EU STD » Tax Research UK

The EU signals its intention to tackle tax haven abuse – and its track record is good

EU STD, Europe, Secrecy jurisdictions, Tax Havens, Uncategorized 5 Responses »

Nov 172011

Commission chief Jose Manuel Barroso unveiled his work programme for next year at the European Parliament in Strasbourg on Tuesday (15 November), calling it a “blueprint for stability and growth.”

Out of the list of 129 separate projects for new EU laws and assorted non-binding strategy papers and recommendations, he highlighted the publication of a commission Annual Growth Strategy; measures to put an end to tax havens and a “quick reaction mechanism” against VAT fraud; as well as laws to end fiddles in the disbursement of EU funds.

The reported continued:

According to commission papers, the tax-haven document, due in autumn 2012, will not be legally binding. But it will aim to “develop a reinforced strategy to protect the EU against the challenges of unco-operative jurisdictions outside the EU.”

Also welcome was the report that:

EU countries will next year be asked to create a pan-EU “framework” for freezing the funds of people involved in terrorist activity and build a joint electronic register to screen financial transactions for terrorist groups on the model of the US Terrorist Finance Tracking Programme.

The EU haw an impressive record in tackling tax haven abuse: in my opinion it has been the most effective agency in the world in doing so. Its European Union Savings Tax Directive is flawed, but is making progress, and even as it stands is a beacon for the importance of automatic information exchange whilst its EU Code of Conduct on Business Taxation has been enormously helpful in tackling tax abuse both on and offshore and is pushing the Crown Dependencies steadily out of business.

The new development looks like an update on the Code of Conduct on Business Taxation. That is also not law, but it has been extraordinarily effective. As such I warmly welcomne this move.

In addition, the moves on terrorist financing simply won’t work without bettr company registries and registries of trusts. Might they be on the way

EU to come down very hard on the UK – Swiss tax deal

EU STD, Europe, Secrecy jurisdictions, Switzerland, Tax evasion, Tax Havens, Tax Justice Network 2 Responses »

Oct 252011

Europolitics has reported today:

The European Commission is planning to attack the tax agreements concluded by Switzerland with Germany and the United Kingdom, on 25 October in Strasbourg. It finds that Berlin and London have encroached upon the Union’s powers by negotiating bilateral arrangements with Berne that interfere with savings taxation rules.

Taxation Commissioner Algirdas Semeta will answer that evening an oral question by British Liberal Sharon Bowles, on behalf of the EP Committee on Economic and Monetary Affairs (ECON), which she chairs.

MEPs question the compatibility of these Rubik agreements, set to enter into force in 2013, with EU rules on taxatin of savings income, which provides for a 35% withholding tax at the source (not in full discharge of liability) on interest earned on savings. More generally, they wonder whether states have the power to negotiate such bilateral tax agreements and whether the Rubik system may present an “obstacle” to revision of the EU savings taxation directive and of the EU’s agreements in this area with Switzerland, Liechtenstein, Andorra, San Marino and Monaco. Will not Rubik agreements “have the effect of halting the move towards an automatic exchange of information for tax purposes,” they ask.

The question answers itself. Luxembourg and Austria have already seized the pretext of Berne’s arrangements with London and Berlin to hold up the savings taxation issue in the EU.

Keen on being treated equally with Switzerland, in order to prevent any capital flight, they refuse to be obliged to switch from the system of withholding at the source to the automatic exchange of information between tax administrations, and to abolish their banking secrecy in the process.

In the context, Commissioner Semeta plans to take a very hard line, on 25 October, and to denounce an abuse of power by Germany and the United Kingdom – except no doubt for the amnesty operation, which the Commission does not have the competence to prevent.

And as they note this is in the context of:

The global network Tax Justice will publish, on 25 October, a study that pillories London and Berne. Its conclusions will doubtless be identical to those of a tax specialist based in Zurich, who is consulted regularly by the Commission and prefers to remain anonymous.

So not only are the UK incompetent in their dealings with Switzerland, they’re also incompetent in their dealings with Brussels who have rumbled exactly what Osborne and Hartnett are doing – which is to undermine any effective challenge to tax havens.

