UK Steadfast On Floundering Withholding Tax Proposal

Tax-news.com

28 November 1999

Despite a series of meetings in London last week Finnish finance minister Sauli Niinisto failed to make any progress regarding the standoff between the EU and the UK over the EU's proposed 20% european withholding tax. Visiting London in his capacity as president of the EU council of finance ministers, Nijnisto met separately with banks, industry representatives, Bank of England Governor Eddie George and UK Chancellor Gordon Brown in a last-ditch effort to find a compromise over the UK's opposition to the EU's proposals for tax harmonisation.

Mr Niinisto failure to shift the UK from its openly hostile opposition to the reforms means that it is highly unlikely that a consensus position on tax reform will be formed before December's EU summit in Helsinki.

The UK government has consistently opposed the proposed withholding tax on the basis that it would jeopardise the future of its lucrative international bond market and would force a large segment of this business to move offshore. The UK has put forward a number of alternative schemes that focus on enabling better exchange of information between tax authorities, but this approach has been rejected by other EU countries, most notably Luxembourg and Austria because of their banking secrecy laws.

Luxembourg has also tabled its own alternative scheme which is based on a flat 10% withholding tax, but so far this has not been well received either.

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