax procedures more efficient and secure. This will have a positive impact on investors, financial intermediaries – like banks – and national tax administrations.

Today, these procedures vary widely across Member States and are often lengthy, resource-intensive and costly.

This applies especially to investors reclaiming excess tax paid in another EU country.

Apart from the frustration caused, it discourages cross-border investment within and into the EU.

The new rules will make sure that cross-border investors are not taxed excessively on dividends and interest payments. They also contain anti-avoidance provisions to help reduce the loss of fiscal revenue from abuse of withholding tax rules and procedures.

This decision is an important building block of the Capital Markets Union. Reducing complexity and costs will allow investors to invest more easily and securely in other Member States.

Second, work will continue to update the EU’s VAT rules to new digital realities, such as the rapid growth of e-commerce and platform work.

Digital technologies like e-invoicing are a powerful tool to raise VAT revenues while helping our businesses to grow. They can help to fight tax fraud too.

Member States lose many billions of euros every year to tax fraud, evasion and avoidance.

In addition, VAT rules vary widely across the EU and place a considerable burden on businesses. Thanks to the Belgian Presidency for their ongoing efforts and we hope to get this over the line during the Belgian presidency.

Moving to the Recovery and Resilience Facility where Council approved the modified national plans submitted by Spain and Italy.

A quick update on where we stand so far on the RRF.

Total disbursements now amount to more than €232 billion to 25 Member States, including pre-financing.

The Commission expects to receive 21 more payment requests by the end of the year and we will process them accordingly.

If all goes to  plan, in 2024 the RRF will have disbursed more than €100 billion and more than €300 billion since the start of the Facility.

Lastly, in light of the Ecofin conclusions following the RRF’s mid-term evaluation, we will soon propose a few practical improvements to reduce the administrative burden linked to RRF implementation. This while preserving  the Facility’s high levels of transparency and accountability.

Turning to the economy.

Without pre-empting the spring forecast that the Commission will present tomorrow, it is clear that the EU economy – and particularly the labour market – continue to show resilience.

Preliminary Eurostat estimates show that in the first quarter of 2024, economic activity in the EU and euro area expanded by 0.3% compared to the previous quarter.

This is the strongest rate since the third quarter of 2022.

Inflation is also on track towards target. Euro area annual inflation is expected to stand at 2.4% in April 2024, stable compared with March and down from 2.6% in February.

With business sentiment improving and labour markets still strong, the conditions are in place for economic activity to pick up pace in the course of this year.

This goes with the usual caveat about continuing risks and uncertainty, not least from current geopolitical circumstances.

Last but not least, Ukraine. As the minister already said, today the Council approved the Ukraine Plan.

It focuses on reforms to tackle barriers to growth, investments in key sectors, and measures to promote Ukraine’s convergence with EU rules and standards as part of its accession path.

The Plan will be the main tool for implementing the Ukraine Facility. The next step will be to pay out pre-financing of €1.9 billion right after the loan agreement is signed. Two more regular payments are expected in September and November.

This comes on the back of yesterday’s agreement to extend our trade support measures to Ukraine by one more year. And last week, EU ambassadors reached political agreement on the Commission’s proposals for using windfall profits from frozen Russian state assets.

Our priority now is to formalise this agreement as soon as possible so that these funds can support Ukraine without undue delay – on top of payments to come from the Ukraine Facility.

On sanctions. Last week, the Commission adopted its proposal for a 14th sanctions package.

This focuses on further weakening Russia’s military industrial complex and adding more measures to tackle circumvention. It is vital to keep up the pressure on Russia by strictly enforcing sanctions in cooperation with our international partners. We now hope for fast agreement by Member States on the latest sanction package.

As we discussed with Ukraine’s Finance Minister Marchenko today, we will continue to tackle sanctions circumvention – and we continue to raise this issue also with our global interlocutors.

Another main development is the very welcome $61 billion US aid package for Ukraine. It will provide more support for Ukraine when the country needs it most. Which means the financing gap for this year is basically covered.

Ukraine and its international partners will now need to focus on the financial support that will be needed for 2025.

I will conclude here. Thank you.

Source – EU Commission

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