On the agenda of today's ECOFIN meeting in Brussels will, as usual, be the thorny withholding tax dossier. Following the UK's budget last week, Dawn Primarolo, Britain's Paymaster-General, will be hewing to the 'exchange of information' line.
The EU tax harmonisation package, which has been held up by the UK's determined resistance to the proposed 20% withholding tax on bank interest payments, always contained exchange of information provisions as an alternative to the withholding tax, but until recently there seemed little chance of gathering unanimous agreement on information exchange.
Now, however, with British resolve against the withholding tax apparently unshakeable, an attempt will be made to assemble a consensus on information exchange. This will require Germany, Austria and Luxembourg to drop their existing statutory banking confidentiality regimes, and there has been no indication that they are prepared to do so - especially not in the case of Luxembourg, which sees its economic survival threatened by such a move.
An exchange of information agreement would, at the minimum, compel banks in all EU member states to pass details of interest payments to EU nationals to their respective tax authorities, so as to ensure compliance with national tax rules. Imagine: after enlargement, banks in Cyprus will have to tell the tax office in Stockholm about Swedes with accounts in Nicosia; banks in London will have to tell the tax office in Bratislava about Slovakians with accounts in the UK.
Of course, it won't stop at interest payments. Will EU nationals have to give their home taxpayer numbers when opening a bank account anywhere in the Union? Will it extend to the beneficial owners of corporate accounts? Logically, it should.
It is thought that Germany is likely to agree; Austria is very unwilling but may give way in the interests of regaining its dignity in the Union after the Heidar affair. So that leaves little Luxembourg as the only one willing put a finger in the dyke of privacy. How long can they hold out? It's a good thing that M. Santer isn't still President of the Union!
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