Confusion Continues Over EU Tax Packages

by Ulrika Lomas, for LawAndTax-News.com

21 March 2003

Confusion reigned over the EU savings and energy tax directives ahead of the two day summit of European heads of state which began yesterday, according to reports.

European finance ministers were hoping to reach an agreement over the two issues earlier this week for the government leaders to rubber stamp at their meeting in Brussels. However, although the current fly in the ointment, Italy, appears to have been satisfied with one element of the negotiations, Italian Finance Minister, Giulio Tremonti refused to comment as to whether the country would be removing its objections to the savings tax package.

Following years of negotiations on the EU proposals for the taxation of non-resident savings interest, third party countries such as Switzerland and were finally persuaded to come on board this year, reassured by concessions which would allow them to levy a withholding tax instead of exchanging information.

However, at talks held earlier this month, Italy threw a spanner in the works by demanding a menu of unrelated concessions, including changes to the treatment of cross-border taxes, revised diesel duties for the Italian trucking industry, and revisions to the taxation of energy products, as well as to milk quotas.

Speaking to the AFP news agency at the sidelines of the Ecofin meeting on Wednesday, Mr Tremonti revealed that he had green-lighted the energy tax package following an agreement whereby Italy will be allowed a reduced rate of diesel tax until 2005.

'We have succeeded in obtaining an exception that we consider completely consistent with our national interests,' he announced. However, according to AFP, he declined to comment on the parallel issue of milk quotas, and refused to reveal whether there were plans to lift Italian objections to the savings tax agreement, and allow it to pass into law.

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