Van Rompuy seeks tax compromise by imposing deadline

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A proposal by European Council President Herman Van Rompuy to fight tax evasion, heralded in draft conclusions to today’s EU summit, will seek to maintain momentum on the EU savings directive by asking leaders to agree the initiative by the end of the year.

 



Austria and Luxembourg have so far stalled EU-wide agreement on automatic exchange of information on deposit accounts.

Officials and diplomats seemed doubtful that a final breakthrough would be achieved on Wednesday (22 May) since both countries are giving off mixed messages, confused in the case of Austria by domestic politics.

Austria's centre-right Finance Minister Maria Fekter opposes the transparency requirements while the Social-Democrat chancellor, Werner Faymann, has said his country would support it.

Fekter’s hard line and talk of defending the interests of Austrian deposit-holders are seen as popular gestures ahead of a September general election.

But EU leaders who believed that Luxembourg had peeled away from Austria and would now back the savings directive were proven wrong last week when veteran Prime Minister Jean-Claude Juncker said a deal on a new EU savings tax directive “won’t be possible.”

“That will take place in the coming months in an orderly fashion,” Juncker said.

Van Rompuy wants a deadline

Van Rompuy’s proposal to ask leaders to sign up to a clear timeline by which the directive should be adopted would enable leaders to claim they had made progress.

If leaders agreed to do so by the end of the year, ahead of the Austrian elections, that would take the political sting out of the debate in Vienna.

Leaders will simultaneously discuss more ambitious information-sharing proposals which have been mooted by the United Kingdom, Germany, France, Spain and Italy – nations that are testing such a system and want to launch it by the end of the year.

British Prime Minister David Cameron wants to use his presidency of the G8 to promote the transparency initiative internationally.

Attempts to update the savings tax directive and are a priority as cash-strapped EU member states seek to maximise revenues in the financial crisis. A raft of stories revealing how little tax multinational companies such as Starbucks, Apple and Google are paying on their global turnover have given the issue fresh urgency.

The Commission estimates that tax evasion and fraud cost member states about €1 trillion a year. Diplomats confirmed that the proposal for a fixed timeline had been mooted, and would likely be acceptable to leaders.

Tax evasion deprives EU governments of roughly €1 trillion annually, according to estimates.

The guidelines for the summit conclusions speak of tax evasion in broad terms, mentioning that only half of the value added tax  (VAT) is collected in the Union.

Another issue is “aggressive tax avoidance”, as recently highlighted by Apple, which has been accused of using a complex web of offshore entities' to avoid paying taxes in the US and elsewhere (read The Irish loophole behind Apple's low tax bill) . The same is said about US coffee retailer Starbucks, which skirts taxes by reporting no or low profits.

22 May 2013: EU heads of state and government meet in Brussels for summit on tax and energy

UK Government

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