European Union

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EU Ministers for Transport, Infrastructure and Communications meet on 10 and 11 December 2015 in Brussels to hold a policy debate on social aspects in road transport, on Thursday, and to discuss a review of EU telecoms rules in the context of the digital single market strategy, on Friday.

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AMENDMENTS 1 - 406 - Draft report on implementation and review of the EU-Central Asia Strategy
Committee on Foreign Affairs

Source : © European Union, 2015 - EP

On 9 December 2015, the Permanent Representatives Committee approved, on behalf of the Council, a compromise agreed with the European Parliament on new rules aimed at ensuring greater accuracy and integrity of benchmarks in financial instruments.

"The adoption of this regulation will help restore trust in the integrity of benchmarks and enhance their robustness and reliability, thereby strengthening confidence in the financial markets and preventing new manipulation scandals," said Pierre Gramegna, minister for finance of Luxembourg and president of the Council.

The agreement with the Parliament was reached during a trilogue meeting in Strasbourg on 24 November 2014. Council and Parliament representatives have held seven trilogue meetings since agreeing their respective negotiating positions in February and May 2014.

Benchmark manipulation

Recent cases of manipulation of interest rate benchmarks such as Libor and Euribor have highlighted the importance of benchmarks and their vulnerabilities. The pricing of many financial instruments and financial contracts depends on the accuracy of benchmarks. Doubts about the integrity of indices used as benchmarks can undermine market confidence, cause losses to consumers and investors and distort the real economy. 

Objectives

Benchmarks are susceptible to manipulation where conflicts of interest and discretion exist and where these are not properly supervised. The regulation has the following objectives:

• Improving governance and controls over the benchmark process, in particular to ensure that administrators avoid conflicts of interest, or at least manage them adequately;
• Improving the quality of input data and methodologies used by benchmark administrators;
• Ensuring that contributors to benchmarks and the data they provide are subject to adequate controls, in particular to avoid conflicts of interest;
• Protecting consumers and investors through greater transparency and adequate rights of redress.

The regulation

The regulation will introduce a legally-binding code of conduct for contributors (of data) requiring the use of robust methodologies and sufficient and reliable data. In particular, it calls for the use of actual transaction input data where possible. But other data may be used if the transaction data is insufficient.

The scope of the regulation is broad, although benchmarks deemed to be critical will be subject to stricter rules, including the power for the relevant competent authority to mandate contributions of input data. The regulation will not apply to the provision of benchmarks by central banks, and, in certain circumstances, by central counterparties and public authorities. 

Administrators of benchmarks will have to apply for authorisation and will be subject to supervision by the competent authority of the country in which they are located.  If an administrator does not comply with the provisions of the regulation, the competent authority may withdraw or suspend its authorisation. Administrators will be required to have in place appropriate governance arrangements and controls to avoid conflicts of interest.

The European Securities and Markets Authority (ESMA) will coordinate the  supervision of benchmark administrators by national competent authorities. For critical benchmarks, a college of national supervisors including ESMA will be set up and take key decisions. 

Three categories of benchmarks

Benchmarks will be subject to requirements appropriate to their size and nature, while at the same time respecting a core set of minimum requirements in line with the internationally agreed principles of the International Organization of Securities Commissions (IOSCO).

Critical benchmarks: Those used as a reference for financial instruments or financial contracts or for the determination of the performance of investment funds having a total value of at least €500bn on the basis of all the range of maturities of the benchmark; or benchmarks based on submissions by contributors mainly located in one member state and recognized as being critical in that member state. Benchmarks of at least €400bn can also be considered critical if they have no or very few appropriate market-led substitutes, and  if their absence would have significant and adverse impacts on markets integrity, financial stability, consumers, the real economy, or the financing of households and corporations.

Significant benchmarks used as a reference for financial instruments or financial contracts or for the determination of the performance of investments funds having a total average value of at least €50bn on the basis of all the range of maturities or tenors of the benchmark over a period of six months. Benchmarks below this threshold can be upgraded if they have a significant impact on the markets, with no or few market-led substitutes.

Non-significant benchmarks are subject to a light regulatory regime based a comply-or-explain mechanism, i.e. general principles in line with the internationally agreed IOSCO principles.

Separate regimes

However, specific regimes will apply to commodity, interest rate and regulated data benchmarks:

• Commodity benchmarks of more than €100m are subject to the principles for oil price reporting agencies (PRA) issued by the IOSCO on 5 October 2012. These principles serve as a global standard for regulatory requirements for benchmarks. They were endorsed by the G20 in 2012 and cover governance structures, controls, integrity, and conflict management.
• Interest rate benchmarks, which are more prone to conflicts of interest and data manipulation, are subject to additional requirements relating to input data and contributors as these benchmarks.
• Regulated data benchmarks are exempt from some requirements as the nature of the data that is used in the determination of such benchmarks is less subject to manipulation and conflicts of interest.

