Wednesday December 5, 2001 Page G-2
Tax, Budget & Accounting
Luxembourg, Austria Raise Obstacles
To EU Cross-Border Savings Tax Plan
BRUSSELS--New obstacles raised by Luxembourg and Austria are threatening to hold up plans to reach an agreement by the end of 2001 on the terms of the European Union's controversial
cross-border savings tax package.
At the heart of Luxembourg and Austria's opposition, voiced at a Dec. 4 meeting of EU finance ministers, is the issue of moving to an information exchange system that would eliminate bank secrecy laws
in both countries.
The two EU member states are insisting on a formal agreement giving final approval to a transition period from a cross-border savings tax on nonresident accounts to an information exchange system
where government tax authorities inform each other of nonresident interest-bearing accounts.
The transition, according to an agreement reached in June 2000, should take place in 2009.
However, Luxembourg and Austria are now insisting that a new agreement formally endorsing the transition to an information exchange system be reached in the year leading up to 2009.
The issue has arisen now because of a formal proposal put forward in July 2001 by the European Commission that encompasses details of the agreement reached in Portugal at a 2000 summit of EU leaders.
It also defines in detail the agreement reached by finance ministers in November 2000 that includes the rate of the cross-border savings tax (15 percent for the first four years and 20 percent for the last three
years before the transition period runs out.).
Third-Party Countries a Concern
"Basically the Luxembourgers and Austrians are trying to ensure that what is agreed with the third countries such as Switzerland also requires an information exchange system and the end of their
bank secrecy laws," said a European Commission official, who spoke on the condition of anonymity.
The agreement reached by EU heads of state and government in Portugal is conditioned on an agreement with Switzerland, the United States, and four other countries that would call for "equivalent
measures" for information exchange between governments.
"Based on the agreement reached in Portugal, the commitment to the agreement on information exchange seven years after the savings tax takes effect [Jan. 1, 2003] has been taken," said
Taxation Commissioner Fritz Bolkestein. "This should be formally approved by the end of the year . I emphasize that this should happen--but that does not necessarily mean it will."
Even if EU member states take the formal step of approving the terms of the cross-border savings tax by the end of 2001, it does not necessarily mean the deal will go through. The savings tax is part
of a package that includes a code of conduct calling for the elimination of a whole range of so-called unfair competitive tax schemes, many of which benefit American companies with operations in the EU.
According to the European Commission little progress on reaching an agreement on the code of conduct has been achieved in 2001 as member states are still opposed to eliminating a number of the 66
measures on the list.
By Joe Kirwin
Copyright © 2001 by The Bureau of National Affairs, Inc., Washington D.C.