Although the pandemic is raging in the EU’s center of power, life and work goes on, including meetings of Ministers in Brussels. In November the ECOFIN was focusing on anti-money laundering and counter terrorist financing, digital taxation and non-performing loans.
Anti-money laundering and terrorism financing
The European Commission’s action plan on combating money laundering and terrorist financing was adopted in May. It is built on various pillars such as effective implementation of existing rules, a single EU rulebook, EU-level supervisor, a support and cooperation mechanism for financial intelligence units and better use of information to enforce criminal law.
Following a resolution by the European Parliament on the issue, the Council adopted its conclusions on anti-money laundering and countering the financing of terrorism on 5 November. Three core points are relevant:
- The first is focused on greater harmonisation of arrangements in Europe through an EU regulation on AML, directly applicable in the Member States, contrary to the current AML Directive which, because the need to be transposed into national legislations, creates fragmentation on the tackling of AML across the EU.
- Furthermore, the Council supports the creation of an EU level supervisory body for financial sector firms.
- Last but not least, the Council also backs the idea of a coordination and support mechanism for financial intelligence units aimed to increase their cooperation in the future.
Time to wait now for the Commission package of legislative proposals on AML, which is expected for the first quarter of 2021.
Fair and effective digital taxation also loomed high on the ECOFIN agenda. In order to curtail tax evasion on digital platforms and achieve fair competition, legal preconditions for fair taxation including the digital sector are needed. As a result, the Council is working on a key proposal for taxes to address to those companies deriving income from digital platforms.
During the press conference, Scholz stressed that he would like an agreement on the digital tax to be secured at the next ECOFIN meeting scheduled to take place in December. This topic is also gathering the attention of the international community. In fact, the G20 and OECD are working on international solutions to ensure proper taxation of the digital sector. An example is the G20 meeting of finance ministers which in October agreed on a blueprint for solution of tax revenues.
Finally, Ministers discussed the hot issue of non-performing loans with the Commission’s update on the implementation of the 2017 action plan on NPL in the banking sector, and the presentation of the upcoming action plan. Though progress has been made in this area, the Coronavirus pandemic is widely expected to lead to significant rises in NPLs. In this regard, vice-president Dombrowskis informed Ministers that the Commission will publish a communication outlining the actions to be taken to «address the possible rise in NPLs focused on measures for developing secondary markets for distressed assets, and on ways to reform the insolvency and debt recovery frameworks ».
On 27 October during an exchange with Members of the European Parliament Andrea Enria, Chair of the Supervisory Board of the ECB, also warned that it is time for banks to get ready to face the changes ahead brought by Covid-19’s unparalleled economic downturn and the very likely rise of NPLs associated with it.
By Sofia Badari