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Ecofin Supports Moves To Tighten Savings Tax Directive

by Ulrika Lomas,, Brussels

08 December 2008

At its meeting on December 2, the European Council of Finance Ministers (Ecofin) expressed support for proposals by the European Commission to tighten up the European savings tax directive.

In its conclusion, released after Tuesday's meeting, the Council called for "rapid progress of the discussions on the proposal" for new legislation that would expand the scope of the savings tax directive to include a wider array of financial instruments and vehicles.

The Council also invited the Commission to continue its negotiations and exploratory talks with financial centres outside the European Union (EU) in order to expand the directive's geographical net. Ecofin called on the incoming Czech presidency of the EU to report back on the progress of these discussions by the Spring of 2009.

Last month, the European Commission announced that it had adopted an amending proposal to the savings tax directive that will widen the scope of the legislation "with a view to closing existing loopholes and eliminating tax evasion." The proposed amendment seeks to tighten the directive, so member states can tax more interest payments channelled through intermediate tax-exempted structures. The amendment would also extend the scope of the directive to forms of income obtained through investments in some "innovative financial products" as well as investments in certain life insurances products.

The savings tax directive has applied in 42 jurisdictions since July 1, 2005. These include 27 member states, 5 non-EU 'third countries' (Switzerland, Liechtenstein, Monaco, Andorra and San Marino) and 10 dependent and associated non-EU territories (Anguilla, Aruba, the British Virgin Islands, the Cayman Islands, Guernsey, the Isle of Man, Jersey, Montserrat, the Netherlands Antilles and the Turks and Caicos Islands).

Discussions with selected Asian financial centres regarding the application of the directive, namely Hong Kong, Singapore and Macao, were started by the Commission earlier this year.

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