Writing for EV, Hirst fears that the rules are likely to be superseded by an OECD standard before ever being applied.
The official line is that Luxembourg and Austria dropped their opposition after the Commission made progress in negotiations on similar rules with five low-tax jurisdictions in Europe: Switzerland, Lichtenstein, Andorra, San Marino and Monaco. The Commission intends to conclude those negotiations, which was a key demand of Austria and Luxembourg, by the end of 2014. But in reality, Austria and Luxembourg have been outflanked by international developments. A notable example is new rules adopted by the United States in 2010, which oblige all foreign banks to give US tax authorities the details of all accounts held by US citizens. The US operations of any banks that do not comply with that requirement face severe sanctions.
Similarly, the Organisation for Economic Co-operation and Development is developing a global standard on the exchange of information. At least 40 countries, including the world's 20 largest economies, are expected to apply the standard. All these developments left Luxembourg and Austria increasingly isolated both within the EU and on the international stage.
The irony is that after several years of negotiations, which included the proposal being discussed by EU leaders on at least three occasions, the exact rules adopted by Member States, which are supposed to come into force in 2017, are unlikely to be implemented. This is because the EU will first align the legislation with the international standard being developed by the OECD, which will be presented to finance ministers from the G20 in September.
So why has so much attention been paid to the EU proposal? Because by resolving their internal differences, EU Member States are able to present a united front in international negotiations on the automatic exchange of information. According to Algirdas Šemeta, the European commissioner for taxation: "Today's adoption means that we remain on track as global front-runners in tax good governance". This is important because global solutions have become the most important way to tackle tax avoidance and evasion. Herman Van Rompuy, the president of the European Council, praised the deal as a sign that "banking secrecy is set to die", but only a global standard will ensure that wish comes true.
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See also: Council adopts new rules on the taxation of savings income
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