Paul Gogarty (Dublin Mid West, Green Party)
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Question 106: To ask the Minister for Finance if he will report on the 8 November 2005 ECOFIN meeting; and if he will make a statement on the matter. [32942/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I attended the ECOFIN Council meeting in Brussels on 8 November 2005. This meeting was attended by Ministers of Finance of all 25 EU member states and of Bulgaria and Romania.

The Council held a debate on Council conclusions on means of establishing an improved control framework for the EU budget on the basis of work carried out by a group of member state experts convened by the Commission and co-chaired by the Presidency. Council adopted Presidency conclusions on the Commission's proposal for a roadmap to an integrated internal control framework for the EU budget, setting out proposals for the harmonisation of principles of controls and for the simplification of legislation.

The Council adopted conclusions on the introduction of a common EU methodology to measure administrative burdens, which burdens are the costs imposed by legal obligations to provide information. The introduction of this initiative will assist the EU Commission in measuring the costs imposed by EU legislation and will complement other initiatives taken in the area of better regulation, such as the screening of regulatory proposals, the simplification of existing legislation and impact assessments.

With regard to EU statistical governance, the Council adopted conclusions, including measures to be taken in order to improve the quality of statistical data to be used in the assessment of member states' budgetary situations. These conclusions support the creation of a new high-level advisory body to enhance EUROSTAT independence and governance. Ireland's National Statistics Board has worked well in a similar role vis-À-vis the Central Statistics Office. I welcome the ongoing review of EU statistical priorities. In a rapidly changing world, it is vital to make sure that the information produced by statisticians matches the information needed by policy makers.

The Council adopted the decision under Article 104(8) of the treaty, which points to Hungary's failure to correct its excessive deficit below the reference value of 3% of GDP by 2008. The Council will closely monitor Hungary's progress in dealing with this issue on the basis of reports from the Commission.

The UK Presidency presented a report to Council on progress on proposals aimed at simplifying cross-border business obligations relating to value-added tax, and on future handling of the dossier by the UK and Austrian presidencies. The proposals are intended to ease VAT compliance for businesses. The proposals consist of a draft directive amending a previous directive with a view to simplifying VAT obligations, a draft directive laying down detailed rules for the refund of VAT to businesses in member states where it has no base, and a draft regulation amending a previous regulation as regards administrative co-operation under the "one-stop" scheme and the refund procedure for VAT. The Council noted the progress made and also the need for further work on the dossier during the UK Presidency and the forthcoming Austrian Presidency.

Additional information not given on the floor of the House.

Council discussed the main issues to be resolved in order that agreement be reached before the end of the year on modifications to EU rules regarding reduced rates of value-added tax applied by the member states. Council agreed to return to this in December. While Ireland is prepared to contribute to further work in the area, we will continue to protect our zero and reduced rated items. The structure of VAT rates is a sensitive political issue for certain member states who can face costly consequences from pressures to reduce particular rates of VAT.

The Commission presented three papers on cross-border mergers and acquisitions in the financial services sector: a communication on intra-EU investment in the financial services sector, a working document on cross-border consolidation and a working paper on review of article 16 of directive 2000/12/EC. Presidency conclusions were agreed supporting the continuation of the Commission's work in reviewing the obstacles to cross-border consolidation in the financial services sector and the issue will be further discussed at future ECOFINs.

Council was briefed on the financial consequences of the reform of the EU's common market organisation in the sugar sector that has been proposed by the Commission. The issue of funding for the action plan to aid African, Caribbean and Pacific countries and the restructuring package for member states was discussed in this context. There were no conclusions.

The annual meeting between members of ECOFIN and members of the European free trade area took place at lunch time. The topic for discussion at this year's lunch was employment and growth in the context of globalisation.

Dan Boyle (Cork South Central, Green Party)
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I thank the Minister for his reply and welcome him back to the House. The detail in the answer makes a welcome change to the previous lack of openness that accompanied ECOFIN meetings.

Will the Minister say what position he adopted at yesterday's meetings in regard to a number of agenda items? He mentioned the discussion on the new VAT directive. This was on foot of a decision made in 2002, when nine of the then 15 countries decided to adopt the lower rate of VAT for labour-intensive industries, and Ireland chose not to. The Minister might say why that was, and whether Ireland is still of the same opinion.

It was also reported before the ECOFIN meeting that Commissioner McCreevy was meant to be in attendance to outline obstacles which he says exist with regard to difficulties in banks being able to merge. Does the Minister agree with the Commissioner or does he think measures need to be taken to protect the very limited Irish input which exists in the ownership of financial institutions? How would they be affected by any new proposals coming from Mr. McCreevy's office? With regard to reports issued before the meeting on the possibility that a number of countries would use the enhanced co-operation mechanism for a shared approach to corporation tax, was that discussed at the meeting and does the Minister share the reluctance of most parties in this House to go down that road in a collective European Union sense?

