Savings taxation: Failures piling up
By Tanguy Verhoosel | Wednesday 14 November 2012
The 27 finance ministers proved incapable once again of working out even a partial compromise on savings taxation, on 13 November. Luxembourg and Austria still refuse to give the green light to the start of new negotiations with Switzerland.
The failure was predictable. On 12 November, speaking to the European Parliament’s Committee on Economic Affairs (ECON), Taxation Commissioner Algirdas Semeta lambasted Luxembourg and Vienna in advance: “I cannot understand that anyone would make even more difficult the consolidation efforts by Greece, Ireland, Italy, Portugal and Spain and many other member states by holding up this issue,” he declared. “It is just, necessary and urgent to make progress in negotiations with Switzerland and to close the loopholes of the savings taxation directive.” On three occasions in 2012, added Semeta, the European Council urged Ecofin to make “rapid” progress in this context. This has become wishful thinking, the repeated expression of which is becoming “ridiculous,” say some.
On 13 November, in any case, the debate was cut short after Luxembourg’s Minister, Luc Frieden, stood his ground, as expected: Luxembourg will not waive its veto on granting the Commission a mandate to negotiate with Switzerland without prior amendment of Article 10 of the EU directive on savings taxation. This article concerns the “transitional period” during which Luxembourg and Austria are authorised to apply the system of withholding at the source (which protects their banking secrecy) rather than automatic information exchange between tax administrations. The two countries are supposed to shift from withholding to automatic exchange once the EU has signed agreements setting up mechanisms for information exchange on request, based on OECD standards, with five non-EU countries: Switzerland, Liechtenstein, Andorra, San Marino and Monaco.
Luxembourg is dodging bullets: Switzerland has already made a number of concessions on information exchange on request under pressure from the G20 and has already expressed its “willingness” to start discussing the EU’s requests. The Grand Duchy, which fears capital flight, is now officially demanding to be placed on the same footing as Berne.
The United Kingdom is apparently “disappointed” by this attitude, while Luxembourg is “astonished” to hear London preach to it after it sealed a bilateral (Rubik) taxation agreement with Switzerland, which harms European solidarity.
In this context, the Cyprus EU Presidency handed the matter back to the 27 national experts for review, without setting any deadline. So are things back to square one? In practice yes, but in theory no, because the 27 have been contradicting themselves.
On 13 November, the finance ministers adopted without debate very surprising conclusions on the communication “on concrete ways to reinforce the fight against tax fraud and tax evasion including in relation to third countries,” presented by the Commission in July 2012. “The Council notes that all member states recognise the importance of taking effective steps to fight tax evasion and fraud, also in times of budgetary constraints and of economic crisis,” read the conclusions, which set certain priorities for action.
Surprisingly, the first priority in the field of direct taxation concerns savings taxation: the 27 should “carry forward work and discussions on the revision of the savings directive and reach rapidly an agreement on the negotiating directive for savings agreements with third countries, as recalled by the European Council conclusions of 28 and 29 June 2012”. Another case of ‘do as a say, not as I do’?