EU states near deal on savings tax

The deal follows a last-minute agreement made in Portugal in June, when it was decided some nations could delay the move to a system of information exchange between authorities to combat tax evasion.

Yesterday’s meeting in Brussels added detail to the interim regime for a group of countries led by Luxembourg which are resisting a swift move to an information exchange because it would involve scrapping banking secrecy.

Encouraged by the conciliatory mood amongst ministers, the EU’s internal market commissioner Fritz Bolkestein spoke of a ‘wind of change blowing through financial centres in the last couple of years’.

Bolkestein said it was unacceptable for financial centres not to co-operate in the fight against tax evasion.

Agreement over savings taxation follows a two-year impasse between EU finance ministers.

Initial EU solutions to the problem worried chancellor Gordon Brown, who feared the damage the plans could have on the City’s lucrative eurobond market. The government opposed proposals put forward for a minimum withholding tax on non-resident savings, which would have seen taxes on savings interest treated in the same way across the EU.

In February, British representatives suggested a alternative system of automatic information exchange, involving routine disclosure of information from payers of interest to their domestic tax authority, which would then be passed on to tax authorities in other countries.

Implementation of the new system should take place in 2003 following a vote on the measures in two years time.

But despite yesterday’s positive atmosphere, Luxembourg and Austria still want equivalent exchange agreements to be made with non-EU countries, namely the US and Switzerland.

AccountancyAge.com on the savings tax row

24 September 1998 – European tax plans lashed

1 October 1998 – Withholding tax row erupts

17 November 1998 – Treasury says no withholding tax

14 December 1999 – UK veto on tax issues under threat from EC president

UK falls out with Europe after digging heels in over withholding tax

25 February 2000 – Primarolo moves to break European deadlock over withholding tax

1 March 2000 – British attempts to break impasse over withholding tax blocked by EC chief

7 April 2000 – Boost for withholding tax alternative

10 April 2000 – EU swings away from withholding tax

20 May 2000 – No end in sight for withholding tax deadlock

5 June 2000 – Finance ministers try to break impasse

21 June 2000 Compromise reached on EU savings taxation