The FT confirms the story I mentioned here a couple of weeks ago - that the EU is looking hard at how to close loopholes in the EU Savings Directive. It reports that:
Laszlo Kovacs, EU tax commissioner, has begun consulting the savings industry on a range of measures to tighten up the savings directive, which is riddled with exemptions.
It adds:
One Commission official said the current directive provided a good basis for future work. "There is a degree of disappointment with the way it has worked so far, but optimism that it will succeed when the loopholes are closed."
I agree with that comment. And I agree that the issues being considered, which are as I predicted, tackle those faults.
The FT doubts that countries like Luxembourg, Belgium and Austria will agree to any change. I'm not sure I agree. Times are getting harder for tax fiddling. And I'll add another reason why they might get harder still. We've recently seen a move against the UK and Ireland's domicile rules on the basis that they prevent the free-flow of capital. So too do the banking secrecy laws that are promoted by these states. They are, of course, in contravention of good market principles and the next time the EU is blocked by these countries on this issue expect a challenge on the basis that capital should be able to locate wherever it makes an appropriate return, not where it can be sheltered by secrecy. I can't see the latter being tolerated much longer.
As Bob Dylan once said, the times they are a-changing.
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In taxation matters, the initiative depends on the Council of Ministers, not on the Commission, and any decision needs to be unanimlously taken by all member states (art 99 of the treaty of Rome if I remember well).
The agenda setting powers of the Commission are therefore very limited and let’s not forget the third party countries also signatories, without which no agreement is possible (the famous “level playing field”).
I am not saying changes will not happen, only that it will take quite some time. Mr. Kovacs can say whatever he wants to try to put the ESD on the agenda, the matter is out of his hands until such time as the Council of Ministers decide to move.
See http://www.ucl.ac.uk/ippr/download/volume-2-2/IPPR_Vol_2_No_2-2.pdf for a detailed analysis on the political process and the interaction between the Commission and the Council.
I’m afraid Charles is wrong about the ESD matter being out of the EU Commission’s hands.
In accordance with Article 18 of the Savings Directive, “The Commission shall report to the Council every three years on the operation of this Directive. On the basis of these reports the Commission shall, where appropriate, propose to the Council any amendments to the Directive that prove necessary in order to better ensure effective taxation of savings income and to remove undesirable distortions of competition”.
The Council has already approved the ESD years ago. The amendments are only a technical improvement and so there won’t be any of the delays that were incured with original initiative.
M
Maybe you should read the treaty of Rome and the relevant European Public Policy works (the book by Franchino on The Power of the Union at Cambridge University Press is a good start), especially in the field of European tax?
I can’t see how the Commission “reporting” to the Council changes the fact that the Council makes decisions at unanimity.
What you see as technical improvement is actually a lot more than just that. Re-read article 17 which ties in Switzerland and all third countries, and go and convince the Swiss to the amendments.
Once again, I am not saying changes will not happen, I am just saying that:
1 – it will take time
2 – the decision power lies with the Council.
What leg do the Swiss have in objecting to the taxation of private offshore companies owned by EU individuals? What defense do they have for excluding structured products, which they themselves tax their own residents? How can they disagree to tax non-UCITS if they already tax UCITS. What reason would they have to dissaprove the includsion of Foundations or Discretionary Trusts? What rationale can they use to exclude partnerships? What argument could they have for not adopting the 3rd Directive on money laundering to identify the beneficial owner? What warrants them routing interest payments through Asian branches merely to avoid the ESD?
On top of that, the Swiss ESD agreement regarding review, states that they must expeditiously apply equivalent measures.
Blatant tax evasion is difficult to justify. Most of these changes will be implemented (i.e. agreed by the Council) much quicker than you assert.
I do not disagree with you when you say that blatant tax evasion is difficult to justify but neither this nor the rights of Switzerland as a sovereign nation to agree to its international treaties in the manner it sees fit are the points I address.
I simply place myself on a procedural and international public policy ground, I am not discussing the right of sovereignty of a country within its borders.
If and when this actually hits the negotiation table at ECOFIN, the 25 diverging interests of each European veto players plus those of the third coutnries will be entertaining to follow (especially those for which the finance industry represents a vital share of their economy) and side deals will have to be struck (such as the milk quota issue with Italy and the Parent Subsidiary Directive with Switzerland).
And if the definition of beneficial owner (art 2) from “individual” to trusts and corporate entities is to be changed, that means the whole negotiation process starting again from scratch.
I believe this wil take quite some time. We will just have to agree to disagree on that one!
[…] Let me come straight to my point. Jersey’s new money laundering rules, supposedly designed to ensure compliance with FATF rules and the EU 3rd Money Laundering Directive are actually designed to facilitate tax evasion, and as such money laundering, by ensuring that effective information exchange becomes much harder to operate, especially under the terms of the EU Savings Directive, both as it now is and as the European Commission would like it to be. […]
Well, Charles… still think the changes to savings directive going to be a long process, including trusts? Me thinks thou doth protest too much.