Third country regime

Benchmarks provided by non-EU countries will be used by supervised entities in the EU through “recognition” or “endorsement” regimes, based on compliance with the IOSCO principles.

Moreover, a partial equivalence regime will facilitate equivalence with regard to third countries which do not intend in the foreseeable future to put in place a fully-fledged regime for all types of benchmarks, but which have put or may put in place specific rules for certain types of benchmarks or benchmark administrators, such as certain interest rate benchmarks.

Adopting the regulation

The regulation will now be submitted to the European Parliament for a vote at first reading, and to the Council for final adoption.

Source : © European Union, 2015 - EP

Daesh, the so-called Islamic State, has again wreaked havoc and destruction around the world. Attacks in Paris, Beirut and against a Russian airliner flying over Egypt have sparked a clamour for our military forces to do more. Many are even suggesting thousands of U.S. or European ground-forces be dispatched to fight Daesh directly in Syria and Iraq.

In order to succeed, military action should only be used to support a strategic political plan to rid the world of Daesh and to ensure groups like it are no longer able to grow, recruit and function.

Such a multifaceted effort must accept that death-cult groups like Daesh do not operate in a vacuum. They may have been created and led by sociopaths, but they survive and grow by different means.

We need to understand and confront the political, social and economic disenfranchisement that has allowed terror groups to gain growth and sustainability. To resolve these issues, we need to confront the root-causes in Syria and Iraq, and then the wider issues around the Islamic world.

First in Syria where the civil war caused by the Assad regime’s brutal repression of its own citizens – with military support from outside countries – has led to the disenfranchisement of the vast majority of Syrians. Daesh has been able to take advantage of Assad’s murderous campaign and usurp the Syrian people’s hopes for democracy.

In Iraq, the Government of the radical Dawa Party has excluded Sunni groups from the political and economic process. It failed to follow-up on promises made after the so-called Sunni-Awakening that rid Iraq of Al Qaeda, and continues to roundup and jail Sunnis, while forcing Tehran-backed militias into Sunni communities. The government in Baghdad so disillusioned the Sunni communities, that Daesh was able to take over cities and towns across western Iraq and even threaten the capital.

Daesh and groups like it have taken these local political problems and matched them with deeper feelings of disenfranchisement in the Islamic world.

As the world becomes ever more interconnected and globalisation reaches almost every society, many parts of the Islamic world have suffered economic and social collapse after years of stagnation and lack of progress. Young people in these communities look to the great wealth of the Gulf and the vast opportunities of the West and they feel left behind.

Daesh exploits these feelings to recruit. It tells the vulnerable this is due to some conspiracy to undermine Islam and that the only way out is to join them

Without dealing with these complex political issues, no amount of military action will ultimately solve the problem. Instead of leading with the military, the strategy to defeat Daesh should be based around five key initiatives:

- the international community should coalesce around building a peace-process in Syria. This will not be easy and will need to be matched with a long-term rebuilding and reconciliation process that brings in all those forced to leave and ensure the country does not slip back into civil war;

- the international community should ensure that a full reconciliation process is started and sustained in Iraq to bring the Sunni community back into political and economic life. This will entail a wide review of the present constitutional settlement, ensuring that Iraq does not fall back into sectarian conflict;

- a significant economic and social regeneration plan for the whole Middle East and North Africa should be created, based on opening-up of education, markets and capital. It should focus on participation for the region’s youth to offer them the sort of opportunities many in the West take for granted;

- military action should only be used in a limited and targeted fashion. It should ideally be led by Arab forces who could remove the sociopaths without stoking further anti-Western feelings;

- political leaders in the region must offer a brighter future for their citizens. The people of the region must be shown a future that is better than the past, one that can strengthen their society and culture while offering wealth and opportunity for all.

Ridding the world of groups like Daesh will not be easy and it will take time. Without a well thought-out and fully implemented political, social and economic plan, we will fail, and be confronted by more attacks like those we have recently seen.

IMAGE CREDIT: Flickr/Alisdare Hickson

The post How to defeat Daesh appeared first on Europe’s World.

Source : © European Union, 2015 - EP

On 8 December 2015, the European Union and San Marino signed an agreement aimed at improving tax compliance by private savers. 

