Brussels, 25/10/2006 (Agence Europe) - The Council has officially authorised the Commission to explore the possibility of negotiating specific agreements with Hong-Kong, Macao and Singapore on savings tax. This step is designed to satisfy the fifteen third countries and associated European territories which have since 1 July 2005 been applying measures equivalent to those applied by EU Member States under directive 2003/48/EC on savings revenue taxation. In the interests of competitive consistency, they are in favour of other international financial centres concluding international agreements with the EU on the application of such equivalent measures. In the terms of the conclusions adopted under point A of the Environment Council's agenda on Monday 23 October, the Council “invites the Commission to start, in close conjunction with the Presidency, exploratory talks with Singapore, Hong Kong and Macao, with a view to looking at the possibility of promoting the adoption of equivalent savings tax measures, and to report back to the Council at one of its future meetings”.
In a specific working document, the Commission proposes that talks with the three financial centres proceed as follows: 1) start with unofficial preliminary exchanges of views at political and technical level; 2) depending of the results of these talks, the Commission could at a later date expressly ask the Council to establish negotiating directives with a view to concluding agreements.
These three Asian financial centres were not selected by chance. The Commission made a comparative study of the development of deposits made by private investors in a range of international financial centres, in spite of the difficulty in obtaining recent and detailed data. It distinguished three groups of countries: group 1 covers jurisdictions (Australia, Bahamas, Canada, USA, Japan, Norway, Taiwan) which have concluded at least one agreement establishing an exchange of information on demand and on a reciprocal basis; group 2 covers those (Bahrain, Hong-Kong, Singapore) in which financial activities are elevated; group 3 covers those (including Bermuda and Panama) which have registered only low levels of foreign non-banking deposits.
“Simultaneously conducting discussions with a large number of administrations across the world has little chance of being effective”, the Commission states. It believes that “the Council should therefore rank the main financial centres in order of importance and choose those with which talks should be conducted", among them "Singapore and Hong-Kong”.
Singapore is the EU's thirteenth biggest commercial partner, whereas the EU is Singapore's second biggest commercial partner after Malaysia, with bilateral trade reaching a value of 40 billion euros. Singapore is very much in favour of concluding a bilateral free-trade agreement with the EU. At the end of September 2005, the throughput of deposits from non-residents stood at 158.1 billion dollars, and rising. The Commission also notes that, despite the existence of extended double taxation conventions linking Singapore to several Member States, these do not allow for a broad exchange of information.
Hong-Kong is an important outside centre for fund and asset management. One of the main arguments used to attract foreign investment to this financial centre is the absence of tax withheld at source, and other fiscal deductions, the Commission observes. Hong-Kong, which is fiscally independent of Beijing, concluded a convention on double taxation with Belgium and is negotiating this kind of measure with other Member States. At the end of September 2005, the throughput of deposits from non-residents stood at 82 billion dollars.
The Chinese special administrative region of Macao, established at the end of 1999, “could become a financial centre to consider”, the Commission believes, adding that “the closeness of ties and the geographical proximity between Hong-Kong and Macao militates in favour of simultaneous consideration of these two financial centres”. They also note that “of the 27 banks established in Macao at the end of September 2005, 23 were subsidiaries or branches of foreign banks”. In 2005, the throughput of deposits from non-residents approached 5.8 billion dollars.
Directive 2003/48/EC, which has been in force since July 2005, introduces taxation on savings interest for physical persons in a Member States other than that where they have their fiscal residence (see EUROPE 8981). 22 Member States participate in a system for exchanging information. Austria, Belgium and Luxembourg benefit from a transitional period during which they take a tax withholding (15% for the first three years, 20% for the subsequent three years and 35% from 1 July 2011). Equivalent agreements apply in five third countries (Andorra, Liechtenstein, Monaco, Switzerland and San Marino) as well as in ten dependent and associated territories of the United Kingdom and the Netherlands. It is this kind of equivalent measures which the Commission would like to negotiate with the three Asian financial centres. (mb)