CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. Semeta Pushes End To Savings Tax Impasse

Semeta Pushes End To Savings Tax Impasse

by Ulrika Lomas,, Brussels

18 January 2013

European Union (EU) Tax Commissioner Algirdas Semeta has reiterated calls for Austria and Luxembourg to give up their blockade of plans for a new Savings Tax Directive.

Using the opportunity of his Dublin visit for a sideswipe at Austria and Luxembourg, Semeta urged both countries to stop blocking plans to reform the current Savings Tax Directive, and urged the Irish EU Presidency to achieve "swift progress" on this issue, which, he pointed out, is currently being prevented by two member states.

The European Commission is currently seeking a negotiating mandate from EU finance ministers to strengthen common instruments against tax evasion by concluding a treaty with third countries, including Switzerland, Monaco, Liechtenstein, Andorra and San Marino, providing for application of the EU Savings Tax Directive in these jurisdictions.

In application since 2005, the EU Savings Tax Directive regulates the automatic exchange of information on the savings income of European Union citizens, and is considered to be a key instrument in the fight against tax evasion. Given that the Directive contained a number of "loopholes," the European Commission presented a revised version in 2011.

Yet Luxembourg and Austria have continued to oppose the Commission’s latest plans. Austria’s Finance Minister Maria Fekter challenged the European Commission's motives, insisting that it is merely endeavoring to abolish banking secrecy and to ensure an automatic exchange of data, rather than to include third states.

Back in May last year, Luxembourg's Finance Minister Luc Frieden defended his decision to block the European Commission's plans to negotiate new and stronger savings tax agreements with third countries, insisting that given recent developments, the automatic exchange of tax information is not necessarily the only solution to combating tax evasion.

Lamenting the lack of debate and spirit of openness, Frieden explained at the time that he had sought to initiate a discussion in Brussels with his European counterparts and with the European Commission on international developments that had taken place since the adoption of the Savings Tax Directive in 2003.

Frieden highlighted the fact that at the time, the automatic exchange of tax information was considered to be the only means with which to combat tax evasion. Since then, other developments have shown the efficiency of the withholding tax system, he argued.

Alluding to the fact that Luxembourg has been "regularly stigmatized" for blocking the Commission's plans, thereby preventing the introduction of an automatic exchange of information in the EU, Frieden underscored the complexity of the debate, which, he argued, could not simply be reduced to "for or against" banking secrecy, as the Commission has suggested.

While emphasizing that Luxembourg is indeed also committed to combating tax evasion, the minister nevertheless insisted that efforts to guarantee the protection of client banking information should no longer be considered synonymous with non-transparency within the framework of international co-operation.

Pointing out that a number of European countries currently apply a system based on withholding tax, Frieden confirmed that such a system is also applied in Luxembourg, both at national and at European level. Luxembourg’s system is based on a double mechanism, the finance minister added, notably on an exchange of information on demand and a withholding tax at source, guaranteeing effective taxation, the transfer of tax due by non-residents to their country of origin, and the transfer of information upon request, in clearly defined cases.

The conclusion of bilateral withholding tax accords between Switzerland and Germany, the UK and Austria, introduces a new element, Frieden continued, namely the recognition by the UK and Germany of the withholding tax principle applied in a third country.

Concluding his remarks, and underscoring his willingness to find a compromise, Luxembourg’s finance minister said that the ongoing debate, which has so far failed to reach an acceptable solution, should now focus on the efficiency of both models in combating tax evasion.

Frieden proposed limiting the mandate to merely extending the field of application of the Savings Tax Directive, to increase the efficiency of the current system.

Despite the apparent urgency, the issue is not expected to be discussed at the upcoming meeting of EU finance ministers on January 22.

TAGS: compliance | tax | European Commission | tax compliance | tax avoidance | law | banking | Liechtenstein | Luxembourg | Monaco | offshore | agreements | legislation | banking secrecy | withholding tax | Austria | Germany | Switzerland | European Union (EU) | Andorra | San Marino | Europe

To see today's news, click here.


Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »

Stay Updated

Please enter your email address to join the mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.

To manage your mailing list preferences, please click here »