03 December 2002

ECOFIN postponed decision on Savings Tax

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The Council, on the basis of a report from the Commission, reviewed the current state of play of negotiations with third countries, notably with Switzerland, on taxation of savings and considered, on the basis of a report from the UK delegation, the discussions on this matter with the dependent or associated territories of the UK.

In the case of Switzerland, Mr Bolkestein reported that the Swiss authorities had offered a package meeting three and a half out of the four objectives sought by the Commission. The Commission considers that the latest Swiss offer is satisfactory as regards applying a withholding tax to EU residents' income from savings in Switzerland and sharing the revenue with EU tax authorities, voluntary disclosure of information and a regular review of the arrangements. However, the Swiss offer to disclose information upon demand in the case of 'tax fraud and the like' is not totally satisfactory.

On the Code of Conduct, the Council took note of a report by UK Paymaster General Dawn Primarolo on the Code of Conduct Group that she chairs. This report covered the work achieved on standstill and rollback of harmful business taxation schemes since June 2002. The forthcoming extraordinary meeting of the Council will consider whether the work on the Code of Conduct to date is sufficient to allow a political agreement on this part of the package. This forthcoming Council will also consider the draft Directive on interest and royalties.

Luxembourg's Prime Minister Juncker recalled that Luxemburg continues to support appropriate taxation of savings revenue. However, he demanded clarification on a number of points before accepting any agreement. He indicated that at EU level, the agreement provides for taxation at source at a rate of 15% until 2007 and 20% up to 2011.

He also expressed surprise that “Member States have no detailed documents on the results of negotiations with Switzerland”. The Danish Presidency has meanwhile explained that other third countries propose to follow the Swiss position.

The Belgian Finance Minister, claims his British counterpart, Gordon Brown, has yet to offer undertakings about applying the EU Directive to the country's territories after January 1, 2004. At the very most, he has undertaken to ensure these territories apply an automatic information exchange system after January 1, 2011.

On 27 November the Commission reported on negotiations on savings taxation with third countries, presenting a report on the progress to date of negotiations. In the negotiations the Commission has focussed on obtaining assurances in relation to measures that could be considered equivalent to those provided for in the draft Directive on savings taxation.

Under the timetables established at the Feira European Council in June 2000 and by the Council in July 2001, the Council should decide unanimously on a final text of the Directive no later than 31 December 2002. The decision should be made on the basis of a report presenting the outcome of the negotiations with the third countries and of the discussions of the United Kingdom and the Netherlands with their dependent and associated territories concerning the adoption of the same measures in those territories.

Commission report

© Graham Bishop