Mr Goebbels in favour of a simpler and, in his opinion, fairer system. The positive assessment of the compromise reached by the EU 15 concerning savings taxation (discussed in this section on 29 January) is not shared by all. According to Robert Goebbels, European parliamentarian from the Socialist group, who benefits from a specific knowledge as former Finance Minister for his country (Luxembourg), it is a deception as 'it will block all fiscal harmonisation (or coordination) in Europe, while a true internal market and single currency calls for, at least, a basis of common implementation, that is to say minimum and maximum rates, allowing for healthy and fair fiscal competition. The starting point for the Council compromise is the automatic exchange of information, system which Mr Goebbels considers bureaucratic, expensive and inquisitorial, which would allow each member country to maintain strictly national taxation. In it he sees the renationalisation of fiscal policy and indicates that he will continue to fight in favour of a much more simple and standardised system, that is to say the withholding at the source of a reasonable rate (20 to 25%), liberating in the sense that each saver, after payment of this European tax, will be in order with their national fiscal administration. This would be a 'European tax' paid directly to the EU budget; it would be 'fair' as it will be paid to all Europeans at the same rate, and it would be acceptable both by Switzerland and by the United States.
Mr Goebbels recalls that he proposed this to the Commission President Romano Prodi (in an open letter notably published in the 'Tagblatt' last 10 December), but that he had only received a 'bureaucratic' response.
Answers to the objections. Mr Goebbels' criticisms of the compromise as well as the alternative project, in my opinion, calls for a few remarks:
- I believe that the final result of the compromise will be the generalisation of the system of automatic information exchange between national administrations. This would only be the case if Switzerland renounced banking secrecy. Thus, it is practically a fact that the final destination will remain the coexistence of the two systems;
- the coexistence between the sharing of information and withholding at the source is not the ideal solution, but certain Member States consider it politically impossible, for reason of fiscal equity, to renounce the first system. They feel that merely the taking into account of interest on savings in the global revenue of the taxpayer is equitable, as it allows for taxation to progress. Thus, a compromise is vital between Mr Goebbels formula and the ethical principals of a certain number of governments;
- unanimity does not exist over the opportunity for the EU to harmonise direct taxation.
Practical efficiency against position of principal. Seemingly, the Member States who will have difficulty in being able to make the exchange of information work at all stages would have an interest, from the practical point of view and at least for a certain number of years, in accepting withholding at the source, as it will guarantee them receipts that presently escape them entirely. However this is their choice. As for considering withholding at the source as a European tax, I am in agreement with Mr Goebbels, and I wrote as much on 29 January without being aware of this earlier ideas; thus the merit for the suggestion is entirely his. It is evident that its realisation will be simpler if withholding from the source was undertaken by all the Member States. While it becomes problematic if most of the Member States enforce the exchange of information. However, the principal of the European tax would also be applied to withholdings made in Switzerland and in other third country territories (including the principality of Monaco and the Channel Isles ), and paid to the Union; the balance between the Member States would them be re-established and the technical and bureaucratic complications less significant.
In fact, we must not underestimate the difficulties involved in the proper implementation of withholding at the source of interest earned in third countries by EU residents. For as long as the rate of withholding at the source remains reasonable (the starting point would be, if the negotiation with Switzerland and the other third countries concerned end, 15% until 2007), attempts to evade or circumvent it will be limited, but this will not be the case if the rate reaches it planned level of 35%. Both those interested and the financial institutions concerned with not loosing their deposits would no doubt demonstrate imagination. Though this is another problem. (F.R.)