Economy agenda: Recovery and taxation to dominate the EU’s priorities

German Finance minister Olaf Scholz gives a press conference in July. The German presidency prioritised the recovery from the coronavirus crisis for its semester at the EU helm. [Council]

This article is part of our special report All aboard: EU policy train builds up steam after summer.

This article is part of our special report All aboard: EU policy train builds up steam after summer.

The implementation of the EU’s recovery fund and taxation will dominate the second half of the year, as both issues will top the German presidency agenda, and new resources are needed to finance the stimulus package to respond to the coronavirus crisis.

Recovery

Our “primary task” will be to implement the recovery package, said German finance minister, Olaf Scholz, in a letter sent to his European colleagues at the start of the German presidency, and seen by EURACTIV.com 

At the same time, Scholz said that during the second half of the year, they will focus on achieving an “effective minimum tax on multinational companies”, the completion of the banking union and the Capital Markets Union. 

In regards to the €750 billion stimulus, called ‘Next Generation EU’ and the EU’s €1 trillion multi-annual financial framework (MFF) agreed by the EU leaders in July, the Council and the Parliament will need to agree on the final details by the end of the year, so the money can be available from 1 January.

Council brokers historic stimulus pact as budget cuts, rule of law retreat plague deal

Leaders of the 27 EU countries finally compromised on a €1,074 billion long-term budget and recovery fund instrument early on Tuesday (21 July) morning, but it took one of the longest-lasting summits in European Council history and the final deal cut funding for some of the bloc’s key priorities.

The herculean task will involve technical negotiations and the blessing of MEPs and member states in most cases for the MFF regulation, the inter-institutional agreement with the Commission, the own-resources decision, the ‘Next Generation EU’ regulation and sectoral legislation to implement the MFF.

In the case of the own-resources decision, required to increase the EU’s capacity to borrow from the markets the €750 billion for the coronavirus package, the decision must be ratified by all member states through their national parliaments. 

Member states will be able to access the ‘Recovery and Resilience Facility’, the main pillar of ‘Next Generation EU’, by proposing national investment and reform plans to unlock the funds. The first proposals should land in autumn, as part of the submission of the national draft budgetary plans for 2021.

The review of the Stability and Growth Pact, including the reactivation of the fiscal rules, suspended since late March, will be also one of the key topics for discussion later this year.

Economy Commissioner, Paolo Gentiloni, highlighted in July the importance of the discussion on the Stability and Growth Pact because it “will probably shape the economic policy for the years to come”.

Italy, Spain and France worst performers as recession deepens

Italy, Spain and France will register the worst economic downturn among eurozone countries this year as the contraction will be more severe than previously expected, according to the latest European Commission forecast published on Tuesday (7 July).

Taxation

As Europe works out how to finance its plan, the European Parliament has been the strongest advocate in favour of setting up new own resources to pay for the the recovery fund.

The first initiatives expected to be finalised will be a single-use plastics tax or an expansion of the EU Emission Trading System. New levies would include a digital tax or Financial Transactions Tax, another priority for the German presidency, 

At the same time, the Parliament also wants to bolster the EU response against tax evasion, tax erosion and profit shifting in the EU. The new permanent subcommittee on these matters will start working in September. 

Dutch MEP Paul Tang to chair new tax subcommittee

Dutch Labour MEP Paul Tang is expected to be elected the chair of the new European Parliament’s subcommittee on taxation on Friday (10 July), after the political groups reached an agreement on his choice, Parliament sources have told EURACTIV.com.

The Commission took the first steps before the summer break as it seeks to bolster the EU’s tax regime.

The EU executive presented on 15 July an action plan to fight tax evasion and to simplify tax regimes. 

“Fair and efficient taxation will be even more important in the months and years ahead, as the EU and the global community seek to recover from the fallout of the COVID-19 crisis,” the document reads.

The package foresees myriad proposals for the months and years to come on VAT or cooperation on tax matters.

In the last quarter of the year, there will be a non-legislative text on business taxation.

Germany said that it will prioritise these dossiers. At the same time, Berlin wants to give a fresh push to two zombie proposals: the common corporate consolidated tax and the financial transactions tax. 

Other initiatives 

The implementation of the recovery package and a review of the tax system in Europe will be the key topics of the informal Ecofin to be held on 11-12 September in Berlin, according to a draft agenda seen by EURACTIV.com.

The meeting will kick off however with a review of a decade of crises, lessons learnt and where ministers see potential for more integration to strengthen the EU.

Finance ministers will also reflect on the impact of digital services on the financial markets.

In this regard, the Commission will present in the third quarter an action plan on FinTech, including a strategy on an integrated EU payments market. In addition, the EU executive will also unveil its long awaited proposal to regulate crypto assets, including Facebook’s controversial digital currency ‘Libra’.

Commission to present 'strong' rules for Facebook’s Libra

The European Commission will present later this year new rules to develop a “sound” crypto-asset market in the EU, including for stablecoins such as Facebook’s digital currency Libra, financial services commissioner Valdis Dombrovskis, said on Tuesday.

[Edited by Benjamin Fox]

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