BRUSSELS (AFP) — EU finance ministers agreed Tuesday to step up scrutiny of tax havens, although Austria and Luxembourg showed resistance to tightening rules on tax dodgers who stash their cash in offshore accounts.
With Berlin and Liechtenstein mired in a standoff over tax evasion, the question of how to crack down on tax havens was the focus of a meeting of the finance ministers in Brussels.
Germany's no-nonsense finance minister Peer Steinbrueck is eager to win backing from Berlin's EU partners to extend a 2005 savings tax directive, which aims to discourage taxpayers from hiding cash in offshore accounts.
The EU finance ministers called on the European Commission to bring forward a review of the savings tax directive to May if possible, and then come up with reform proposals "in due time."
"The commission will prepare a report on the functioning of the savings taxation directive and on the basis of this report the commission will present some legislative proposals if appropriate," EU Tax Commissioner Laszlo Kovacs told reporters.
In its present form, the savings tax directive requires EU members to share tax information with one other on interest income kept by account holders from other EU countries.
However, it was only agreed after special arrangements were made for Austria, Belgium and Luxembourg, which were eager to protect their banking secrecy practices.
Under the directive, they do not have to exchange tax information with fellow EU countries but instead have to charge foreign account holders a withholding tax on interest income.
The EU has similar bilateral agreements requiring a withholding tax with a clutch of countries and territories known for their banking secrecy laws, including Switzerland and Liechtenstein.
However, the savings directive allows considerable scope for people to set up foundations in order to get around the rules, which also do not cover such revenues as dividend income or capital gains.
The directive also does not cover fast-growing Asian offshore banking centres such as Hong Kong, Macau and Singapore, with which the EU is struggling to negotiate similar information-sharing accords.
Belgian Finance Minister Didier Reynders voiced support for beefing up current rules, which he said would have to include extending them to cover sources of income other than interest earned.
"We've got a directive that is limited to certain products," he said. "I've said from the start, for example, that insurance products are not covered. We've got to cover all savings."
However, Austria and Luxembourg were less enthusiastic about a reform plan, which would need unanimous backing to go ahead.
Although Luxembourg Finance Minister Jean-Claude Juncker said he was open to discussing beefing up the rules, he indicated that he was in no rush to agree to a tougher regime.
"I look forward to many years of fascinating and fundamental discussions," Juncker told his counterparts.
Austrian Finance Minister Georg Molterer sounded opposition to any reform that did not also crack down on third countries and insisted that in Austria "banking secrecy is not negotiable."
"Changes are not possible in the EU that are not respected by third countries," he maintained.
Kovacs, the EU tax commissioner, said any reform of the savings tax directive should also include plans to phase out the withholding tax and for an exchange of tax information, which would deal a painful blow to those countries that cherish banking secrecy.
"My personal view is that it is a transitional arrangement and I am very much in favour of final arrangements and uniform arrangements," he said.
Copyright © 2009 AFP. All rights reserved. More »
