Luxembourg, 02/06/2004 (Agence Europe) - The entry into force of the directive on tax on savings is still suspended, pending last-minute bargaining with Switzerland. The Ecofin Council has given the Commission 15 days to clarify with Berne the date for the agreement on tax on savings to enter into force, before adopting a definitive decision at the end of the month.
On the substance, the Ecofin Council said in Luxembourg on Wednesday that agreements concluded with third countries (Switzerland, Andorra, Monaco, Liechtenstein, San Marino) are satisfactory: these countries have all committed to apply a withholding tax on the revenue from saving placed by EU residents, and to refund 75% to the saver's State of residence. They are also prepared to supply information "on demand" to the tax authorities of the Member States as part of criminal or civil trials. The most recent negotiations, with Monaco, were concluded on Tuesday evening. Commissioner Bolkestein told the Council that an agreement would be initialled by the end of next week with Andorra, and "as soon as possible" with Liechtenstein. "Neck and neck with Switzerland", as a diplomatic source said, Liechtenstein is however waiting for the agreement with Berne to be signed before following suit.
The four "micro-States" have obtained a poor counter-balance; the assurance, in a "memorandum of understanding" annexed to the agreements, that negotiations can be opened allowing them to benefit from "Parent-Subsidiary" and "Royalties and Interest" directives, thus avoiding double taxation of revenue paid between the branches of a pan-European group. Andorra also obtained commitment to open negotiations for the right to produce Euros.
"There was unanimity within the Council that all subjects of substance with the countries has been resolved, and with the associated and dependent territories of the Netherlands and the United Kingdom", said Commissioner Frits Bolkestein. "This is a considerable result after five years of effort", he added.
In principle, the conditions imposed by Luxembourg have thus been fulfilled, and the directive on tax on savings can enter into force within the EU on 1 January 2005. However, the entry into force of the agreement with Switzerland could be delayed by referendum procedures within the Confederation. According to the Swiss authorities, if all the bilateral agreements which have just been concluded are signed on 11 June, they can be put before Parliament in September. There will then be a period of three months for the Swiss citizens to table petitions calling for referendums on the agreements;
This timetable was confirmed by the President of the Swiss Confederation, Joseph Deiss, in a letter sent last week to the Presidents of the Commission, Romano Prodi, and of the Council, Bertie Ahern. President Deiss said that under this procedure, Switzerland would, as planned, pay taxes on saving as of 1 January 2006, which were due "from the entry into force of the agreement". This is far from clear for the Europeans: if the entry into force is delayed, will the withholding tax be applied from 1 January as planned?
During the Council, Luxembourg, Austria and Italy called for "symmetry" between the EU and Switzerland. Luxembourg's Prime Minister and Finance Minister, Jean-Claude Juncker, said that the agreement was satisfactory. However, he pointed out that the directive on tax on savings provides for measures to enter into force at the same time for the EU and third countries, if the Council decided to delay the text's entry into force. The United Kingdom suggested 1 July 2005. An option rejected notably by countries wanting the swift repatriation of capital into their coffers, Germany, France and the Netherlands at the head. The German Minister, Hans Eichel, urged the Commission not to show any weakness in its final discussions with Berne.
In its conclusions, the Council "notes with satisfaction that an agreement of principle has been reached on all issues of substance with the dependent and associated territories, plus Andorra, Liechtenstein, Monaco, San Marino and Switzerland, on the necessary arrangements to allow the directive to be applied on tax on savings. The Council acknowledges that the decision on the date for the directive to enter into force is to be taken by the end of June, on the basis of article 17. It calls upon the Commission to continue negotiations with Switzerland on timetable issues and to report to Coreper by the end of June, so that a decision can be taken this month".
The Commission intends to get in touch with Berne immediately. Before putting pressure on the Swiss negotiators, it said that the signature of all the bilateral agreements could be delayed. "I could explain to my Swiss friends the importance to both sides to finalising the timetable of our agreements on the subjects outstanding, including text on savings, as soon as possible", commented Commissioner Bolkestein.
Frits Bolkestein informed the press that, "internal procedures in Switzerland were not the Commission's problems. We want the date of 1 January, known about for years, to be respected. How that will be done, by what legal means, is Switzerland's problem". The Commission hopes that the Swiss government can adopt a decision that compels the banks to put back the tax on savings income while waiting for a referendum to approve the agreement. During the Council, several Member States, including Luxembourg expressed doubts about the practicality of such a retroactive measure and Swiss legal procedures. The president of the Council Charlie McCreevey said that they did not have any significant disagreements with Switzerland and what there were involved the timetable.