EU Savings Tax Directive Aimed At 'Unfair' Tax Competition Says CATO Analyst
By by Amanda Banks, Tax-News.com, London
16 December 2003

In a speech to the Bermuda International Business Association last week, Cato Institute tax analyst Veronique de Rugy argued that the European Savings Directive is as much motivated by Europe’s desire to end ‘unfair’ tax competition in low tax jurisdictions like Bermuda as by any crack-down on tax evasion.

Speaking at BIBA’s annual general meeting luncheon, Ms de Rugy pointed out that: “The underlying assumption is that low tax countries are engaged in unfair tax competition with high tax nations. As such, the Savings Tax Directive is designed to create a tax cartel and is a significant threat to market-based policy and fiscal competition.”

Ms De Rugy contended that politically motivated initiatives such as the Savings Tax Directive or the OECD’s blacklist of ‘uncooperative’ nations, have no real economic value, and the main reason that offshore jurisdictions attract such scrutiny from the major economic powers is that they “dislike the competition” from countries such as Bermuda.

However, although Ms de Rugy observed that the EU rarely “takes no for an answer” on these matters, she contended that the policy will be ultimately self-defeating, as capital will take flight to a location beyond the reaches of European political influence.

Ms de Rugy concluded by observing that: “The fact that Bermuda will not be doing as great is not going to make the Europeans look better, it just going to make China and Hong Kong better and there will always be a place in the world that does business correctly and attracts capital.”

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