It’s good news that the EU is fighting back. So they should. The promotion of tax haven abuse is unacceptable anywhere - including in London.

Angela Eagles says Labour would not have signed a tax deal with Switzerland

EU STD 2 Responses »

Sep 282011

I was on a panel at a fringe meeting with Angela Eagle , Shadow Chief Secretary to the Treasury. When asked about the reecent UK – Swiss tax deal she made it clear that there was no way Labour would have done this deal: it had been committed to EU solutions to tax evasion.

The point seemed clear: this is definitely a party political deal and not a pragmatic HMRC development.

Good news.

The EU say ‘get on with the new European Union Savings Tax Directive’

EU STD 5 Responses »

Sep 282011

As Europolitics reports:

In a surprise move, European Commission President José Manuel Barroso personally joined the combat the Union is trying to lead against tax evasion, on 28 September.

“It is not only financial institutions who should pay a fair share” of the costs of the financial crisis, he declared during his ‘State of the Union’ address to the European Parliament in Strasbourg. “We cannot afford to turn a blind eye to tax evasion.”

Barroso hammered out the message that “it is time” for the 27 member states to agree on revision of the EU’s savings taxation directive

Good news, and undoubtedly aimed at the UK and Germany – as well as at Luxembourg and Austria who are deliberately promoting tax evasion through their tax systems right now – just like the Swiss continue to do despite deals with the UK and Germany.

It’s mood music I know.

But it’s important mood music none the less.

The UK Swiss tax deal – not so fast the EU begins to say

EU STD, Europe, Switzerland, Tax evasion 9 Responses »

Sep 262011

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.

Swiss-German tax treaty undermines prospects for European tax cooperation

EU STD, Switzerland, Task Force on Financial Integrity and Economic Developm, Tax avoidance, Tax evasion 1 Response »

Aug 042011

The following comes from the blog of Eurodad, a fellow member with Tax Research UK of the Task Force on Financial Integrity and Economic Development:

An imminent “withholding tax treaty”, will allow Germany to claw back some revenue from tax evasion, but it will also protect Swiss bank secrecy and undermine the prospect of automatic information exchange globally, and more specifically the EU European Savings Tax Directive (EUSTD).

Switzerland and Germany will conclude the deal on 10^th August, according to German and Swiss newspapers. A withholding tax will be charged on income from savings and investments of German citizens with Swiss accounts, i.e those who had previously evaded tax in Germany. There will be both a one-off payment for lost income in the past, paid initially by Swiss banks, and then an ongoing tax on interest and return on capital. However, the withholding tax will be returned anonymously, thereby protecting Swiss banking secrecy.

The one-off compensation for past lost earnings could raise between €1.8 Billion and €10 billion according to different estimates, and will be paid for by Swiss banks initially, who will be reimbursed if Germany can make individuals pay up.

Actually obtaining the ongoing revenue is likely to be difficultas in many cases account holders can dodge these rules by moving money between Switzerland and other tax havens. Equally, the German government is probably being naïve in trusting the Swiss authorities and banks to collect taxes for them. Tax Research UK point out that Switzerland is a country that “has a proven record of facilitating crime, and being utterly indifferent to it. And that has consciously and deliberately withheld information from other governments for decades.

Britain has been in negotiations with Switzerland for a similar deal, and other countries might well follow suit, with France and Spain currently considering it.

The actual tax rate has still to be finalised but it is likely to amount to around 25-26%. This is less than the EUSTD, and will therefore undermine the initiative. EUSTD requires member states except holdouts to automatically provide other members states with information, but this only applies to wealthy individuals’ interest income. For example, Holland would have to automatically provide France with the details of any interest paid by Dutch banks to French citizens. This interest would then be taxed at 35%, from which Holland would keep a quarter and France the rest. The Swiss-German treaty will strengthen the hand of holdouts Austria and Luxembourg, who also pay anonymous withholding taxes rather than sharing information. It seems Switzerland has been pursuing the withholding tax deals precisely because they undermine the EUSTD, and damage the prospects of other international automatic information exchange deals.

