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European Union Finance Minister Remarks To The Press On Creation Of Capital Markets Union

World Affairs – Finance

Open Eyes Opinion {source: EC/OECD}

Latvia

Press remarks:

ECOFIN Press Conference, Riga, 25 April 2014 The European Commission Vice-President Valdis Dombrovskis

Riga, Latvia  25 April 2015

Translated to English (speaking in Latvian)

Minister,

Ladies and Gentlemen,

This is the final day of the informal meeting of European Union Finance Ministers in Riga. I would like to thank Minister Reirs, the Latvian Presidency and its team for the substantial work that they have invested in the organisation of the event. Hosting such high level events is a challenge for any country. At the same time, it is a unique experience and an investment in the people.

As the Minister said, today’s meeting looked into issues related to the creation of the Capital Markets Union and the initiative to fight aggressive tax planning. I would like to thank my colleagues, Commissioners Hill and Moscovici, for the work invested in these initiatives.

The European Commission, led by President Juncker, works to strengthen economic growth and job creation in Europe.

European companies depend heavily on bank funding, which is an issue to address. To reduce this dependence and ensure investment financing, we need to facilitate access to capital by EU companies. This is why the European Commission has made the development of the Capital Markets Union a key priority when it comes to economic growth in Europe.

(continues in English)

A single market for capital will help money flow through the EU to where it can be most productive. It will help unlock the capital around Europe that is currently frozen and put it to work in support of Europe’s businesses, particularly SMEs.

So, stronger capital markets would complement banks as a source of financing. That, in turn, would make the financial system more stable by opening up a wider range of funding sources.

In essence, our task is to find ways of linking businesses and savers to finance growth. We need to identify and then remove the barriers, which stand between investors’ money and investment opportunities. And we need to identify and remove the obstacles, which prevent businesses from reaching investors.

Why is this worth doing? Let me give you one example.  Medium-sized companies, the engines of growth in many countries, receive five times as much funding from capital markets in the US as they do in the EU. Certainly, there is a scope for improvement.

Today, Ministers discussed for the first time the Green Paper on the Capital Markets Union. There was strong support for what we are trying to do. I hope we will be making fast progress as regards design and implementation of the CMU.

Furthermore, ministers discussed the fight against Base Erosion and Profit Shifting (BEPS).

If we want to tackle aggressive tax planning,

If we want stable revenues in the long-term,

And if we want a Single Market that works for all businesses,

Then we need to work together and Europe needs to lead the way in the fight against tax avoidance. It is the Commission’s political priority in its work agenda this year.

And we are delivering with remarkable speed.

Our proposal for the automatic exchange of information on tax rulings, which was presented in March, is a crucial first step in creating greater transparency in corporate taxation.

With the proposed new requirements, each Member State will be better able to react if another’s tax ruling is impacting its own base.

The automatic exchange of information will remove the shadows that currently surround tax rulings.

This new openness should encourage fairer competition in this area, and deter companies from using tax rulings as an instrument for tax abuse.

We are now calling for a swift agreement on the file by co-legislators. Soon the European Commission will come out with further proposals and initiatives in the context of the G20 initiative on base erosion and profit shifting.

Mr Minister and Latvian Presidency, thank you for the very good and productive discussions and for the very good organisation of the Council.

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Background Note: CMU in a nutshell

The challenges

  • Investment in Europe remains heavily reliant on banks
  • Significant differences in financing conditions between Member States exist
  • There are differing rules and market practices for products like securitised instruments or private placements
  • Shareholders and buyers of corporate debt rarely go beyond their national borders when they invest
  • Many SMEs still have limited access to finance

The objectives

  • Develop a more diversified financial system complementing bank financing with deep and developed capital markets
  • Unlock the capital around Europe which is currently frozen and put it to work for the economy, giving savers more investment choices and offering businesses a greater choice of funding at lower costs
  • Establish a genuine single capital market in the EU where investors are able to invest their funds without hindrance across borders and businesses can raise the required funds from a diverse range of sources, irrespective of their location

For More Information on the Capital Markets Union Please Visit:   

http://ec.europa.eu/finance/capital-markets-union/index_en.htm

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Background Note : OECD – Base Erosion and Profit Shifting

Base erosion and profit shifting (BEPS) is a global problem which requires global solutions. BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.

BEPS is of major significance for developing countries due to their heavy reliance on corporate income tax, particularly from multinational enterprises (MNEs).

In an increasingly interconnected world, national tax laws have not always kept pace with global corporations, fluid movement of capital, and the rise of the digital economy, leaving gaps that can be exploited to generate double non-taxation.

This undermines the fairness and integrity of tax systems. Fifteen specific actions are being developed in the context of the OECD/G20 BEPS Project to equip governments with the domestic and international instruments needed to address this challenge. The first set of measures and reports were released in September 2014.

Combined with the work to be completed in 2015, they will give countries the tools they need to ensure that profits are taxed where economic activities generating the profits are performed and where value is created, while at the same time give business greater certainty by reducing disputes over the application of international tax rules, and standardising requirements.

For the first time ever in tax matters, non-OECD/G20 countries are involved on an equal footing.

For More Information on BEPS Please Visit:   http://www.oecd.org/tax/beps-about.htm

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