The European Union's 2007 agenda encompasses a range of activities aimed at achieving cohesion in accounting, auditing and finance, with taxation in particular receiving as much attention as anything else, as the focus of a number of planned efforts.For instance, the European Commission's work program cited the ongoing issue of sales tax, where examples of massive fraud have been building to a head. By March, the commission is anticipating the results of two studies: one on reducing rates, and the other dealing with how to tackle fraud.
Another taxation issue in focus is a consolidated common corporate tax base for European Union companies. At present, company taxation across the 27-nation community is a relative free for all - each nation can do what it wants in the area (and often does). However, following current technical work on its CCCTB, the commission plans during the first quarter of 2007 to publish a technical paper on the subject. Although it would carry no legal authority, strategically, the document could lead to a voluntary code for an inner ring of EU nations.
All moves towards a common tax base are strongly opposed by the United Kingdom and Ireland, which have opposed giving Brussels the ability to influence tax rates. EU commissioner Laszlo Kovacs, who oversees the tax and customs union, is undoubtedly heading for a showdown with them by continuing to strive for tax harmony.
Company taxation is also a key issue in 2007 for the Luxembourg-based European Court of Justice. The court has taken the general line of opposing national stances to protect their own interests against the interests of the EU single market.
Several cases are lining up for preliminary indications, and judgments could be relevant to accountants working on international issues including exemptions on inheritance tax on shares in family companies; the booking of commercial values of properties; discrimination over the taxation of dividends; indirect taxation on raising capital; and different pensions payments.
The EU competition section, which deals with antitrust matters, will conduct a sector inquiry into retail banking in 2007. Officials also will examine the causes of market fragmentation and aim to highlight barriers to competition. The section will look into conditions of competition and market-entry barriers for business insurance.
INSURANCE, ACCOUNTING
In July, the commission will come out with its long-awaited draft on the Solvency II package on capital adequacy for the insurance industry. Delays in following the Basel II program have occurred because of the greater accounting complexity in insurance. Implementation of Solvency II, however, is not expected before 2010.
In addition, the International Accounting Standards Board plans to air a discussion paper outlining a new version of International Financial Reporting Standards No. 4 on insurance contracts, with the aim of achieving a universal standard.
Henri Olivier, secretary general of the European Federation of Accountants, made the point that in the U.S., insurance regulation is conducted on a state-by-state basis, in contrast with the EU, which already has some kind of coordination under Solvency I. "We are not just catching up [with the U.S.], we are in some places overtaking," he said.
Overall, the commission's plan to upgrade its 40-odd directives in the financial sector will place a heavy burden on its internal market division. One of its most ambitious goals of 2007 will be the implementation of MiFID, which became effective in November. The Markets in Financial Instruments Directive introduced a single market and regulatory regime for investment services across the European Union. Its key objectives are to complete the EU single market for investment services, to respond to changes and innovations in the securities markets, and to protect investors.
