Brussels, 25/02/2000 (Agence Europe) - Deadlocking on the tax package is of great concern to the European Commission. On Monday, the Economy/Finance Council will discuss a limited number of aspects of the package and probably express its approval of release of the Primarolo report on corporate taxation. The group working under the chairmanship of Mrs Primarolo (United Kingdom) has identified 66 national tax schemes that can be harmful to other Member States. Its report is rather widely known; it is even said to be available on Internet already. Given these conditions, its publication by the Council seems logical. But this will not break the deadlock, which concerns the two principal aspects of the tax package, namely:
Taxation of savings. The high level group charged by the Helsinki Summit with studying the difficulties blocking the Commission's proposal for a directive met on Friday. It took note of the result of the fact-finding mission to London made by European Commission officials who analysed with British authorities and City experts the question of the information banks and other financial bodies already have to compile pursuant to the money laundering directive. The Commission's thesis is that the information to be compiled pursuant to the savings taxation directive is practically the same and that, consequently, the new directive will not impose further administrative and bureaucratic burdens. As withholding at the source on interest earned on savings is not compulsory (no Member State will be obliged to introduce this measure, unlike what was recently still being claimed in London), it will coexist with the system of the forwarding of information to tax officials of the country of origin of the non-resident saver to whom interest is paid. The principle of compulsory taxation on savings was reiterated by the Helsinki Summit, and Tony Blair confirmed this week his intention of applying it.
This is why the European Commission still hopes it will be possible to overcome UK opposition and the Commissioner for Taxation, Frits Bolkestein, will be in London on Tuesday 29 February to meet Chancellor of the Exchequer Gordon Brown and the President of the Financial Services Authority Howard Davies. In the European Parliament, a "hard-line tendency" has emerged in favour of blocking further progress on the liberalisation of financial services (which is of particular interest to the British) if the United Kingdom maintains its deadlock on taxation on savings. Frits Bolkestein this week expressed (before the EP Committee on Economic Affairs) his disagreement with this tactical approach, saying it was not advisable to link the two issues.
Corporate taxation. Publication of the Primarolo report (see above) will not solve the fundamental question, i.e. whether, after having identified 66 national taxation schemes that can distort competition, the group will address the issue of their abolition or amendment. There is no evidence that Member States are moving in this direction. For this reason, Commissioner Mario Monti has announced that the Commission could take action to eliminate aid schemes based on taxation, pursuant to its powers on state aid (see EUROPE of 24 February, p. 8). The full text of the Monti declaration is reproduced in page 11 of this bulletin.