EU-flash: Special European Council on Brexit, Results of the ECOFIN meeting & European Parliament report on Fintech

01/06/2017

On April 29, President Tusk called a special European Council to adopt the EU’s negotiation guidelines for Brexit talks. At last week’s ECOFIN meeting, a range of tax-related issues were discussed. Furthermore, on May 17, the European Parliament adopted an own-initiative report on FinTech.

Below you can find a brief summary of these topics.

Special European Council on Brexit

The heads of the remaining 27 EU countries agreed to adopt the draft guidelines issued by Donald Tusk into a special summit in Brussels on Saturday 29 April.

Key negotiating points for the EU27:

  • There will be no “cherry picking” of the four core single market freedoms, which are “indivisible”. This rules out government’s hope of keeping “elements of a single market” without free movement of people.
  • The 27 countries will negotiate with Britain as a unified block, relying on the principle that “nothing is agreed until everything is agreed”.
  • There should be a phased approach to Britain’s withdrawal. The first phase will set out to “avoid disruption” from an “abrupt change”, and the main priority will be to give certainty to EU citizens about their legal status. Once that is decided, the European council will give the go ahead for next phase of withdrawal, which would involve working out a framework for the future relationship.
  • Citizens’ rights will be the “first priority of the negotiations”. The rights of EU and UK citizens will be protected when the UK formally leaves, which at this point looks as if it will be around March 2019
  • “Flexible and imaginative solutions” will be sought to the thorny issue of the border between Northern Ireland and the Republic, which has been fluid since the Good Friday agreement.
  • No final figure for the divorce has been given, but the bloc will pursue one “single financial settlement”, meaning the UK will continue budget payments until 2020.

Report by President Donald Tusk to the European Parliament on the Special European Council.

Speech by President Juncker at the European Parliament Plenary session on the conclusions of the Special European Council.

Results of the May ECOFIN meeting

EU Finance ministers met on 23 May 2017 in Brussels. They were called on to agree on a new system for resolving double taxation disputes, and expected to adopt rules on 'hybrid mismatches' between tax systems. The Council also discussed the in-depth reviews of macroeconomic imbalances in the member states.

During the ECOFIN meeting, the Council agreed on a new system for resolving double taxation disputes within the EU.

The Council agreed on a broad scope but with the possibility, on a case-by-case basis, of excluding disputes that do not involve double taxation;

The Council will adopt the directive once the European Parliament has given its opinion.

Member states will have until 30 June 2019 to transpose the directive into national laws and regulations. It will apply to complaints submitted after that date on questions relating to the tax year starting on or after 1 January 2018. The member states may however agree to apply the directive to complaints related to earlier tax years.

The Council also discussed a proposal for a common corporate tax base (CCTB) in the EU, aimed at reducing the administrative burden of multinational companies.

The presidency confirmed its intention to continue discussions on new elements of the proposal, and that an appropriate degree of flexibility should be provided for. A separate proposal on tax consolidation (CCCTB) will be considered without delay once the CCTB rulebook has been agreed.

The Council adopted conclusions assessing the Commission's in-depth reviews of macroeconomic imbalances in 13 member states and the implementation of the Council's 2016 country-specific recommendations on economic and fiscal policies.

More details.

European Parliament report on Fintech: the influence of technology on the future of the financial sector

On 17 May, the European Parliament adopted an own-initiative report on Fintech entitled “Fintech: the influence of technology on the future of the financial sector”.

The Parliament work on Fintech will feed the current discussions in the European Commission, including the on-going consultation on Fintech (deadline: 15 June 2017).

The report stressed that legislation and supervision in the area of Fintech should be based on three principles:

  • “Same services, same risks”: the same rules should apply, regardless of the type of legal entity concerned or its location in the EU;
  • Technology neutrality
  • Risk-based approach taking into account the proportionality of legislative and supervisory actions to risks and materiality of risks.

Other key messages:

  • Fintech should contribute positively to the development of financial intermediation (but also create new risks).
  • The European Commission  and the European Supervisory Authorities should avoid overlaps of regulation as well as the creation of new barriers to entry on the market and apply, when possible, pass porting regimes to providers of new financial services.
  • Blockchain and Distribute Ledger Technology : potential applications for cash and securities transfers, smart contracts…
  • Issues to take into accounts: cybersecurity, Data, interoperability, financial stability and consumer protection, financial education and IT skills.

Click here to read the report.

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