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Luxembourg's 10% EU Withholding Tax Proposals Unwelcome

Tax-news.com

31 October 1999


A meeting of senior finance ministry officials in Brussels last week attempted unsuccessfully to thrash out an agreed solution to the impasse over the EU's proposed withholding tax, in advance of the Helsinki Summit on December 10th.

A majority of the officials present agreed that a 'provisional' deal should be tabled in Helsinki, leaving intricate and difficult negotiations with Switzerland and the dependent territories like Liechtenstein and the Isle of Man to take place afterwards. It was suggested that the negotiations should take place directly with the EU and not with individual member states.

No prizes for guessing which member state disagreed with the proposals. Luxembourg also threw a spanner in the works at the meeting by proposing a compromise 10% rate of withholding tax, and asking for investment funds (SICAV) to be excluded because they paid 'dividends' and not 'interest'.

Everyone seemed opposed to the Luxembourg proposal, the British because they don't want the tax at all, and everyone else because they want a higher rate. A German official said the Luxembourg proposals 'complicate' matters; and the Finnish Finance Minister Sauli Niinisto, who chaired the meeting, said the talks were 'very, very difficult' and he was 'not too optimistic'. The British compromise proposal for a 40,000 euro exemption level now seems dead in the water.

In the afternoon, the officials discussed the definition of 'interest', and finally indulged themselves in a chicken-counting exercise by working out how they would divide the proceeds of the tax among member states.

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