The figures revealed that EUR400,000 in withholding tax revenues has been raised from the investments of Irish residents in jurisdictions covered by the directive, much lower than had been expected.

The savings tax directive, which was introduced in July 2005, was originally conceived as an information reporting system whereby EU member states would exchange information on investment income held within their territory with the tax authority of the jurisdiction in which the investor was resident. However, as a sort of compromise, some jurisdictions reluctant to dilute banking secrecy instead have the option to levy a temporary withholding tax, currently 15%. Three-quarters of these revenues get remitted back to the investor's home state.

Nonetheless, it is relatively easy for investors to legally avoid the prying eyes of European tax collectors. The most obvious route is for investors to place their assets in jurisdictions not covered by the directive; anecdotal evidence suggests that Dubai, Hong Kong and Singapore have been major beneficiaries. But there are a number of investment instruments that have, for whatever reason, not been included within the scope of the directive.

Major banking centres applying withholding tax have reported low withholding tax revenues: Luxembourg EUR48 million, Jersey EUR13 million, Belgium EUR9.7 million, Guernsey EUR4.5 million, Liechtenstein EUR2.5 million and Switzerland EUR100 million.

According to a Financial Times report published last month, European Commissioner for Taxation, Laszlo Kovacs, has ordered a review of the operation of the directive, with a view to clearer definition of investment funds and clarifying the treatment of interest payments made to trusts.

“The Commission is aware of causes for concern relating to the interpretation of the directive," a spokeswoman for the Tax Commissioner was quoted as stating by the FT.