Brussels, 17/05/2011 (Agence Europe) - Italy's finance minister, Giulio Tremonti, explained at the Economic and Financial Affairs (ECOFIN) Council on Tuesday 17 May that Italy opposes the latest draft of the updated savings tax directive on the grounds that the directive has been watered down and does not include any real sanctions for violation of the new rules. The finance minister of Luxembourg, Luc Frieden, said that Luxembourg could agree to the Hungarian Presidency's conclusions document, thereby removing its reservations expressed at the most recent COREPER meeting (on Thursday 11 May, see EUROPE 10374). Austria made similar comments to Luxembourg - it had indicated at the COREPER meeting that it would no longer be opposing the new directive.
The Hungarian Presidency had been trying to persuade Luxembourg and Italy (see EUROPE 10378) about the urgent need to reach agreement on the draft directive with the aim of tackling tax evasion and fraud by automatically exchanging information among different countries' tax offices and expanding the scope of the directive to cover all savings income and all savings products generating interest or similar forms of revenue, including shares and securities where the income is known in advance, collective investment (OPCVM) and life-insurance policies that are directly comparable with OPCVM; also ensuring the directive covers trusts, foundations and investment companies outside the EU providing income to people living in the EU.
The draft conclusions document submitted by the Hungarian Presidency to the ministers was three-pronged, including guarantees for Italy that a detailed, in-depth examination would be carried out by the European Commission on the functioning of the current form of the directive; agreement by the delegations on the most recent compromise document expanding the scope of the directive (see above); and a suggestion to give the Commission a negotiating mandate to enter negotiations with Switzerland, Andorra, Liechtenstein, Monaco and San Marino to ensure that they introduce equivalent rules in their own country to the revised EU savings directive.
During the debate, the Hungarian Presidency focused on the idea of separating off the question of the transition period granted to Luxembourg and Austria from the rest of the issues under discussion. During the said transition period, both countries would be able to continue with their deduction of savings tax at source (thereby keeping the identity of the individuals concerned secret) for a certain time before having to introduce the automatic exchange of information set out in the new savings directive. Both countries want to be treated the same as Switzerland, fearing that if not, non-resident savers investing in Austria and Luxembourg would take their cash out of the country and deposit it in Switzerland, where banking secrecy is ensured.
The taxation commissioner said the changes in the scope of the new directive would be a great improvement. In order to appease Italy's concerns, he said that the European Commission would be publishing a very detailed report before the summer break on how the current directive worked in practice. The report will be a way for the Commission to monitor and scrutinise the station to ensure the rules were robustly and properly applied, and the Commission would launch infringement proceedings where necessary. The commissioner said the Commission needed a negotiating mandate to draw up new, tighter agreements with non-EU states which, along with the new directive, would clamp down on tax evasion and fraud and ensure a uniform tax system was in operation within the EU and along its borders.
These arguments failed to convince Italy's finance minister, who described the draft directive as being “drawn up by Switzerland” and called the new version a “paper tiger” because there are no penalties in the event of fraud or other forms of abuse and it could not be used to properly counter the regular infringements of the directive. When asked to endorse the conclusions document, Tremonti said he would only do so if the new document included an explicit commitment to issue penalties against member states violating the rules. (F.G./transl.fl)