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Benelux Summit Centers On EU Savings Tax Directive

by Ulrika Lomas,, Brussels

16 December 2013

According to the Grand Duchy, the latest Benelux gathering in Luxembourg focussed on preparations for the upcoming European Council meeting, due to take place in Brussels on December 19 and 20, as well as on plans to extend the scope of the European Union (EU) Savings Tax Directive.

Ahead of the European summit, Luxembourg's new Prime Minister Xavier Bettel confirmed the Grand Duchy's position on automatic exchange of information (AEI) to Dutch Prime Minister Mark Rutte and to Belgian Prime Minister Elio Di Rupo. Luxembourg's policy is not intended to protect tax evaders, Prime Minister Bettel made clear.

Highlighting the commitments undertaken by Luxembourg recently, Bettel insisted that negotiations with third countries have still not yielded results which would suffice to meet the circumstances defined by the European Council in May 2013 for the adoption of the revised agreement, notably as regards a "level playing field" between EU member states and third countries.

While underscoring Luxembourg's determination to make progress on automatic information exchange, and emphasizing the country's commitment to applying AEI for interest payments within the EU from 2015, Prime Minister Bettel nevertheless stressed that Luxembourg is waiting to see what steps have been taken to ensure a level playing field with third countries. Bettel's Dutch and Belgian counterparts expressed their "understanding of Luxembourg's position on the matter."

International ratings agency Standard and Poor's has confirmed Luxembourg's "AAA" rating for long-term debt, with a "stable" outlook, despite the upcoming challenges facing the Grand Duchy's banking sector, notably the introduction of an automatic exchange of information from 2015, and the cost of compliance due to the new regulations. The ratings agency anticipates that the banking system will remain profitable over the period 2014-2016.

Furthermore, it stated that the size and diversification of the financial sector will be able to offset a less sustained overall growth and an increasing regulatory pressure.

Underlining the political stability of the country, and robustness of its public finances, as strong assets that should enable the Grand Duchy to cope with potential external shocks, Standard and Poor's said that it expects the Luxembourg economy to grow by around 2 percent from 2013-2016.

The Luxembourg Government remarked that this growth will largely be driven by the financial services. The agency noted that the investment fund industry will be a strong sector for growth, as demonstrated by the historical level of EUR2,500bn (USD3,445bn) reached at the end of 2012. This figure represents more than a quarter of the total assets under management in European funds.

Luxembourg, Germany, and Finland are the only countries to have maintained their highly prized "AAA" rating in the Eurozone. Standard and Poor's pointed out that the Grand Duchy's triple A score is based on the good resilience of the Luxembourg economy and public finances to external shocks, in particular because of the high degree of economic prosperity and net assets held in the state's portfolio, including the existence of a large pension pool.

Commenting, Luxembourg's Finance Minister Pierre Gramegna said: "This positive outlook reflects our economic stability, which is reinforced by our diversified economy. Luxembourg has solid macro economic fundamentals with the lowest public debt levels in the EU, which gives us our competitive edge."

TAGS: compliance | Finance | tax | investment | tax compliance | Belgium | Netherlands | tax avoidance | interest | banking | financial services | Luxembourg | Finland | Germany | regulation | individual income tax | European Union (EU) | services | Europe | Tax | Tax Evasion

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