EU finance ministers set for battle over Liechtenstein tax rules

4 March 2008

BRUSSELS – The European Union’s finance ministers were Tuesday poised for battle over plans to crack down on tax dodgers in European tax havens such as Liechtenstein.

The Ecofin council in Brussels was expected to focus on German calls for changes to the EU’s Savings Tax Directive and make it harder for citizens to stash their money in secret accounts abroad.

German prosecutors have launched a major probe targeting hundreds of German nationals who have opened accounts in the tiny Alpine principality nestled between Switzerland and Austria.

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

Germany is supported by, among others, France and the Netherlands, whose minister Wouter Bos said he would support "anything that brings in more money."

"People should pay taxes on their savings, so anything we can do to increase that discipline I will support," Bos said.

But proposed changes to the Savings Tax directive have received a lukewarm response from countries like Luxembourg and Austria, which negotiated a watered-down version of the rules that came into force in 2005.

The directive also applies to non-EU countries such as Switzerland, Andorra and Monaco, which like Liechtenstein are considered tax havens.

"We expect a very lively discussion on this issue," said Slovenia Finance Minister Andrej Bajuk, whose country holds the rotating presidency of the EU and was chairing the meeting.

The EU executive, the commission, had originally planned to present an updated report on the directive in the autumn. It has since said it is willing to speed up its efforts and close any loopholes.

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