The agreement will contribute to efforts to clamp down on tax evasion, by requiring the EU member states and San Marino to exchange information automatically. 

This will allow their tax administrations improved cross-border access to information on the financial accounts of each other's residents. 

Upgrade

The agreement upgrades a 2004 agreement that ensured that San Marino applied measures equivalent to those in an EU directive on the taxation of savings income. The aim is to extend the automatic exchange of information on financial accounts in order to prevent taxpayers from hiding capital representing income or assets for which tax has not been paid.

"The sharing of information between national tax authorities remains one of the fundamental elements of an effective fight against tax fraud and tax evasion. The EU is undoubtedly a leader in this field."

Pierre Gramegna, Minister for Finance of Luxembourg

The text was signed in Brussels: 

• on behalf of the EU, by Pierre Gramegna, minister for finance of Luxembourg and president of the Council;
• on behalf of San Marino, by Antonella Benedettini, ambassador, head of mission.

The signature took place in the presence of Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs, who also signed the document. 

Decision 

The Council adopted a decision on 8 December 2015 to authorise the signature on behalf of the EU.

"The sharing of information between national tax authorities remains one of the fundamental elements of an effective fight against tax fraud and tax evasion", Mr Gramegna said. "The EU is undoubtedly a leader in this field."

The EU and the OECD 

The agreement ensures that San Marino applies strengthened measures that are equivalent to measures in force in the EU. However, whereas the 2004 agreement was based on the EU's taxation savings directive, that directive has now been repealed. Directive 2003/48/EC was repealed on 10 November 2015 in order to eliminate an overlap with directive 2014/107/EU, which includes strengthened provisions to prevent tax evasion. 

The agreement also complies with the automatic exchange of financial account information promoted by a 2014 OECD global standard. 

The EU signed similar agreements with Switzerland, on 27 May 2015, and with Liechtenstein on 28 October 2015. It approved the conclusion of those agreements on 8 December 2015. 

Coverage 

It sets out to limit the opportunities for taxpayers to avoid being reported to the tax authorities by shifting assets. Information to be exchanged concerns not only income such as interest and dividends, but also account balances and proceeds from the sale of financial assets.

Tax administrations in the member states and in San Marino will be able to:

• identify correctly and unequivocally the taxpayers concerned;
• administer and enforce their tax laws in cross-border situations;
• assess the likelihood of tax evasion being perpetrated;
• avoid unnecessary further investigations.

The EU and San Marino must now ratify or approve the agreement in time to enable its entry into force. Provisional application is scheduled for 1 January 2016.

The Council:  

1. NOTES that effective corporate taxation can be undermined by base erosion and profit shifting;
2. STRESSES that unfair tax competition between Member States as well as between the latter and third countries could affect the functioning of the Single Market, whilst acknowledging the importance of taxation for competitiveness;
3. RECALLS and CONFIRMS the European Council conclusions of 18 December 2014 stating the urgent need to advance efforts in the fight against tax avoidance and aggressive tax planning, both at the global and EU levels;
4. RECALLS the European Council Conclusions of 13 and 14 March 2013 on the need for close cooperation with the OECD and the G20 to develop internationally agreed standards for the prevention of BEPS and in particular its call for the European Union to coordinate its positions;
5. HIGHLIGHTS the recent political agreement reached by the Council on automatic exchange of information of tax rulings and the pioneer role of the European Union in this field in fully implementing OECD BEPS conclusions on Action 5 (harmful tax practices);
6. WELCOMES the conclusions of the OECD Base Erosion and Profit Shifting (BEPS) Action Plan, as recently endorsed by G20 Finance Ministers in Lima, Peru, on 8 October 2015 and G20 Heads of State in Antalya, Turkey, on 15-16 November 2015;
   
