Brussels, 11/12/2002 (Agence Europe) - After a day of bilateral negotiations, the Danish Presidency was still trying Wednesday evening to secure a political agreement by the Ecofin Council on the tax on savings. It was essentially trying to convince Luxembourg and Austria, opposed to the text of the conclusions presented in the morning by the Presidency, on the basis of a compromise that it had placed on the table at the last Ecofin meeting (see EUROPE of 4 December, p.6). The majority of Member states regarding as inadequate the outcome of negotiations with Switzerland (for which it is adopting equivalent measures as those to be put in place by the Fifteen in the context of the directive on the tax on savings), the Presidency had proposed: 1) postponing the final decision to January 2003; 2) that Luxembourg, Austria and Belgium apply retention at source of revenue on savings of 20% in the first three years and 35% from 2007, rate proposed by Switzerland; 3) that these three States join the automatic information exchange system in 2011, on condition that there is agreement with Switzerland for it to agree to supply information on request on the model of the OECD Convention.
Luxembourg and Austria considered that the levels of retention proposed were unacceptable. savings market in Europe and I reject that", he asserted. Luxembourg protested against being alone against everyone else, highlighting the fact that Spain and Italy found the Danish compromise too vague, as well as the result of the negotiations with Sweden, and that Sweden had requested a pure and simple postponement of the decision in order to extend negotiations with Switzerland.
The Feira Agreement, concluded after lengthy negotiations, aims to apply withholding rates of 10%-25%. The Luxembourg Budget Minister, Luc Frieden declared to the press that, "For Luxembourg, it is clear that Feira should be respected". Austrian Minister of Finance, Karl-Heinz Grässer indicated that the 35% rate was unacceptable. He pointed out that the rules could not be changed during the process in order to be attached to the proposals of a third country. Luxembourg and Austria also thought it unacceptable to have to put the automatic information exchange system into place in 2011, whereas Switzerland could stick to an information exchange system on demand, according to the terms defined by the OECD Convention on double taxation.
Luc Frieden rejected the responsibility for the failure as being that of the United Kingdom, which had refused co-habitation between the two systems of a withholding tax and an information exchange system proposed in 1997. The United Kingdom very much wanted to avoid harmonisation in the field of taxation in Europe and we are in the middle of renationalising, France, Germany, the Netherlands and the United Kingdom, on the other hand, backed the Presidency's proposal. Belgian Finance Minister Didier Reynders pointed out, for his part, that Belgium was not party to the debate on rates of taxation, in so far as it is willing to go on to the system of automatic information exchange in 2011. He also considered that the indications provided by the United Kingdom on negotiations with the dependent and associated territories showed that real progress had been made.
British Minister Gordon Brown pointed out that the Channel Islands were ready to set in place an information exchange system from 2004. As far as the Caribbean islands which are dependent and associated to the United Kingdom are concerned, Gordon Brown hoped an agreement would be reached so that they give way to these same measures, failing which the United Kingdom would impose this through legislative means.
The Fifteen seemed, on the other hand, in agreement on the follow-up to the report by the Primarolo Group on the code of conduct regarding corporate taxation and the dismantling of 66 tax regimes that would be harmful for competition. The Presidency's draft conclusions provided for the Council to take note of the work in progress and to accept the extension of several regimes beyond 2005: 1) the coordination centres in Belgium (until 31 December 2010), 2) foreign income for Ireland (31 December 2010), 3) 1929 holding Companies for Luxembourg (31 December 2009), 4) international financing for the Netherlands (31 December 2010), and 5) the free economic zone of Madeira for Portugal (31 December 2011).
The Council was still to tackle the theme of energy taxation on which a compromise seemed possible.