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September 26, 2002
US Opposes Sharing Information on Savings Taxation: White House Advisers Come out
Against European Request For Data
On Foreign-Held Accounts:
Correction Appended
By Edward Alden, Francesco Guerrera and Amity Shlaes
The US will refuse to co-operate with the European Union's savings directive - a decision that could derail the EU's four-year
attempt to agree on rules governing the taxation of non-residents' savings.
Glenn Hubbard, chairman of the White House Council of Economic Advisers, told a meeting of conservative political groups this
week that the US would not agree to European requests for broad sharing of information on savings accounts held in the US by foreigners. "We are not for the European savings initiative," Mr Hubbard said at
the meeting. The comments reflected a position hammered out last month by senior US officials from all the leading US economic agencies.
US agreement to participate before the end of the year is seen by the European Commission as vital to the success of the
proposal, which is a key part of the EU's plans to create a single financial market. Failure to strike a deal on savings' taxation would be a huge blow for the EU, which says the measure would enable governments to
fight tax evasion and money laundering.
Under the current plans, agreed on by EU governments in December after a long dispute, EU countries will automatically exchange
information on the interest paid to non-resident holders of savings accounts. This would enable each government to tax the savings of its own citizens - an approach backed by the UK, which was staunchly opposed to a
previous plan for a EU-wide "withholding tax" on interest from cross-border savings.
However, EU states said they would approve the plan only if the European Commission could persuade a number of non-EU countries,
such as the US and Switzerland, to adopt similar measures. Up to now, the Swiss had been the main stumbling block to a deal on savings taxation. Earlier this month, EU finance ministers asked the commission to draw
up a list of sanctions if Switzerland did not comply.
Commission officials had said that talks with the US Treasury had been proceeding well. But Mr Hubbard's comments suggest the
White House is taking a tougher line on the issue.
"(The Commission) want to get us to sign on in order to badger the Swiss into signing, and get the Swiss to sign on to
badger us," said the White House official. He said the automatic information-sharing requirements of the directive were at odds with the US tradition of sharing such data only for specific purposes.
The US Treasury said no final decision had been made, and that discussions with the EU were at an early, technical stage. Tara
Bradshaw, a Treasury representative, said the US favoured "appropriately tailored information exchange relationships" that would help to enforce tax laws. She added that Paul O'Neill, Treasury secretary,
"has also made clear that the US has no interest in participating in any effort toward tax harmonisation and that protection of the confidentiality of taxpayer information is paramount".
US conservative groups have lobbied the White House, charging that the directive is part of a Europe-led campaign to force low
tax countries such as the US to raise taxes while invading the financial privacy of individuals worldwide.
Additional reporting by Amity Shlaes
Correction: September 27, 2002
A quote in yesterday's paper, referring to European Union efforts to press the US to co-operate in the Savings directive,
appeared to have come from Glenn Hubbard, chairman of the Council of Economic Advisers, because of an editing error. In fact, its source was another White House official, who spoke on the condition he not be
identified.
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