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.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
It could go one of two ways. Its quite possible that the new deals between the UK/Switzerland and UK/Germany will become the model going forward and that the existing EUSTD will become obsolete.
I see no chance of that, at all.
Not a hope
And nor does the EU
Richard – it appears that Mark (your proclaimed “guru” of all things EUSD-related) has now come to the conclusion that the withholding regime will remain for the foreseeable future in the revised EUSD.
It looks very similar to the Swiss deals, doesn’t it?
And there is not a hope in hell that the withholding tax arrangement will be agreed within the EU, precisely because the UK will block it. We would have had one but for that you rate the fact.
Richard – but if the UK block a withholding tax regime, and Luxembourg/Austria block automatic exchange, then we will never extract ourselves from the current stalemate. And we revert to the current (unsatisfactory) position of withholding tax by default, with numerous loopholes.
Not at all
We’ll get there
Crooks will not be tolerated
Germany clearly does and my spies tell me France does to. On the basis that they drive the EU I wouldn’t rule it out.
I’m sure as heck getting different information from you then
LoL Harry, didn’t know you were a stand up comedian. The Appollo awaits you.
I can tell you the EU Commission is ready to savage the Swiss deal if any clause is in contention with EU level legislation…. and by the way, the Swiss / UK deal is a mere fraction of the revised EU savings tax in its complexity and ability to attack loopholes.
Mark
I don’t disagree with you (other than your totally unnecessary first paragraph!).
Don’t shoot the messenger – I’m just telling you what I’ve been hearing over the past fortnight, which is that it is increasingly accepted that the EUSD is useless without Switzerland, Singapore, Hong Kong, Dubai fully committing to it and that as they aren’t going to do so, the approach from within the EU is changing. That much seems pretty obvious from the UK and Germany breaking rank with Switzerland. The clear and overriding objective is to collect more tax revenue, rather than driving tax cheats even further away.
Mark – this is a debate we have had a few times already.
The member states are in agremeent about the vast majority of the terms of the revision, including the extension of the sources of income it covers and the entities to which it applies.
The real issue is around information exchange. If the Commission or certain member states continue to demand automatic exchange, then Luxembourg and Austria will simply veto any progress. The only way forward is for the withholding regime to be made either permanent (the most likely outcome), or to set a review or “external conditionality” clause that kicks the can down the road until 2020 or so.
This is where it gets interesting though, because by then the agreement between Germany and Switzerland (it is the one that really matters, the UK agreement is a bit of a side show) will have been in operation for a few years and will have become the de facto model for relationships between member states and jusridictions with consitutional banking secrecy either wihin the EU or outside the EU (e.g. Switzerland).
Finally, since Switzerland is not part of the EU or the EUSD, the only basis on which the EU could challenge the UK and German agremeents would be if Germany and/or the UK would be found to have failed to comply with their EU treaty obligations. This is a very tall order: member states have retained sovereignty over tax matters, and are therefore free to enter tax agreements with third-party jusrisdictions as long as they do not cause discrimination versus other member states. The Commission would have a very tough time arguing this case.
Darren,
One of the main features of the Swiss / UK agreement is granting access of Swiss banks to UK market. This is an EU level issue, not a Member State decision.
Secondly, the EU savings tax amendment will still obligate the Paying Agent Upon Receipt outside of Switzerland with a Swiss bank account (e.g a. Guernsey trust with a bank account in Geneva) to apply the savings tax provisions and even exchange information, irrespective of what the Swiss do.
So the Swiss deal falls apart. Not a good basis for the EU savings tax to be eradicated.
Mark –
First, on the issue of access for Swiss banks, the EU can only object if the arrangement can be shown to be detrimental to the functionning of the common market, or if the terms are better than those offered to member states under EU treaty. It is clearly not the case here, so the EU would have trouble putting together a challenge.
Second, the new obligations for Paying Agent Upon Receipt outside of Switzerland with a Swiss bank account are really a (potentially major) issue for Guernsey and others (as per your example) rather than for the Swiss, for which this does not create any additional disclosure requirements.
