Taxation - Fraud directive 'threat to eurobonds'

The British Bankers’ Association has launched a stinging assault on an EU draft directive on savings tax, designed to prevent tax fraud.

The BBA, which represents 320 UK and overseas banks based in London, attacked the directive for its potential adverse impact on European financial markets. It said the directive would increase funding costs for corporate borrowers in eurobond and other markets.

According to the BBA, the measures would provoke a migration of financial services business from the EU into ‘less regulated offshore centres, making tax evasion less easy to detect.’ A spokesman for the BBA said the directive would impose a set of reporting procedures which would slow up the process with paperwork that would be a disincentive in eurobond trade. The attraction of the eurobond market was its simplicity.

Tim Sweeney, the BBA’s director general, said: ‘The financial services industry is a major UK employer which punches well above its weight in export earnings and contribution to the nation’s economic well-being.

The measures could, as drafted, undermine a major source of the EU’s collective prosperity.

‘The markets deserve proper consultation before EU finance ministers consider this deeply flawed proposal.’

Sweeney said the present government had given a pledge last November to protect the competitiveness of the UK financial services industry, and to exclude the eurobond market from any taxation of savings directive.