   Implementation of OECD BEPS conclusions
   
   
7. NOTES that G20 Finance Ministers renewed on 8 October 2015 a commitment for swift, global and efficient implementation of BEPS conclusions and asked the OECD to prepare an inclusive monitoring framework by early-2016;
8. INDICATES that several legislative proposals linked to the BEPS agenda are currently under discussion in the Council, notably the proposal for a Common Consolidated Corporate Tax Base (CCCTB) and the recast of the Interest and Royalties Directive (IRD);
9. UNDERLINES furthermore that the Code of Conduct Group on business taxation established in 1998 continues to perform important non-legislative work in combating BEPS phenomena both inside the European Union and towards third countries;
10. STRESSES therefore the need to find common, yet flexible, solutions at the EU level consistent with OECD BEPS conclusions, paying specific attention to compliance with EU Treaty freedoms and competences and SUPPORTS an effective, swift and coordinated implementation by Member States of the anti-BEPS measures to be adopted at EU level;
11. OBSERVES that OECD BEPS conclusions often propose different options for implementing certain of its recommendations and that a common approach at EU level in favour of certain options would bring value with a view to ensure the proper functioning of the Single Market;
12. CONSIDERS that EU directives should be, where appropriate, the preferred vehicle for implementing OECD BEPS conclusions in the EU in order to ensure both legal certainty and proportionality in the level of harmonisation required by the Single Market;
13. AGREES in this respect that where the implementation of an OECD BEPS conclusion is foreseen through EU legislation this process is given priority over possible parallel soft-law discussions;
14. UNDERLINES at the same time the role that can be played by the Code of Conduct Group in providing guidance to Member States for implementing certain other OECD BEPS conclusions;
15. INVITES the Council's High Level Working Party on Tax Questions (HLWP) to closely monitor the implementation of the anti-BEPS actions at EU level and, more generally, to play a central role in overseeing work in this field, as it has done so far, including through 6-monthly Presidency BEPS roadmaps when presented;
    
    Implementation of BEPS conclusions through EU legislation
    
    
16. TAKES NOTE of the Commission's expert group final report on the taxation of the digital economy (May 2014) and of the subsequent OECD BEPS conclusions on Action 1, as well as of the Commission's intention to revise in 2016 value added tax (VAT) rules in the context of its 'Digital Agenda for Europe' initiative;
17. RECALLS that OECD BEPS conclusions on Actions 2 (hybrid mismatches), 3 (Controlled Foreign Company rules), 4 (interest limitation rules), 6 (general anti-abuse rule), 7 (permanent establishment status) and 13 (country by country reporting) might be implemented, following further technical analysis, through legislative proposals focusing on international anti-BEPS aspects, without precluding the application by Member States of domestic or agreement-based provisions aimed at preventing BEPS;
18. INVITES therefore the Commission to come forward with a proposal on these international aspects which takes fully into account the work done on these issues in the frame of the on-going legislative files, notably CCCTB;
19. NOTES that the insertion of a common anti-abuse clause is envisaged in the context of the recast of the Interest and Royalties Directive, following the insertion of a similar clause in the Parent-Subsidiary Directive, on the basis notably of OECD BEPS conclusions on Action 6;
20. ACKNOWLEDGES the need for further discussion on the concept of minimum effective taxation, in particular within the recast of the Interest and Royalties Directive;
21. INVITES the Commission to reflect on possibilities to improve the availability of corporate taxation data and statistics at the EU level on the basis of OECD BEPS conclusions on Action 11;
    
    A complementary 'soft law' approach
    
    
22. NOTES that OECD BEPS conclusions on OECD Action 2 (neutralising the effects of hybrid mismatch arrangements) are being taken into account for ongoing works of the subgroup on hybrid mismatches of the Code of Conduct Group and  INVITES the Code of Conduct Group and the Subgroup to discuss the forms of hybrid mismatches which are not addressed  through EU legislation;
23. RECALLS its previous endorsement of the modified nexus approach (doc. 16846/14) and INVITES the Code of Conduct Group to follow this approach, as outlined in OECD BEPS conclusions on Action 5 (harmful tax practices), for monitoring the legislative processes necessary for Member States to change their existing 'patent box' regimes;
24. INVITES the Code of Conduct Group to assess the opportunity, in the light of the fourth criterion, of developing EU guidance for implementing OECD BEPS conclusions on Actions 8-9-10 (aligning transfer pricing outcomes with value creation) and on Action 13 (Guidance on transfer pricing Documentation), with the support of the Commission and its advisory bodies, notably the EU Joint Transfer Pricing Forum;
25. INVITES equally the Code of Conduct Group to assess the opportunity of developing EU guidance for implementing OECD BEPS conclusions on Action 12 (disclosure of aggressive tax planning), notably with a view to facilitate exchange of such information between tax authorities;
    
    Other implementation issues
    
    
26. NOTES that certain OECD BEPS conclusions concern bilateral double taxation agreements entered into by Member States and CONSIDERS that some form of exchange of views through the HLWP would in this respect be useful;
27. STRESSES the need for a swift and efficient implementation of OECD BEPS conclusions also at global level and LOOKS FORWARD to the multilateral instrument to modify tax treaties envisaged under OECD BEPS conclusions on Action 15 expected by the end of 2016;
28. UNDERLINES the importance of involving a maximum number of countries, including developing countries, in order to ensure a level playing field in the area of BEPS. 

