The Hungarian EU Presidency is in the process of finalising a compromise on draft measures exempting micro-businesses from obligations to prepare annual accounts.
The initiative is part of a broader aim to cut red tape pushed by the EU's High Level Group of Independent Stakeholders on Administrative Burdens. But the proposals have been drastically watered down during discussions in the Council working party on company law.
In the proposal micro-businesses are defined by their turnover and balance sheets, which in the first draft – already agreed by the European Parliament at first reading – stood at €1,000,000 and €500,000 respectively.
After wrangling in the Council working party the most recent draft – seen by EurActiv – has slashed these figures in half to €500,000 and €250,000 respectively.
This would mean many more companies continuing to lodge accounts, and although the measures have yet to be formally adopted by the Council, member states have indicated that they will accept the draft on the current basis.
'Better than nothing,' say UK, Germany
The original proposals were watered down at the instigation of a series of countries including Austria, Belgium, France and Luxembourg.
The proposals would not be obligatory and would offer member states the option of exempting such companies falling within the definition from accounting reporting obligations.
These countries felt that national obligations already in place within their jurisdictions would require the companies to continue lodging accounts anyway, discounting any positive effects from the new rules and making other member states more attractive locations for such small businesses.
However, member states in favour of making the proposals benefit a greater number of micro-entities – including Germany and the United Kingdom – have accepted the diluted proposals.
A British diplomat told EurActiv: "We want to see as many people [member states] on board as possible, and in terms of the number of companies which are involved we think that the proposal gives us something, which is better than nothing."
Germany also believes that accepting the diluted proposals is the only way of avoiding a stalemate in the negotiations.
Protecting interests of small accountants
One MEP, who preferred not to be named, said that the proposals had also been watered down to protect the position of smaller accounting practices, many of whom rely for their livelihoods on drawing up accounts for smaller companies.
Although the draft has yet to be adopted formally by the working party on company law within the Council, the current thresholds are now almost certain to be approved before the summer. However, when the draft subsequently returns to Parliament, the changes will meet with opposition.
Klaus-Heiner Lehne MEP (European People's Party; Germany), who steered the proposals through first reading in the Parliament, told EurActiv that since the first draft had been adopted by almost a two-thirds majority there, the changes made by the Council would "not be accepted".
Since the proposals were not designed to be binding on member states, he described as "dog in the manger" those countries that watered down the measures.