Most EU Countries Are In Breach Of Law Governing Tax Rules On Investment Funds

by Ulrika Lomas, Tax-News.com, Brussels

26 June 2001

According to a survey published yesterday (Monday) by Pricewaterhouse Coopers, the tax regulations on investment funds in many countries within the European Union could be in breach of European law. PwC's research has led it to conclude that national tax laws are a significant obstacle to the development of a single market for investment funds, which could be costing consumers around Euro 10 billion ($8.6 billion) each year.

The survey has revealed that the majority of EU member countries' rules are discriminatory and force overseas fund managers into forming national subsidiaries as well as customising products in order to benefit from the tax breaks that are available for local businesses. As a result of this practice, fund managers incur additional costs which they pass on to the investors. The survey claims that, out of the 15 member countries in the EU, only 4 are fully compliant with the European law: Finland, Luxembourg, Spain and Sweden.

Just a few weeks ago the European Commission pledged to target countries with those types of tax regulations that discriminate against overseas companies. The Commission said that it intended to 'be more pro-active' when confronting the countries that are breaking European law.

David Newton, a tax partner at PwC, told the Financial Times: 'What we are talking about is not harmonisation of tax rates but simply getting rid of discrimination. [The Commission] knows that if they get the thing working properly, then costs to consumers will go down dramatically. We are talking very big numbers here, if you get rid of these tax barriers, you get rid of some of the things that make fund managers have a multiplicity of products.'

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