Meeting in Brussels yesterday, the ECOFIN working group of senior officials from finance ministries returned wearily to the task of trying to assemble a consensus on the savings tax directive.
Luxembourg continued to ask for a 'coexistence' model in which it could apply a withholding tax to interest payments made to citizens of EU member states until such time as it chose to switch to exchange of information (possibly never, given its atachment to the principle of banking secrecy).
Austria (also with strict banking secrecy law), Belgium (with its dentists) and Greece (why?) supported Luxembourg in wanting to be able to choose between applying the tax and giving out information on depositors and savers from other member states.
At the other extreme, the UK continued to demand a compulsory switch from an initial, optional situation to a uniform regime for exchange of information within a predetermined period of, say, ten years. Most other countries took up positions in between the two extremes, although agreeing that exchange of information was a better model than actual collection of the tax.
The UK is also nearly alone in its continued insistence that other countries such as Switzerland and the US should conform to the 'exchange of information' model on the same time-scale as the EU.
On the rate of tax to be applied, there is still majority agreement on 20%, although some countries would want to apply a higher rate. Luxembourg, in an unexpected concession, said that it would not seek to retain all the tax it collected. Bank assets in Luxembourg belonging to EU nationals dwarf those in any other member state, so that a 20% tax on interest payments would yield vast sums for the tiny country. Of course, those deposits are in Luxembourg just because of low taxation and secrecy, and it is reasonable to suppose that many of them would leave promptly if a tax was imposed.
The dossier now goes to the ECOFIN ministers' council in June, without much expectation that a compromise will be found; but it is not ruled out. The most likely result remains that perfidious Albion will have succeeded in scuppering the whole project, in the unspoken interests of its dependent territories. But is it Gordon Brown or his officials who are behind the plot?
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