European Council meeting will take place on 17-18 December 2015 in Justus Lipsius building in Brussels. 

Journalists who have not yet applied for accreditation may apply online for last-minute accreditation:

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Media representatives applying to attend a European Summit for the first time or who have not been fully security screened in the last 18 months (i.e. have not attended a summit in the last 18 months or had registered last minute) will be the subject of a comprehensive and detailed verification by our security service.

Considering the time and resources needed for these verifications, not all requests may be processed. Media are therefore advised to avoid sending representatives falling into these categories. 

General : Recent events in Europe have brought the issues of marginalisation and extremism to the forefront of public debate. On 7 December Parliament's culture committee adopted a report on the role of intercultural dialogue, cultural diversity and education in promoting EU fundamental values. Ahead of the vote, we spoke to report author Julie Ward, a UK member of the S&D: "We have one world and we have to find some way of being mutually respectful and tolerant of each other."

Source : © European Union, 2015 - EP

General : Recent events in Europe have brought the issues of marginalisation and extremism to the forefront of public debate. On 7 December Parliament's culture committee adopted a report on the role of intercultural dialogue, cultural diversity and education in promoting EU fundamental values. Ahead of the vote, we spoke to report author Julie Ward, a UK member of the S&D: "We have one world and we have to find some way of being mutually respectful and tolerant of each other."

Source : © European Union, 2015 - EP

The Council: 

1. RECALLS its determination to combat tax fraud, tax evasion and aggressive tax planning at EU and global level;
2. RECALLS the adoption by the Council and the representatives of the Governments of the Member States, meeting within the Council, in December 1997 of a resolution on a Code of conduct for business taxation (hereafter "the Code");
3. RECALLS the subsequent establishment in March 1998 of a Code of Conduct Group (hereafter "the Group") to assess the tax measures falling within the scope of the Code and oversee the provision of information on these measures;
4. UNDERLINES that the May 2013 European Council conclusions noted that “it is important to continue work within the EU on the elimination of harmful tax measures. To that end, work should be carried out on the strengthening of the Code of Conduct on business taxation on the basis of its existing mandate”;
5. RECALLS  the usefulness and the efficiency of the work done under the Code of Conduct so far to assess Member States individual tax measures;
6. CONFIRMS that work on the future of the Code of Conduct and its reinforcement should focus on making better use of the existing mandate of the Code; on examining the possibilities and modalities to extend the mandate and to update the criteria and on the possible need to adjust the governance of the Code accordingly;
7. ENDORSES the Group's new Work Package, and ENCOURAGES the Group to continue its work on that basis;
8. CONFIRMS its invitation to the Group to develop general guidance to prevent tax avoidance, base erosion and profit shifting (BEPS);
9. INVITES the High Level Working Party on Taxation (HLWP) to discuss a revision to the mandate in relation to the concept that profits are subject, as appropriate, to an effective level of tax within the EU, notwithstanding the competencies of Member States in the area of taxation;
10. AGREES that the rollback and standstill procedures foreseen in paragraphs C and D of the Code should cover existing and future general guidance notes developed by the Group;
11. INVITES in this respect the Group to ensure through such general guidance an effective implementation at the EU level of the relevant OECD BEPS Project conclusions when not covered by the EU legislation, and in accordance with the Group's new Work Program;
12. AGREES that the Code Group should clarify the third criterion by developing guidance on the basis of the OECD BEPS conclusion on  Action 5;
13. AGREES that the Code Group should clarify the fourth criterion by developing guidance  in the light of OECD Transfer Pricing Guidelines, as amended by OECD BEPS conclusions on Actions 8-9-10;
14. INVITES the Group to further develop, where appropriate, guidance notes on the interpretation of the criteria of the Code, including the gateway criterion, and their application;
15. CONFIRMS the importance that the principles of the Code of Conduct are applied on as broad geographical basis as possible, WELCOMES in this respect the recent Joint Statement with Switzerland and ongoing dialogue with Liechtenstein and INVITES the Group to open dialogues with relevant third countries, as well as to monitor the implementation of past agreements;
16. EXPRESSES the wish to improve the visibility of the work of the Code of Conduct Group and AGREES therefore that its results, in particular its 6-monthly reports, are systematically made available to the public;
17. INSISTS however on the confidentiality of the Group's deliberations with a view to protect the public interest as regards the economic policy of Member States, maintain the efficiency of the assessment process and counter related risks of aggressive tax planning;
18. INVITES the High Level Working Party on Taxation (HLWP) to conclude on the need to enhance the overall governance, transparency and working methods and to finalise the reform of the Group during the Dutch Presidency.