Compromise proposed on EU Savings Tax Directive amendments
16 May 2011
Amendment of the EU Savings Taxation Directive
is under discussion again at this week's meeting of the EU Council
of Finance Ministers (ECOFIN).
Ministers will hold what they call an
"orientation debate" on the European Commission's proposed
amendments, which are intended to stop taxpayers using trusts and
other non-bank intermediaries to circumvent the existing
directive's provisions. They also extend the directive - adopted in
its current form in 2005 - to cover certain types of non-interest
income.
This extension of the directive's scope has
been the subject of much negotiation among member states, and a new
compromise text will be presented to finance ministers at the
meeting today.
The Hungarian presidency of the EU believes
member states are now so close to agreement that they can start
negotiations with non-EU states that will be affected by the
amendments. These talks would be aimed at getting these third party
jurisdictions - Liechtenstein, Switzerland, Monaco, San Marino and
Andorra - to accept a treaty with the EU that would essentially
impose on them provisions identical to those in the amended
directive.
However, the long history of controversy over
these proposals indicates that negotiations will not be over until
they are over. Ecofin's most recent attempt to reach agreement, in
January this year, ended in deadlock when two member states -
Austria and Luxembourg - insisted on retaining their transitional
right to impose withholding taxes on interest payments, instead of
reporting them to savers' home countries. The same objections had
blocked agreement the previous January, in principle both countries
are required to abandon their withholding tax options by 2014.
Only when this extension is agreed can the EU
negotiate similar agreements with Liechtenstein, Andorra, Monaco,
San Marino and Switzerland to prevent EU citizens using their
financial institutions to circumvent the Directive.
Sources
European Commission
Ecofin press statement after January 2011 meeting (PDF)