Brusells, 4 December 2007 - Minister of Finance, Dr. Andrej Bajuk, attended the today's meeting of the Economic and Financial Affairs Council (ECOFIN), at which, after long negotiations, the Finance Ministers reached an agreement on the extension of the use of reduced value added tax (VAT) rates in some of the new EU member states until 31 December 2010, and adopted the entire value added tax package. Minister Andrej Bajuk emphasized: "The extension of the deadline applies also for Slovenia which will continue to use a reduced VAT rate concerning food preparation and residential housing construction, renovation and maintenance (including all kinds of residential housing, not only those in the framework of the social policy)".

The Ministers continued the discussion on the long-term regulation of non-general VAT rates, and reached a conclusion that the revision of the structure of applicable VAT rates should be oriented towards the rationalisation and simplification of the system in force without affecting the rights of the member states to actually use reduced rates, in particular in services carried out on the local level. The European Commission will prepare a legislative proposal of a wider approach towards applying non-general VAT rates.

The Ministers adopted the entire value added tax (VAT) package. The package includes changes regarding the location of services performed, a centralized mini one-stop system, rules concerning VAT refund to taxable entities with no registered office in the refunding member state, as well as changes concerning administrative co-operation and information exchange. As regards the change in connection with the location of services performed relating to telecommunication services, TV and radio broadcasting programmes, as well as electronic services performed for persons who are not taxable persons per location of consumption, a compromise has been reached, including the deferral of the enforcement of the new rules until 1 January 2015. The compromise includes a distribution of VAT revenues between the country of the registered office of the company providing the service, and the country of consumption. In 2015 and 2016 the country of the registered office will retain 30%, while in 2017 and 2018 this portion will be 15%, and in 2019 the entire amount of VAT revenues will be collected by the state of consumption.
The Commission informed the Ministers of the report and working paper describing the status of discussions in the framework of the working group for combating tax fraud. The Commission will prepare legislative proposals at the beginning of 2008 during the Slovene presidency. Minister Andrej Bajuk pointed out that in Slovenia a proposal of a new Penal Code is being prepared in the framework of the preparation of adequate legislation necessary for the protection of revenues, including sanctions and criminal proceedings against VAT fraudsters, as well as provisions on the punishment of taxable entities evading foreign taxes in the EU member states.

Financial services

The Ministers had an orientation discussion on open key questions concerning a proposal of a directive on insurance company capital adequacy, the so-called Solvency II Directive. They have been informed of the progress made and agreed that further work is necessary, especially in the field of monitoring cross-border insurance groups, and additional relieves granted to the groups applying the regime of the group support. Further work will be performed during the Slovene presidency that will treat this Directive preferentially. Minister Andrej Bajuk emphasized that the Slovene presidency will make every effort to ensure that the new regime will improve the competitiveness of the European insurance market, taking into account its diversity. He pointed out the sharing of burdens in the case of financial crises that affect cross-border insurance groups; this depends on the system of competencies of control over the group.  The Portuguese Presidency wished the Slovene presidency a lot of success in reaching an agreement on the final text of the Directive proposal.

In the framework of the review of the so called Lamfalussy process, the Ministers agreed that the structure has functioned well by now however, it can be improved in certain segments on all 4 levels. The level one is political and means the adoption of legislation by the Council and the Commission, the level two is formed of committees consisting of experts from the member states, preparing detailed implementation acts, the level three consists of the representatives of supervisors of the financial systems of the member states and on the level four, the Commission assures a uniform enforcement of the legislation in the member states. The need for better working conditions on the level three consisting of national supervisors was underlined. In their term of office they wish to introduce a commitment for cooperating on the EU-level as well as in the field of financial stability, to introduce qualified majority voting where applicable, and to introduce changes in the field of monitoring cross-border financial groups.

The Lisbon strategy

The Ministers concluded the first discussion on this year’s reports on the implementation of National Reform Programmes in the framework of the Lisbon Strategy. They have come to the conclusion that the connection between competition and legislation intensely influences the business environment, innovations and economic growth. A substantial progress has been accomplished in terms of reducing unnecessary administrative burdens. In the field of net industries, the opening up of the telecommunication sector has been proved to be very successful. An agreement has been made also on opening up the market of postal services, while in the electric power and gas supply market numerous obstacles remain to exist. Most probably the states will not reach a goal of spending 3% of GDP for research and development (R&D) by 2010, however, it was pointed out that the efficiency of the R&D expenditure is of key importance, as well as the strengthening of reforms in the European labour market including fiscal measures and the system of incomes and duties. Slovenia was pointed out as a model of a member state establishing a special public fund of risk capital in the field of innovations. The period of incorporating a company has been shortened (up to one week), a tax reform has been implemented, tax burdens and the number of tax classes have been reduced, while at the same time the criteria for the access to social transfers have become sharper.

In the evening of 3 November, Minister Bajuk attended the session of the Eurogroup, and in the framework of preparations for the presidency, he met also with European Commissioner for the Internal Market and Services Charlie McCreevy, Dutch Minister of Finance Wouter Bos and Deputy Secretary-General of the Council of EU Pierre de Boissieu.

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