Brussels, 02/06/2000 (Agence Europe) - Meeting in Luxembourg on Monday 5 June, the European Union's Finance Ministers will seek, without great hope, a path to break the deadlock on the fiscal harmonisation package. The wave of optimism, mid-May, following confirmation of a development in the British stance, has now given way to a certain amount of fatalism. The last meeting of the "high-level" group, instructed by the Helsinki Summit to devise a compromise by end-June on the tax on saving, led to their observing that it had been a failure (see EUROPE of 31 May, p.9), and experts remain skeptical as to the possibilities of progress on Monday. An additional meeting of the EcoFin Council could be planned for the eve of the European Summit of Feira on 19 and 20 June. The issue would then be handed to the Heads of State and Government, in Feira, where "it has not been ruled out that real negotiations will take place", says a diplomat.
Tax on savings is only one of the three components of the "fiscal package" being negotiated, that also relates to company taxation and taxation on interests and royalties paid between associated companies. Discussions are, nevertheless, focusing on this issue as it is the one that poses most problems. The aim is to avoid the revenue on savings of EU nationals escaping income tax when they place their money in another State than the one in which they live. The European Commission is proposing "coexistence" between a system of information exchange between tax administrations and - for countries with banking secrecy - a retention at source of 20% on the revenue on savings of non-residents; the choice between the two systems would be left up to the Member States.
Dissension between the Fifteen on this revolves especially around two things: a) has "coexistence" to be a transitional regime before moving to a generalised system of information exchange, and if so, for how long?; b) how to conduct discussions with third countries and territories dependent on certain Member States?
On the first point, the debate is "quite Manichean", says a diplomat who "doesn't really see any solution". On the one hand, the United Kingdom demands the move to a system of information exchange after five years. On the other, Luxembourg, backed by Austria, Belgium and Greece refuses to contemplate the long-term disappearance of retention at source. At most, this group of countries is prepared to provide for a review clause in the directive, to take up the issue again in a few years.
"The ten other countries could accept the compromise of the Portuguese Presidency", says a diplomat. Without setting precise deadlines, this draft compromise provides for the "ultimate goal of the EU being to reach a solution providing for as wide as possible an exchange of information" and that this principle should serve as basis for future negotiations with countries candidates for accession. The European Commission would draw up a report, every two years, on the directive's implementation and on the international situation to propose "as soon as conditions permit" the move to the single system of information exchange.
The second problem concerns the date for implementing the European directive. Some countries (Austria, Belgium, Greece, Ireland, Luxembourg and the United Kingdom) want to wait for negotiations with countries like Switzerland, Liechtenstein, Monaco and certain territories like the British off-shore islands and the Isle of Man, to end. Others (France and Germany) reject such a condition, even though they recognise the importance of these related negotiations.
Two other tax issues to be raised at Monday's Council
The Council will examine a report on fraud in the EU, the result of work undertaken since the autumn by a "high-level group" composed of officials responsible for fiscal control in Member States (see EURPOE of 10 September 1999, p.7). Established at Spain's request in September last, the group has discovered shortcomings in Community legislation relating to direct and indirect taxation and makes a certain number of recommendations to improve cooperation between tax controllers. The European Commission could on this occasion announce legislative initiatives.
Finally, the European Commissioner responsible for the Internal Market, Frits Bolkestein, will present the Fifteen with a report on the implementation of the exemptions granted to Denmark, Finland and Sweden on what travelers are allowed to carry. These three countries are allowed to limit the quantity of alcohol and tobacco that travelers may import from other EU Member States without paying additional taxes. The report concludes that these restrictions are not, in practice, well respected and that imports of alcohol and tobacco are on the increase. It calls on the three Member States to take the necessary transitional measures by 1 January 2004, date at which these exemptions will definitively end.