EU in last-ditch effort on savings tax

The European Union will make a last-ditch effort to conclude an agreement on the taxation of savings revenues before the self-imposed 31 December deadline. The latest round of talks failed on 3 December.

The controversial issue of creating an EU-wide regime to tax non-residents' savings has divided the Member States since 1989. While rifts remain among the governments, the EU's Finance Ministers agreed on 3 December to press Switzerland to accept a compromise to break the stalemate. Unless the Swiss, who are not members of the EU, agree to new rules on the taxation of EU residents' savings held in their bank accounts before the end of the year, the whole deal will collapse.

Designed to root out tax fraud and evasion, the plan calls for the exchange of information about non-resident savings, enabling each country to chase its own taxpayers. However, this approach has been fiercely resisted by those EU states which have a long tradition of banking secrecy, in particular Austria, Belgium and Luxembourg. These states have said they would agree to the plan only if Switzerland, the US and 12 major tax havens of the world follow suit. In Switzerland, tax evasion is not a criminal offense, only an administrative infraction.

Bern has offered to levy a 35 per cent withholding tax on interests paid to EU citizens' Swiss savings accounts and share the proceeds with EU governments. Britain is now behind this compromise, but Luxembourg and Austria are resisting it. Should negotiations fail to produce an agreement by the end of the year, the terms of the package will have to be renegotiated.

 

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