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ECOFIN - 5 June 2007

Volume 461: debated on Monday 4 June 2007

The Economic and Financial Affairs Council will be held on 5 June in Luxembourg. The items on the agenda are as follows:

Implementation of the Stability and Growth Pact: Excessive Deficit Procedures

Ministers will be asked to agree conclusions abrogating the excessive deficit procedures on Malta, Germany and Greece. In January 2003, the Council decided Germany’s deficit of 3.7 per cent. of GDP in 2002 was excessive, and gave them a deadline of 2004 to correct this. The deadline was subsequently extended to 2005 and then to 2007, as the deficit remained above 3 per cent. In 2006 the deficit fell to 1.7 per cent. of GDP.

The EDP was started on Greece in 2004 on the basis of a deficit of 3.2 per cent. of GDP in 2003. In January 2005 the Council concluded that no effective action had been taken to correct this and gave Greece notice to bring the excessive deficit to an end by 2006. In 2006 the deficit was 2.6 per cent. of GDP.

Malta was deemed to be in excessive deficit in July 2004, following a deficit of 9.7 per cent. of GDP in 2003. They were given a deadline of 2006, and last year the deficit declined to 2.6 per cent. of GDP.

Convergence Reports by the Commission and the European Central Bank

Ministers will discuss the Commission and the ECB’s convergence reports for Cyprus and Malta, and Commission proposals for the abrogation of their derogations and for a regulation on the introduction of the euro. This would allow both countries to join the euro as planned on 1 January 2008. This will next be discussed by Heads of State and Government at the European Council on 21-22 June.

Quality of Public Finances

This follows up from the discussion at the informal ECOFIN. The Council will receive a report from the Economic Policy Committee on the efficiency and effectiveness of public finances, focusing in particular on the need to improve the measurement of public sector output. The Council is also expected to adopt conclusions on these matters.

Tax

a) Combating Tax Fraud

Ministers will be asked to agree Council conclusions on conventional measures and more radical solutions to combat VAT fraud, including German ideas on the wide reverse charge.

b) VAT Package

Ministers will discuss a package of measures to modernise the EU VAT regime for the cross-border supply of services.

c) Common Consolidated Corporate Tax Base

There will be an orientation debate on the CCCTB. The UK does not believe that the competitiveness of the EU would be helped by a harmonised company tax base and remains sceptical about both the principles and the practicalities.

d) Code of Conduct on Business Taxation

The report of the code group chaired by the UK’s Paymaster General, including a proposed future work programme, will be adopted through conclusions.

e) Joint Transfer Pricing Forum

The forum is a body of tax officials from the member states and business representatives. It has agreed guidelines on the handling of arrangements relating to the tax treatment of certain cross-border transactions between related businesses.