Hat tip: Mark Morris

The European Union Savings Tax Directive: halting progress

EU STD, Uncategorized 59 Responses »

May 182011

As Europolitics reports:

The pugnacity of the Hungarian EU Presidency and of the European Commission did not pay off: Italy refused, on 17 May, to support a compromise on the taxation of savings income in the absence of sanctions for states and operators that “systematically” violate the existing rules. Rome’s refusal in this context targeted Switzerland.

This is unfortunate:

The Hungarian Presidency had proposed that the 27 finance ministers give a green light to the Commission to draft mandates to negotiate with five countries – Switzerland, Liechtenstein, Andorra, San Marino and Monaco. The idea was to ensure that they continue to apply measures equivalent to the EU’s in the area of taxation of savings income. The 27 are considering extending the scope of their directive to new products (investment funds, life insurance, etc) and to certain ‘intermediaries’ (trusts, foundations, etc) that can serve as screens for fraudsters.

Luxembourg ended up approving Budapest’s draft conclusions, which carefully avoid the sensitive issue of abolishing banking secrecy. Luxembourg and Vienna demand to be treated on an equal footing with Switzerland. They refuse to be forced to switch from withholding at the source to the automatic exchange of information between tax administrations if Berne does not follow suit.

That was progress. But Italy was adamant:

Italian Finance Minister Giulio Tremonti accused certain states and economic operators of “systematically” violating existing regulations.

The EU directive on savings taxation “was written by Switzerland, of which the Union has become a member,” he railed. “This is a paper tiger, a text with no teeth. Obligations were imposed on financial institutions and states, but no sanctions were put in place” against those failing to comply.

This “leaves the door wide open to abuse. It’s a scandal,” he added, accusing banks (Swiss in particular) of “using insurance systems or offshore funds” to circumvent their obligations.

This seems misguided ion Italy’s part:” the new European Union Savings Tax Directive would address these issues, so meeting its concerns. But:

Rome consequently refused to make the slightest concession until the Union “undertakes to apply sanctions against non-compliant countries and operators” in the framework of the review of implementation of the EU legislation. The Commission will present a report in June, confirmed Taxation Commissioner Algirdas Semeta, who wants “to use it as an instrument of surveillance”.

I understand Italy’s anger. I’m not sure they’ve expressed it the right way.

But it doesn’t look as though it’s back to the drawing board. Progress is likely, I think.

Could this be the week we get a new European Union Savings Tax Directive?

EU STD, Europe, Tax evasion 24 Responses »

May 152011

European Voice reports:

Officials are hoping that next week’s (17 May) meeting of finance ministers will at last see movement on the EU‘s plans to harmonise savings taxation, and the issue of banking secrecy that has become the stumbling block in the talks.

Amazingly, a new obstacle has emerged after Austria and Luxembourg appear to be allowing progress:

But just as these two countries appear ready to allow progress, a new obstacle has arisen from a threatened Italian veto. Italy’s concern is of a different nature – relating to its wish for changes in the way that savings taxes recovered from member states are distributed. Officials from Hungary have written to the Italian government urging it to back down before the meeting on May 17.

My suspicion is the publicity suggests there is a belief a deal can be done.

If so this will be a good week for tax justice.

And a bad week for tax cheats.

And an especially bad week for tax havens.

Fingers crossed.

Progress on the European Union Savings Tax Directive expected next week

EU STD, Europe 2 Responses »

May 122011

The EU’s Economic and Financial Affairs Council (Ecofin) is meeting on Monday and Tuesday next week. As they note:

The Council will hold a policy debate on the taxation of savings interest. A report will be made to the Council about taxation of the financial sector.

That is, of course, a debate on reform of the European Union Savings Tax Directive. My sources tell me that Ecofin have given top priority to getting this reform approved this month. Hungary is the current president, and has done its utmost to get the required unanimous approval from the 27 EU Member States.

There is no guarantee that this issue will progress as desired, but to say that it is on the back burner is also completely wrong. The vast majority of European states want the extension of the EU Savings Tax Directive, and rightly so. Tax cheats should not prosper in a free market. If they do, there’s no such thing as a free market. There is just a market free riders. And that something very different.

It is for precisely this reason that Savings Tax Directive reformers so heavily opposed by places like the Channel Islands, who will be directly impacted by it. They exist to promote economic free riding. The rest of us pay the price.