EU agrees to speed up talks on tax rules

5th March 2008, Comments 0 comments

The initiative comes in the wake of a major Europe-wide probe on tax evasion.

Brussels -- The European Union's finance ministers agreed on the need to speed up the fight against tax dodgers who stash their savings in Liechtenstein and other European tax havens.

But resistance from member states such as Austria means a deal is not likely any time soon.

Meeting in the wake of a major European-wide probe that has uncovered scores of tax evaders in the tiny Alpine state, ministers heard calls from Germany for the EU's savings tax directive to be reformed.

The directive, which came into force in the summer of 2005 and is to be reviewed every three years, requires member states to share tax information.

But Austria, Belgium and Luxembourg were instead allowed to withhold taxes applied on interest earnings made on people's savings. Such a compromise was also extended to non-EU members such as Switzerland, Andorra and Liechtenstein.

Though no concrete proposals were discussed on Tuesday, German finance minister Peer Steinbrueck asked for the scope of the directive to be extended to also include non-EU countries as well as foundations, not just individuals' accounts.

In their probe, German prosecutors discovered that hundreds of wealthy Germans had created foundations in order to hide their savings in Liechtenstein.

Steinbrueck received the backing of heavyweights France and Britain, as well as Italy, Spain, the Netherlands, Sweden, France and Greece.

"I was positively surprised by the support," Steinbrueck said at the end of the meeting.

But Austria, which is keen to protect its strict bank secrecy rules, said any new rules would also have to apply to non-EU tax havens.

"Austria is a transparent country, not a tax haven," said Austrian finance minister Wilhelm Molterer. Molterer further argued that his country's bank secrecy rules were a useful instrument "if used responsibly."

Steinbruck said Austria was also backed by Luxembourg and Belgium, the other two EU countries that have been allowed to withhold taxes applied on interest payments rather than share information with other member states.

Slovenia, which holds the rotating presidency of the EU, called on the European Commission to complete its planned review of the directive by May, months ahead of originally expected.

EU tax commissioner Laszlo Kovacs acknowledged the need to speed up its review of the directive and to discuss any possible changes that such a review may highlight.

"The deadline (for the review) is the end of June, but we will try to do it quicker," Kovacks said.

The commissioner also said he regarded the concessions that had been made to Austria, Belgium and Luxembourg as "transitional".

The German investigation has uncovered billions of euros worth of avoided taxes and has inspired similar probes in the rest of Europe as well as in the United States and Australia.

Prosecutors in Italy said they were investigating Liechtenstein accounts worth 2-3 billion euros held by about 400 wealthy Italians.

Any changes to EU tax rules require the unanimous backing of all 27 member states.

DPA with Expatica

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