Examination of Witnesses (Questions 160
- 172)
WEDNESDAY 10 JANUARY 2007
COMMISSIONER KOVACS
AND MR
STEPHEN BILL
Q160 Lord Watson of Richmond:
We really are coming up to a fork in the road basically and your
estimate is this will emerge one way or another within the German
Presidency.
Mr Bill: I think everything points to June as
being the crossroads because, as the Commissioner said, that is
when we would expect from the second round of discussion with
ministers that we will get a clear orientation. By that time we
hope that the European Parliament and the Economic and Social
Committee will have given us their opinion on the communication.
By that time we would have held our conference, we would have
done all our consultations with business. In June I think we will
have the feedback that we need to know which way to go so that
in the second half of the year we can come forward with what we
promised, which was a concrete action plan. What is going to be
in that concrete action plan will emerge over the next six months
and then we will come back with it in the second half of the year.
Lord Watson of Richmond: If the balance
points towards going down the VAT reform route you are going to
have an enormous workload on your shoulders over the summer of
this year, are you not?
Q161 Chairman:
My interests are slightly sectarian in this, Commissioner Kovacs,
because I am trying to steer the production of a House of Lords
report on carousel fraud and I am also, therefore, trying to produce
it at the most helpful and useful moment when it is a contribution
to the other debate. I feel that the conference of business in
March is most definitely a very useful staging post because although
that is largely talking about administrative measures there and
they have not talked quite enough about other administrative measures,
which I will pick up in a second, that seems to me to be a very
important piece of the timetable. Then the June meeting is also
an important piece of the timetable. I think one might aim to
feed something into the June meeting or produce a report which
the June meeting might bear in mind when it is doing it. We have
not talked very much about the other administrative measures,
such as greater co-operation between the states. There is a set
of avenues to explore in your report: improving the functioning
of co-operation; assistance in the field of recovery; improved
risk management; a permanent forum for discussion at Community
level—I think I thought it was ECOFIN—increased co-operation
with third countries. Are we intending, expecting, hoping to make
progress on any of these quickly?
Mr Kovacs: I think yes. Just returning to the
first part of your remark, I can promise to keep you informed.
We can send you some reports and a summary after we have had the
March conference with the representatives from business. We can
also provide you with some information after the April informal
ECOFIN and after the June ECOFIN and then you can follow the whole
procedure.
Q162 Chairman:
Yes. Will this include trying to progress things like negotiations
with the third states, states outside the EU? Are you making any
progress with these or is this a list of things which we ought
to be doing?
Mr Bill: This is a list of things we ought to
be doing but, to put it in perspective, we adopted new legislation
two or three years ago—improved administrative co-operation
legislation—and it is a little bit like you can take a horse
to water but you cannot make it drink. The legislation is already
there and part of the problem is that Member States are not using
the facilities which are there now. Part of what we have to do
is to find out why it is that they are not doing that and how
can we encourage them and in which directions should we encourage
them to work because it is the Member States who control the tax,
not the Commission, and we are only acting as facilitators. What
we have to do is to try and help them to help themselves, in effect.
Q163 Chairman:
"Why are you not talking to the Brits or the Germans or the
French?"
Mr Bill: "Why are you only making 26,000
exchanges of information a year? How can we help, what can we
do, where are there lacuna in the legislation? You have got to
tell us where those are in order that we can improve that".
Part of our assessment is that it is not so much a lacuna in the
legislation, it is a lacuna in using the legislation, and that
is our analysis.
Q164 Chairman:
That has been said to us.
Mr Bill: Therefore, part of the solution is
to get the Member States talking so that we have already reached—
Q165 Lord Watson of Richmond:
That was why I wondered whether it was a cultural thing.
Mr Bill: We are part of the way down the road
to the solution in that Member States are talking, they have identified
this, along with us, as a priority and they are discussing it
and have put it on the agenda. Mr Steinbruck wants to have it
on the agenda at the informal ECOFIN but he wants to have it on
the agenda in June because he and a number of other Member States
recognise the problem, that they have to talk about it and, therefore,
we hope the solutions will come out of that discussion. We are
not omniscient in terms of coming up with the solutions.
Lord Kerr of Kinlochard: Come, come!
Q166 Lord Cobbold:
If our report helps to develop the argument it will be useful.
Mr Kovacs: When we presented this communication
in June at the last ECOFIN meeting under the Austrian Presidency
the reaction was, "Yes, it is very good and we appreciate
it".
Q167 Chairman:
Excellent. Good stuff.
Mr Kovacs: It takes time for Member States to
consider it seriously.
Q168 Lord Kerr of Kinlochard:
Have you persuaded the ministers of finance, not the tax ministers,
not the revenue ministers, not the ministers in charge of indirect
taxation, that this really is a big issue which they need to grapple
with? I speak from memory, and maybe the present generation of
ministers of finance are quite different from the ones I remember,
but I remember finding it very difficult to persuade finance ministers
to stay in the room when topics of this kind were under discussion.
It would be the junior minister responsible for the Fiscal policy
who would be left and, of course, it would be the finance minister
back home who would receive the criticism from the lobby for an
over-heavy, interfering system. I used to think it was unfortunate
that those arguing for co-operation did understand each other
but were not the senior ministers responsible for the system at
home.
Mr Bill: I think ECOFIN has learnt that lesson.
What happens now is that tax matters only appear once or twice
under a Presidency and we have increasingly what are called Tax
ECOFINs, so we will have nothing on the January and February agendas,
we will have March and probably June that are tax issues and there
will be—
Mr Kovacs: And May.
Mr Bill: And May. The tax items are now concentrated
with a view to counter this problem. Secondly, it has become more
and more apparent that the only thing ministers really have a
discussion about now in ECOFIN is tax.
Mr Kovacs: Where there are conflicts of interest.
Mr Bill: Most of the other things are either
euro group or rubber-stamping in ECOFIN. The only real debate
which takes place now in ECOFIN is on tax and we concentrate those
tax issues in two or three ECOFINs, so there is plenty to get
your teeth into.
Q169 Lord Watson of Richmond:
What you are describing is quite a major change, is it not?
Mr Bill: It is. It has evolved over the last
three or four Presidencies.
Q170 Chairman:
If I may say so, I also think that Commissioner Kovacs' view that
you frighten people by reminding them how much tax they might
be losing might actually get the attention of a few ministers
of finance. This is a useful idea.
Mr Bill: This is certainly the case for those
ministers who are concerned. For example, Mr Steinbruck is very
concerned; Mr Grasser is very concerned, the Austrian Finance
Minister; the Spanish Finance Minister is very concerned. It is
the finance minister, not the tax minister, who is concerned.
Q171 Chairman:
I think it would be fair to say that our Chancellor is concerned
rather than the minister in charge of tax, who is Dawn Primarolo.
Mr Bill: I think she is concerned
too.
Chairman: I am sure she is concerned
too but I think our Chancellor has now noticed that it is quite
a lot of money that has gone missing with which you could build
things, which was exactly your point, Commissioner Kovacs. Colleagues,
we are approaching the end of our time with Commissioner Kovacs,
does anybody else have anything they have failed to ask or would
like to ask?
Lord Watson of Richmond: I hope you have
got the impression from us that we quite like your €250 billion.
Q172 Chairman:
Indeed. We have found this session very helpful. Thank you very
much indeed for seeing us and for dealing so patiently with our
questions. If we may keep in touch and be kept in touch we should
be most grateful.
Mr Kovacs: We will certainly deliver the information.
Chairman: Thank you very much.
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