Brian Cowen (Laois-Offaly, Fianna Fail)
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We have economic and tax models which have ensured our unemployment rate stands at half the EU average and our growth rate is more than 2.5 times the euro zone average. These models include low taxes on employment and enterprise and different indirect taxation levels. It is a question of how a tax system is structured.

The one-stop scheme idea concerns business consumer and Internet type businesses and the operation of a VAT regime in which businesses do not have to register for VAT in respect of each country in which they trade. Common rules are being devised which would enable such a system to work more efficiently and the benefits of this proposal may be seen for people operating such businesses in Ireland.

Discussions took place to reach agreement before the end of the year on modifications to EU rules on the reduced rates of VAT applied by member states. The Council agreed to return to this issue in December. We are prepared to contribute further to work on the area and will continue to protect our zero and reduced rate items. When this dossier came before us in the past, efforts were made to reach a compromise based on losing a zero VAT rate, of which we are not in favour. The compromise proposal that has emerged under the UK Presidency seems to protect our position in that regard and, therefore, our disposition towards it has changed. We are now prepared to work further to determine whether a consensus may be built around the proposal.

On the financial services issue and cross-border consolidation in the EU financial sector, the Commissioner, Mr. McCreevy, was present for that part of the meeting and outlined the Commission's position. Three papers were presented on cross-border mergers and acquisitions in the financial services sector, namely, a communication on intra-EU investment in the financial services sector, a working document on cross-border consolidation and a working paper on the review of Article 16 of EU Directive 2000/12/EC. Presidency conclusions were agreed with regard to supporting the continuation of the Commission's work on reviewing the obstacles to cross-border consolidation in the financial services sector and the issue will be further discussed at future ECOFIN meetings.

I believe in ensuring that an internal market on financial services will be of benefit to us. The more the Single Market integrates, the greater the experience for Ireland. The financial services industry in Ireland will function more effectively if obstacles do not get in the way of cross-border mergers and acquisitions. Ireland has experienced six takeovers of banks by international players such as Skanska, Rabo and Bank of Scotland. This results in increased competition, improved products and better deals for consumers, and the more we are open to it, the better. While we all share the desire to see that the headquarters of major Irish banks are retained in Ireland, we must ensure that Ireland continues to have a strong banking system. Competition has had a positive impact and an internal market in financial services is in the interest of this country.

Joan Burton (Dublin West, Labour)
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During the course of the ECOFIN meeting, did Ministers have opportunities to discuss, formally or otherwise, the prospect of rising interest rates in Europe and, in particular, the problem that such a situation poses for economies such as Ireland's, where there are high levels of personal indebtedness and mortgage debt? A 1% interest rate increase over the next year will have disastrous implications for the personal budgets of many young families, for example, in the case of couples with 100% mortgages costing €600,000.

Brian Cowen (Laois-Offaly, Fianna Fail)
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Interest rate policy is exclusively a matter for the Governor of the European Central Bank. I do not speculate on such issues, for obvious reasons.

The European economy is experiencing a slight recovery, with a possible 1.2% growth this year. While that figure varies significantly from our experience, it is to be expected of the euro area. Unless evidence is found of second round effects with regard to recent oil prices, that recovery will hopefully be taken into account when the central bank considers this issue. I do not want to say anything that might suggest there will be any change to the current situation of extreme vigilance by the Governor of the ECB.

Joan Burton (Dublin West, Labour)
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During the course of the ECOFIN meeting, did Ministers formally or informally discuss the prospect of rising interest rates?

Brian Cowen (Laois-Offaly, Fianna Fail)
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I do not know what informal discussions may have taken place among others but I did not discuss the matter with anyone at ECOFIN. As the Deputy is aware, the proceedings of the euro group meeting, which took place the preceding night, is confidential.

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Can the Minister tell us whether the proposed EU directive on motor vehicle or passenger car tax and related taxes was discussed at yesterday's ECOFIN meeting? I specifically refer to the possibility of an EU directive on vehicle registration tax as it applies in this jurisdiction. If that issue was not addressed, does the Minister expect it will be discussed at a future meeting of European Finance Ministers? In anticipation of such a directive, can he assess the implications for motorists in terms of what may replace the VRT and the impact of such a change on the Exchequer and the economy in general? Will he advise us as to his expectations with regard to this signalled intent?

Brian Cowen (Laois-Offaly, Fianna Fail)
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The matter was not discussed at yesterday's meeting, nor am I aware of its planned discussion under the UK Presidency. The Austrian Presidency will set its own agenda. I have not been advised that the matter is of imminent concern. VRT tax take is an important part of our tax revenues.