The Treasury has flatly ruled out any moves towards a withholding tax on savings – despite pressure from other members of the European Union.
Financial secretary Dawn Primarolo said the government was taking an active part in discussions on a draft directive on the taxation of savings income.
But she added in the Commons: ‘We have made it clear on a number of occasions that we would not agree to any course of action that would seriously damage the UK or other European financial markets.’
She acted to quash speculation that the chancellor will have to give in to pressure from France and Germany .
In exchanges on Treasury questions, she said: ‘We have made it clear that we would not accept a solution that obliged the UK to withhold tax, although we would be attracted to action based on the principle of exchange of information.’
Tory MP and accountant Nick Gibb accused her of failing to give the same assurance – that income tax is a matter for national governments – for corporation tax, and demanded a government veto of any proposal for EU decisions on company taxation.
Primarolo said any change required a unanimous vote and ‘the government have made it absolutely clear that we intend to maintain, for this House, decisions on taxation’.