Brussels, 27/11/2000 (Agence Europe) - After nine hours of negotiations interrupted by a short night of sleep, the European Union's Finance Ministers reached agreement Monday morning on the major principles of a directive on tax on savings. The great unknown of the previous day was the mind of Luxembourg; yet, it was with the intention of "reaching a compromise" that Luxembourg Prime Minister Jean-Claude Juncker arrived Sunday evening, eager, according to his spokesperson, not to add tax to the already weighty agenda of the Nice Summit, next week. The French Presidency of the Council thus won its bet to keep the "fiscal package" alive, often left for dead and for which a deadlock now would have been fatal. Luxembourg nevertheless retains up its sleeve the possibility of slapping on its veto, when the time comes, to the directive's implementation. Indeed, Monday's agreement opens the way to talks with certain third countries (Switzerland, Liechtenstein, Monaco, Andorra, San-Marino and the United States), and it is in relation to the outcome of these talks that the Council will decide, through unanimity, on the adoption and implementation of the directive, at latest end-2002.
The directive's goal is to guarantee a minimum of actual taxation of interests gained by European nationals on savings placed in another Member State than the one in which they live. To do so, the Fifteen agreed, in June, to apply a generalised system of information exchange between tax administrations, by 2010. But "we shall only arrive at this exchange of information if third countries and dependent territories do likewise", the Luxembourg minister Luc Frieden warned. "If Switzerland does not move in the same direction (abolition of banking secrecy) we shall not move in that direction. This is also Austria's stance. In 2002, we shall judge the situation on the basis of negotiations with third countries", he said, adding: "I wish good luck to the two Council presidencies that will negotiate with these countries". The conditions proposed by the Grand-Duchy do not, moreover, stop there. "We shall ensure that the code of conduct (on company taxation, second of the three chapters of the "fiscal package") is applied at the same time; we must read the details of the draft directive on savings, that has not yet been written".
The outcome secured on Monday was nevertheless welcomed as being an "important step towards tax alignment in Europe" by the French Finance Minister, Laurent Fabius, who swept aside the idea of a risk of further deadlock in two years. "This agreement does not depend on what will happen with third countries", he said. And even if, "legally", a vote through unanimity is scheduled for 2002, "from the moment we have entered a dynamic, it will be very difficult to turn back", he stated. Optimism that the European Commissioner for Tax, Frits Bolkestein also seems to share, for whom "a new wind has been blowing for two years", including at international level through work conducted by the OECD to combat tax fraud and money laundering.
According to the scenario decided on on Monday, from the time the directive takes effect, each Member State will automatically communicate to other Member states information on the revenue on savings of their residents. But Austria, Belgium and Luxembourg will, for a seven-year transitional period (to end 2009) apply taxes on the interest on savings of their non-residents, instead. The level of this tax is set at 15% for the first three years, then 20%. The States concerned will pay-on 75% of the revenue of this tax to the State of residence of the saver. The directive's field of application will include interest on all nature of revenue distributed by investment funds (including "non-coordinated" investment institutions, i.e., those not covered by some European legislation). Specific rules are provided for trusts and partnerships. A grandfather clause excludes securities issued before 1 March 2001 from the directive until the end of the transition period.
For the second chapter of the "fiscal package", the code of conduct for company taxation, 66 potentially harmful systems should be dismantled before 1 January 2003. However, the Council can, on a case by case basis, decide to extend the effects of some of these systems beyond 31 December 2005, to take account of "particular circumstances". Companies should no longer enter harmful systems after 31 December 2001.
Finally, the third chapter (tax on interests and fees paid between associated companies), Greece, Portugal and Spain secured transition periods.