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February 10, 2004
Savings tax plans likely to cause EU quarrel
By Daniel Dombey and George Parker
European Union finance ministers are expected to clash today over savings tax proposals in the wake of continuing difficulties over a reciprocal deal with Switzerland.
Last year, the EU's 15
member countries ended years of arguments over a new savings tax regime - agreeing to put in place an EU-wide system if third countries put in place equivalent measures.
But although Switzerland has agreed a
deal with the EU, it is unwilling to sign it until it has reached a parallel agreement on the EU's Schengen system on the free movement of peoples.
Bern has called for an exemption on provisions for judicial
co-operation on VAT evasion and smuggling, although most EU states say these are an integral part of the Schengen system.
Switzerland says that its concessions in the savings tax agreement should be taken
into account in the Schengen talks.
Swiss officials believe that without a compromise on the fiscal offences chapter of the Schengen agreement, approval for the whole package of nine agreements with the EU
will be hard to win in parliament.
Italy and Luxembourg, which have both held up approval of the savings tax package in the past, have indicated that they sympathise with Switzerland's linkage of the two
issues.
At a recent finance minister meeting, Giulio Tremonti, Italian finance minister, suggested that the EU's savings tax deal might have contributed to the Parmalat scandal by diverting attention from
cracking down on tax havens.
But most other EU members want Switzerland to approve the deal forthwith.
Ireland, which holds the EU's revolving presidency, concedes that the impasse with Switzerland is
affecting the momentum for negotiations with four other smaller European states. However, Swiss officials are hopeful that a deal can be reached in the next few weeks.
Meanwhile, today's Ecofin council is
also expected to see renewed tension between ministers over France's budget deficit, which will breach the stability pact's ceiling of 3 per cent of GDP for the third successive year in 2004.
Austria, the
Netherlands and Spain are among the countries concerned that France is failing to tackle the problem with sufficient urgency, and that Paris could break the pact again in 2005.
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