3. COUNCIL REPORT (ECOFIN) TO THE
EUROPEAN COUNCIL ON REINFORCED TAX POLICY CO-OPERATION (13140/1/99)
Letter from Lord Tordoff, Chairman of
the Committee, to Dawn Primarolo MP, Paymaster General, HM Treasury
At its meeting on 15 February, Sub-Committee
A considered this report, together with your Explanatory Memorandum.
It has asked me to write offering you its support in your pressure
for publication of the report of the Code of Conduct Group.
It has also asked me to raise with you some
questions which were not covered in your Explanatory Memorandum,
as follows:
(1) You say that the 66 measures found to
be harmful within the meaning of the Code do not include any UK
measures. Do they include any measures in the UK's Overseas and
Dependent Territories?
(2) What do you now expect to happen in relation
to the measures which were found to be harmful? Will the Council
seek to have them rolled back, or simply to prevent the introduction
of any new such measures? Is it possible that the Commission might
use the State aid provisions against such measures?
(3) We recognise that agreement on the substantial
content of the Directive on the taxation of savings may be some
way away. The report says that, once such agreement was reached,
there would be discussions with dependent or associated territories
and with third counties, and that "the Council would decide
on the enforcement of the Directive once sufficient reassurances
with regard to equivalent measures had been obtained". We
wonder whether this gives sufficient assurance to meet the Government's
fears about the effect of even a modified Directive on the London
bond market, and we should welcome your comments.
17 February 2000
Letter from Lord Tordoff, Chairman of
the Committee on the European Union, to Dawn Primarolo MP, Paymaster
General, HM Treasury
Although this is not apparent on the face of
the letter, your office have kindly faxed me a copy of your letter
of 8 March to Jimmy Hood, responding to the queries on this document
raised by the House of Commons European Scrutiny Committee. The
normal convention is that letters to the Chairman of the relevant
Committee in either House are also sent to the other, So I should
have expected at least a formal copy of this one. More significantly,
however I would remind you that a reply is still outstanding to
my letter of 17 February, which also raised a number of specific
points (some, but not all, of which are addressed in the letter
to Jimmy Hood which has been faxed to me).
While I am writing may I thank you for your
letter of 29 February, covering the report from the Code of Conduct
Group to ECOFIN, and congratulate you on having persuaded ECOFIN
to put this in the public domain. I shall write to you more fully
about this once Sub-Committee A has had the opportunity to consider
it.
15 March 2000
Letter from Dawn Primarolo MP, Paymaster
General, HM Treasury, to Lord Tordoff, Chairman of the Committee
Thank you for your recent letter. My reply to
your questions on the above report and associated Explanatory
Memorandum is set out below:
CODE OF
CONDUCT
Your first two questions relate to the report
of the Code of Conduct Group. I have written already in order
to inform you as soon as possible that, following continued pressing
by the Government, the ECOFIN Council of 28 February decided to
make the report public. I enclosed a copy of the report for the
Committee's information and copies have been placed in the libraries
of both Houses.
As you have noted there were no measures in
the UK that were found harmful. However I can confirm that a number
of the measures in the UK's Overseas and Dependent Territories
were found harmful within the meaning of the Code.
As I explained in my previous letter, Member
States are committed under the Code to amending their laws and
practices as necessary in relation to any of their measures that
are found to be harmful (rollback). Member States are also committed
not to introduce new tax measures, which are harmful within the
meaning of the Code (standstill). The Code is a voluntary process
and is not legally binding so neither rollback nor standstill
can be legally enforced. I explained the position of the UK's
dependencies in my previous letter to you.
The State Aid procedures are separate and complementary
to the provisions of the Code. Unlike the Code, the longstanding
State Aid provisions of the Treaty have legal force. I can confirm
that, as noted in paragraph J of the Code itself, there may be
measures covered by the Code of Conduct, which fall within the
scope of the State Aid provisions. The Commission may therefore
examine and rule on measures considered by the Group if they qualify
as possible State Aids within the scope of the treaty.
TAXATION OF
SAVINGS
Your last question refers to the draft Savings
Directive. This is a directive which can only be agreed by unanimity.
I can assure you that the Government's position remains as steadfast
as ever—we will not agree to any directive which risks serious
damage to EU financial markets and, in particular, the City of
London's International Bond Market.
15 March 2000
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