I hear rumours from the EU Commission on the UK Swiss tax deal.
First rumour is forget the Swiss German deal - it won't get through the parliament so the UK is going to be in the Swiss dodgy deal market all on its own.
Second, forget the 26% tax rate being less than the EU savings tax rate, although that' obviously unacceptable
The reality is that the official policy of the EU Commission is automatic exchange of information, nothing less. This is a principle they have not wavered from one iota with the EU savings tax amendments and even set in concrete with the Administrative Cooperation and Mutual Assistance on Tax Matters Directive adopted unanimously by ECOFIN in February this year.
The German and UK agreements with Switzerland apparently state that "withholding tax is equivalent to automatic exchange of information in the long-run". Well, so they might. But that's in conflict with the EU policy. In that case the EU will "intervene" i.e. block the entire agreement by saying it is illegal within the EU.
Why will they do that? Simply because the EU Commission doesn't believe the PR that withholding tax is equivalent to exchange of information, besides which the EU Commission believes the withholding tax agreement has loopholes in which case an ineffective agreement with the Swiss certainly doesn't match automatic exchange of information.
So Dave Hartnett may have signed a deal.
But there's a good chance he may not actually see it come about.
Back to the much better European Union Savings Tax Directive then.
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Let’s look at a few things:
“The reality is that the official policy of the EU Commission is automatic exchange of information, nothing less. This is a principle they have not wavered from one iota”
That is factually correct, but totally irrelevant. Taxation matters remain the domain of the member states and are therefore decided by the EU Council. Luxembourg and Austria have consistently said that they will veto any legislation the imposes automatic exchange. The EU Commission is totally irrelevant here, and a very marginal player.
“But that’s in conflict with the EU policy. In that case the EU will “intervene” i.e. block the entire agreement by saying it is illegal within the EU.”
We have been through this several times before. Switzerland is not part of the EU, so the EU has no ability to block the deal. And before you start shouting that Switzerland is ‘de facto’ part of the EU, just read what the EU Commissioner said about this here http://bit.ly/qE2H9W .
“The automatic exchange of information is the rule in the EU. The use by Austria and Luxembourg of the withholding system was authorised only for a transitional period. Things are different for non-EU countries: the Union asks them to apply measures equivalent to its own, not identical measures. What counts is that they respect OECD standards on the exchange of information on request.”
Seems pretty clear that automatic exchange does not apply to Switzerland, among various non-EU jurisdictions.
Finally, you should face is that the German-Swiss deal WILL be approved by Germany’s legislature and you might as well stop engaging in wishful thinking. It is true that Merkel does not have a majority in the German upper chamber, but she has more than one way to “buy” a few votes if she comes up short. Remember that Germany continues to see vast fiscal transfers from West to East, which makes it very easy to trade favors across the aisles of the legislature. While nothing is certain except death, it is a safe bet that this treaty will be ratified, most likely on a day where everyone else is looking the other way and is busy putting out a fire across the EMU. There will be a lot of opportunities.
You continue to ignore reality at your own perils.
Ah, and who makes up ECOFIN?
Would YOU like to face a little realism?
Darren you are relying too heavily on a simple view of EU competence here. On the direct tax side the ECJ has already repeatedly imposed the basic treaty freedoms on member states tax regimes requiring essentially equal treatment.
This potentially captures bi-lateral agreements even between member states and non-member states as the agreements are require by the Lisbon treaty to be consistent with treaty freedoms. If the agreement can be said to give an advantage to the Swiss vis a vis any member state undertaking (apart from a UK undertaking you are allowed to be worse to your own people) then arguably there is a free movement problem (establishment /capital in this case). Also note Free movement of capital applies to third countries as well so that is another way a non-EEA state might become subject / able to benefit from Treaty freedoms.
Without official competence the EU has not introduced minimum harmonisation but the ECJ has imposed harmonisation non-the-less and this has led to race to the bottom on tax matters – one of the reasons member states have been struggling to protect their tax bases.
The Commission has room to intervene if it wants but whether it will or not is a political call. Down the line though the agreement is probably at risk from a challenge by an aggrieved competitor to the Swiss banks perhaps a US institution looking for equal treatment — could be costly if we lose.
ECOFIN is composed of the Economics and Finance Ministers of the Member States. There are various voting system depending on the matter at hand. Taxation is subject to unanimity, which is why Luxembourg and Austria are able to block any legislation that would threaten their bank secrecy.
Amazing how they get agreement though
And will again
As they did on the issue of automatic information exchange
Oh yes, they have reached agreement
They have agreed to de-link the issue of automatic exchange from the more substantive revisions to the EU savings directive.
This means that under the proposed compromise Luxembourg and Austria will retain their withholding regime.
And that’s not agreed
Yet
So you’re the chancer
But even if they do the Swiss deal undermines – so is a negative that has to be stopped
Richard,
While it is about certain that Germany will approve the deal, there is still a very real possibility that it fails because the Swiss don’t ratify it. There is a lot of background talk that the votes are simply not there to have the agreement ratified in the Swiss congress. Many Swiss representatives believe that the clauses of the agreement dealing with administrative assistance give too much ground.
Right now it looks 50:50.
Oh excuses
My German sources differ