Luxembourg has threatened to undermine the European Commission's savings tax directive unless the European Commission forces Switzerland to abandon its banking secrecy. Commissioners had been hopeful that some sort of agreement would be reached at a meeting of the European economics and finance ministers (ECOFIN) due on December 3 but the Luxembourg Prime Minister Jean-Claude Juncker's declaration would throw this plan into disarray.
Juncker stressed that the Luxembourg position has not changed since the Feira meeting in June 2000 when the country decided that in practice the expression "equivalent measures" should mean "identical measures" for both EU members and third-party countries including Switzerland and the US. The Luxembourg prime minister does not believe that the Swiss proposal of applying a 35% withholding tax on non-resident savings and giving the proceeds to the EU is sufficient. "As I see the situation, unless there are any last-minute changes I will be forced to veto this directive," he said.
This could mean the end for the directive, which is supposed to be agreed before the end of the year, as all tax reform in the EU has to be agreed on unanimously by all 15 member states. In addition to the withholding tax Switzerland has also said that it will exchange information on non-residents' savings in cases of suspected tax fraud if the EU requests. The drafted EU savings directive calls for the automatic exchange of information.
Last week EU Internal Market and Tax Commissioner Frits Bolkestein presented a report on progress with the third countries where it said that there was a basis for agreement everything except the exchange of information on request and that he was optimistic four of the other five countries (Liechtenstein, Monaco, Andorra and San Marino) would commit to a similar level as Switzerland.
The report noted that the US is considering extending the coverage of its domestic reporting requirements to provide a more complete basis for information exchange.
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