Senior EU tax officials, including European Tax Commissioner Laszlo Kovacs,
are preparing to make a fresh approach to Asian financial centres, in a bid to
have them included within the ambit of the European Savings Tax Directive.
According to a report from Reuters, Kovacs is scheduled to visit Hong Kong later
this month, while other senior officials will launch a new charm offensive in
the territory of Macau and the city-state of Singapore.
The directive, which extends to a number of 'third countries' such as Switzerland,
the Channel Islands and Caribbean offshore territories, facilitates the exchange
of information between EU tax authorities on certain types of savings and investments
held by EU residents in their territory, so that interest earned can be taxed
in the resident investor's home state.
The legislation gave jurisdictions reluctant to compromise banking secrecy
the option to apply a temporary withholding tax on savers' interest, which is
currently set at 15%, instead of exchanging information. Three-quarters of these
tax revenues are remitted back to the account holder's home member state, but
reports have suggested that the revenues raised so far have fallen well below
EU expectations.
However, while the EU was effectively able to bully smaller territories such
as those in the Caribbean with colonial links to member states like the UK and
the Netherlands, the Asian territories have no such ties binding them to Europe. Unsurprisingly,
EU officials have already received frosty responses from Hong Kong and Singapore
regarding the issue, and little is expected to have changed.
In the case of Hong Kong, signing up to the savings tax directive could mean
altering the Basic Law which safeguards the future of its financial centre under
Chinese rule. Singapore on the other hand, is known to be staunchly opposed
to the idea of sharing bank account information with the EU, and has rejected
European overtures to include information exchange provisions within a broader
economic agreement.
The European Commission is currently reviewing the operation of the savings
tax directive and is likely to make several recommendations for tightening up
the legislation that would make it harder for EU-based investors to legitimately
side-step the law - for example by moving assets from bank accounts to vehicles
such as companies and trusts - which weren't included in the legislation - or
by shifting money to accounts based in territories out of the reach of the directive's
information sharing provisions.
It is expected that this review will be completed by the end of the year, after
which any new proposals will be put to member states.
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