Boost for withholding tax alternative
Britain's proposals for a European-wide information exchange as an alternative to the controversial withholding tax have received a timely boost from the European Commission.
Disputes over the tax directive, which proposes a minimum withholding tax on non-resident savings interest to stamp out evasion, have soured relations between the UK and other EU countries. The government has resisted the tax fearing the damage it could have on the City’s lucrative international bonds market.
In February, paymaster general Dawn Primarolo attempted to ease the impasse by suggesting a system of automatic information exchanges. This system would involve routine disclosure of information from payers of interest to their domestic tax authority, which would be passed on to other tax authorities.
Initially the idea went down badly, with European Commissioner Frits Bolkestein criticising the scheme on a recent visit to the UK.
He suggested that at least two member states would have major difficulty accepting the UK government’s solution.
But commission spokesman Jonathan Todd, yesterday suggested the proposals might be accepted.
‘If member states felt they could accept a full exchange of information in the long term, the commission could live with it,’ he said.
EU finance ministers are due to discuss the tax issues at a meeting in the Portuguese capital Lisbon this weekend and it appears that the British alternative to the 20% withholding levy will definitely be discussed.
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