Select Committee on European Communities Second Report


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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