Third, one should be concerned that the entities etc. currently organised in Guernsey will move to jursidictions outside of the EU where the EUSD does not apply. A popular destination is Panama for instance. A Panama-registered company with a UK shareholder, banking in Switzerland, would not fall under the EUSD since it does not apply to either Panama or Switzerland.
There will be a lot of negotiation, and it will be fun to watch.
Darren
You are 100% incorrect that A Panama-registered company with a UK shareholder, banking in Switzerland, would not fall under the EUSD, since it does not apply to either Panama or Switzerland… .
A Swiss Paying Agent (viz. economic operator in Switzerland i.e. a bank) must look through the Panama IBC (an untaxed entity listed in Annex I of directive) using the 2005/EC/60 EU money laundering and anti terrorist financing directive at the beneficial owner and apply the savings tax provisions.
I helped write the draft law on this, so there is no interpretation or possibility of me being wrong on this.
As some of you are rather keen on Singapore and Panama being a solution, it would be useful for you to look at my web page on the EUSD amendment impact on these two territories.
Also have a gander at the EU Commission’s 2nd review of the EUSD currently underway. Yes, every three years of operations, more loopholes will be closed.
Mark – this would all be completely correct BUT for the fact that Switzerland are NOT a parties to the EUSD, current or revised, and NOT bound by the terms of any EC directive. Switzerland is only bound by the terms of any agreement it enters bilaterally with each member state. To date, that only consists of the 2004 agreement. We have had this conversation already many times and you seem to consistently ignore this fact.
I hope that others within the legislative team can get their basic political and legal facts right. We sure need it.
Your comments really to evidence a remarkable lack of political understanding.
I know that many neoliberals seem to think that the world is simply a collection of contracts, but the reality is a little more complex than that, even though that fact passes most neoliberals, economists and lawyers by.
The fact that Switzerland may only have the 2004 agreement is utterly irrelevant. These relationships are not based upon contract, they are based upon political realities, and the political reality is that Switzerland has to be much more cooperative with Europe than any agreement would suggest. It cannot stand out alone, or if it did, it would suffer severe consequence, and it knows it. That is why reform is inevitable.
As a result your argument is based upon a totally false premise, and Mark and I know that
Darren,
Switzerland has said many times, it will agree to the directive changes.
Mark – I think you are right, as long as the withholding regime is made permanent, which appears to be the case now. Switzerland WANTS to do a deal, and this is an opportunity that both the German and British governments took advantage of.
Darren
You appear to be wasting all our time by wilfully ignoring what is said, and then distort it
I’m stopping you doing so now because it is clear that you are not seeking to engage in proper debate
Richard
Richard – the political reality is that the EU itself is unable to reach agreement among member states on the revised EUSD. It has been stuck for over 3 years. In the absence of an internal agreement, there is no way that the EU can even begin to negotiate with Switzerland (and Singapore, etc).
Darren,
Don’t get me wrong. I have always advocated that the only way for unanimous approval is withholding tax rather than exchange of info. For the moment, exchange of info will be a future battle.
Mark
Mark – apparently that is one memo of yours that Richard has not read yet…..
Mark
Unless I’m missing something, if the Swiss/UK deal falls apart and the Swiss still don’t budge on automatic exchange of information, then what progress has been made with Switzerland under the EUSTD? And if Switzerland doesn’t acceded to automatic exchange then Luxembourg and Austria won’t either. And if that’s the case then there is zero chance of getting Singapore, Dubai and Hong Kong to play ball if they are at a disadvantage to Switzerland.
For any progress to be made, any arbitrage re automatic exchange has to be eradicated in the EU, Switzerland and the EU-connected offshore territories. Otherwise money will be simply relocate to those who retain an advantage.
Harry,
Let me tell you. The previous and current EU Commissioner of Tax and Customs Union has often said publicly that there is a lot of tax being missed due to the loopholes. Therefore the withholding issue is very important. So the progress on the EUSD will be to close most of the tax avoidance planning opportunities.
Secondly, no one is demanding that Singapore / Dubai / Macau / Hong Kong / Bahamas / Bermuda / Belize etc be part of the EUSD before they agree to the amendment. (Except for Jersey.. and they got no chance of holding up the agreement by themselves).