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Dáil Éireann debate -
Thursday, 30 Nov 2000

Vol. 527 No. 2

Ceisteanna – Questions. Priority Questions. - Official Engagements.

Jack Wall

Question:

9 Mr. Wall asked the Minister for Finance if he will report on the meeting of ECOFIN in Brussels on 7 November 2000; and if he will make a statement on the matter. [28012/00]

The agenda for the meeting of Economic and Finance Ministers, ECOFIN, which I attended on 7 November 2000 consisted of the following issues. Under the heading "Follow-up to the Lisbon European Council and preparation for the Nice European Council" four issues were discussed. These were as follows. In regard to corporate financing, ECOFIN took note of a progress report from the Commission on the risk capital action plan, and adopted conclusions aimed at refocusing and improving the coherence and co-ordination of the various Union financial instruments for small and medium-sized enterprises.

In regard to structural performance indicators, the ECOFIN discussion took account of a draft report prepared by the economic policy committee and a Commission communication on this topic. ECOFIN agreed on a global list of indicators, which are to be used to assess progress in social and economic reforms in the areas highlighted by the Lisbon European Council. It was also agreed to submit the economic policy committee report to the Nice European Council, together with a note from the Presidency setting out Ministers' views, especially on the need to identify a smaller number of core indicators.

With regard to public finances, ECOFIN discussed a progress report from the economic policy committee on the financial impact of ageing populations. Ministers welcomed the report, and approved its publication. Ministers also asked the economic policy committee to continue its work, with particular focus on health care expenditure and tax aspects. ECOFIN agreed to come back to this subject once a year.

Under the same public finances item, ECOFIN also noted a progress report on the quality and sustainability of public finances prepared by the Commission. The report refers to four criteria for assessing whether tax reforms can achieve a sustainable reduction in the tax burden when still adhering to fiscal discipline. It was noted that these four criteria had not been agreed by Ministers. The Commission acknowledged that this was the case, stating that it used these criteria in its own analysis. It was agreed that more work could be done in this area.

I would note that the Commission document is generally very positive regarding Ireland. For example, it states that average tax rates on low and middle income earners in Ireland, Luxembourg and the UK are lower than in the US and that marginal tax rates have fallen significantly in Ireland and the Netherlands. It also notes that a few countries, including Ireland, have made some moves towards more active labour market measures. Finally, it observes that the share of public investment spending as a percentage of the total spending is highest in Ireland, Greece, Spain, Luxembourg and Portugal.

Additional informationThe framework for exchange rate strategies of pre-accession countries was also discussed and a set of conclusions setting out the broad framework envisaged were adopted. In this respect, Ministers noted the intention of the Swedish Presidency to initiate in 2001 a broad economic policy dialogue, including on exchange rate strategies, between the Council, the Commission and the European Parliament and the accession countries. The objective of this dialogue will be to assist the accession countries in their economic accession strategies.

The final item on the formal ECOFIN agenda was the Commission's proposal to recast the financial regulation for the EU budget. Commissioner Schreyer, who is responsible for EU budget matters, gave a short presentation on the Commission's proposal. The recasting of the financial regulation is designed to modernise, simplify and clarify the day to day rules for implementing the EU budget and the responsibilities of those charged with its implementation. The Council took note of the Commissioner's presentation and asked for examination of the proposal to proceed at technical level.

Over lunch, the Presidency gave a short debriefing on the Eurogroup meeting which had been held the previous evening. Discussion at lunch also touched upon the possible extension of qualified majority voting to certain EMU articles of the Treaty, macro-financial assistance to the western Balkans and preparation for a meeting between oil producers and consumers in Riyadh.

As the Deputy will appreciate, the above is a very brief summary of ECOFIN's discussions and conclusions. I would draw the Deputy's attention to the Council secretariat press release which was issued after 7 November ECOFIN and which contains a more detailed summary of the meeting. I have arranged to supply the Deputy with a copy of the press release, which is also available on the Council secretariat's website.

Will the Minister comment on the agreement among Ministers for Finance in relation to withholding tax on deposit interest? Is he satisfied that Irish banks will have no difficulty complying with the exchange of information requirement, which I understand is part of the agreement?

The meeting on 7 November did not deal with that topic. It was dealt with in the meeting on Sunday and Monday of this week.

It was finally agreed at the Feira Council that exchange of information would become the way of doing this. It was decided on 1 November 1997 that a coexistence model would be used, with either exchange of information or a withholding tax. However, in the discussions leading up to the Feira Council, the whole thing was turned around and it was decided we would go the exchange of information route.

There is a period of time during which that can take place. Ireland has said we are going to go the exchange of information route. A small number of countries will have a withholding tax for a period of time. We sat until 3 a.m. last Sunday night-Monday morning trying to agree a compro mise on this. The compromise finally arrived at was that those countries not going the exchange of information route, such as Luxembourg, would have a 15% withholding tax for the first three years, 20% for the next four years and, after those seven years, they would have exchange of information. This is to start in 2003.

It was agreed, however, at the Feira Council, and at the ECOFIN leading up to that, that this will not come into place until understandings are reached with countries outside the EU, such as Switzerland, which do not have similar provisions. The Luxembourg authorities made it clear that that is part of the agreement. That was also part of the Feira Council conclusions.

We are going the exchange of information route. I signalled a long time ago that I had no difficulty with either the exchange of information route or a withholding tax. The exchange of information route suits us better, which is why we will adopt that when the directive is put in place.

Are we talking here about the exchange of information in relation to individual taxpayers or about the total amount of deposits held in an EU country by residents of another country? Are we talking about aggregates or individuals?

I briefly went into the details of what happened last weekend. However, it was also agreed there would be a 75:25 split of the revenue that arises from this. In other words, if country A identifies that deposit accounts there are held by people from country B, the revenue will be shared on a 75:25 basis. The original proposal was for a 90:10 split, but due to pressure that was changed to a 75:25 split.

Does the country of origin or the country of deposit get the bigger proportion?

It goes to the country where the people are resident. The Irish situation is not that complicated, although we have a lot of individual account holders here. The IFSC deals with funds from institutions in other countries. That area is not as big a difficulty for us as it is for Luxembourg, for example. It is alleged by some countries that many deposit accounts in Luxembourg are held by individuals in nearby member states. I do not know whether that is correct and neither does anybody else. That has exercised one country in particular for some time. The split of the revenue will be on a 75:25 basis, with the 25% being held by the country in which the deposits are held.

We must proceed to the next question.

What was the other point raised by the Deputy?

The nature of the exchange.

The exchange will be by the revenue authorities. It will identify, in time, the addresses of the deposit holders.

May I ask the Minister—

We must move on as we are way over the time limit on that question.

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