EU Savings Tax Directive Just The Start Warns Academic

by Jason Gorringe, Tax-News.com, London

17 July 2003

According to an academic from the Centre for European Studies, the offshore sector will continue to face pressure from the European Union over tax for many years to come, and the wave of legislation and regulations from Brussels will not stop with the recently agreed Savings Tax Directive.

Speaking at a recent Euromoney seminar in London, Mattias Levin, a research fellow at the Centre, told delegates: "Taxation increasingly stands out as a major obstacle to a full realisation of internal markets in the EU. Therefore the little tax action that we have seen so far- mainly in the form of the tax package- is only the start."

Levin continued: "More will come. Whether it will be in the form of extending the scope of the savings tax directive or whether it will be some form of corporate tax harmonisation, remains to be seen. But I think it's fairly safe to say that more tax measures are likely to emanate from the EU."

According to the IoM Online, which reported on the conference, Levin also observed that there has been increasing competition from onshore jurisdictions over the last decade, as their governments have introduced more efficient regulations and introduced tax incentives.

"Offshore centres face a harsher environment. Their traditional competitive advantages have been dented and the emerging international and EU framework means they have less freedom to manoeuvre," Mr Levin told delegates.

However, on a more optimistic note, the CES fellow was sceptical that the spectre of tax harmonisation will become a reality, and announced that he doubted that such a thing was achievable at all.

"There is absolutely no theoretical case for having any kind of harmonised regime," he explained, continuing: "Therefore there is much less foundation for any kind of international effort in that respect."

Also speaking at the conference was Isle of Man's International Serices Division head, Jane Dellar, who sounded an optimistic note with regard to the Island's future growth in financial services. "I think we are going to see an increase in business," Mrs Dellar predicted, although she tempered her remarks slightly by adding that: "My one area of dispute with the regulators is risk. With new business comes risk and we have to balance that risk."

"Offshore jurisdictions have (traditionally) come into their own by being prepared to take that risk," the ISD chief noted. "And (onshore-based) parent companies are going to have to acknowledge that their offshore subsidiaries sometimes have to take a bit more risk than they do and allow their regulation and compliance to facilitate that risk."

However, Mrs Dellar spoke in strong terms on the possibility of further interference from outside organisations such as the EU or the FATF, stating that she considers that regulatory standards in the financial sector are now as good as they can be.

"We've had the Edwards review, the OECD, the IMF, the FATF. How many more grillings is each jurisdiction going to be subject to before some overriding authority comes out and says: That's enough!

"My fear is that with spending so much time worrying about the international bodies ... we're actually forgetting what we're there to do ... and I think that at some point we have to draw a line in the sand and say "enough is enough", let's just get on with it now. We've done everything we've been asked, we're co-operating, we've got an open dialogue ... please let us just get on with our business now," she concluded.

Recommended