TaxPersonal TaxEU swings away from withholding tax

EU swings away from withholding tax

UK proposals for an alternative to the controversial withholding tax have received a warm welcome from a number of finance ministers at the European Union's Ecofin summit in Lisbon.

Meeting at the weekend, ministers discussed plans for a tax information exchange, a system suggested by the UK government as an alternative to the minimum 20% withholding tax on non-resident savings income.

Efforts to end tax evasion on savings income had reached an impasse with the UK strongly opposed to the idea of a tax that it feared would damage the City’s international bonds market.

Negotiating in Portugal on behalf of the UK, chancellor Gordon Brown said he thought the EU would accept the compromise.

‘The debate is moving towards an exchange of information,’ he said.

Other countries gave a cautious welcome to the UK’s ideas. German finance minister Hans Eichel believed the step showed the UK was no longer blocking progress.

But discussions are far from over, with Luxembourg finance minister Jean-Claude Juncker opposing the UK’s plan, which would require reform of banking secrecy laws across the EU. He said Luxembourg would not surrender banking secrecy laws until competitor countries [Liechtenstein and Switzerland] did likewise.

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