Brussels, 16/09/2008 (Agence Europe) - On Monday 15 September, the European Commission adopted its first report on the implementation of Directive 2003/48/EC on savings taxation (EUROPE 9659 and 9660). According to the report, the directive is working quite well within the confines of current regulation and important improvements are possible, particularly with regard to more cover for legal undertakings and financial products. The Commission will adopt a legislative proposal in the next few weeks that includes some of the suggestions put forward in the report.
This document is certainly “very technical” but it is “very important for the proposal the Commission is going to adopt in coming weeks” to amend rules on savings tax, declared Philip Kermode, Director on tax policy at the Commission. Kermode added that overall, “the directive is working quite well but within its own constraints, given that it is the result of a compromise at the Council”. He indicated that European legislation had been transposed into the law of member states in time and implemented on the ground. Only two member states are subject to infringement procedure. In July 2007, for example, Luxembourg received a reasoned opinion, requesting it to amend its legislation which treats its own payment agents based in own territory (economic agents paying interest to a beneficiary) more favourably (EUROPE 9462).
The Commission has proceeded to an economic evaluation of the directive over the first two years of applying the rules (2005-06). Countries with the largest economies participating in the information exchange mechanism, are displaying the highest rates: the United Kingdom therefore declared that it had €9.1bn. According to Mr Kermode, the average interest payment per capita stands at €6000-6500 in countries like Germany, France and Ireland. Revenues from the withholding mechanism applied in three member states (Austria, Belgium and Luxembourg) and five third countries (Andorra, Liechtenstein, Monaco, San Marino and Switzerland) are close to €15bn over the same period. Switzerland (42% of the total) and Luxembourg (22%) are the two countries from where most of the payments have benefited Germany, first of all, (€193 million) and then Italy (113). Based on this quantitative analysis, the Commission points out that there has not been any significant change in investment habits directly resulting from implementation of European rules. Mr Kermode explained that there has been no specific abandonment of a financial product due to its being covered by the directive. He did warn, however, that the quality of data has to be significantly improved.
Possible improvements. The report confirms the Commission's first analyses, according to which the directive on savings tax income can be fine-tuned. Mr Kermode indicated that two objectives in the legislative proposal on revising rules were expected in the next few weeks, “to ensure effective taxation and eradicate obstacles to competition” resulting from differentiated treatment of financial products equivalents.
The Commission is initially examining how legal undertakings should be treated (trusts and foundations etc) in third countries when they attempt to bypass directive rules. Kermode acknowledged that there was a problem in this area. He believes that a possible solution would be to ask payment agents to use the information they have in the application of the directive on combating money laundering and subsequently verify whether these entities have paid interest payments to European residents. Another difficulty involves the application of the “reception payment agent”. The Commission is proposing to create an annex to the directive containing a positive list of undertakings receiving interest payments from economic operators in and outside the EU. The Commission's report indicates that it would “therefore be possible…to guarantee fairer competition between upstream operators inside and outside the EU”. It is also easy to get round Directive 2003/48/EC by investing in innovative financial products (derivatives, stakes in speculative funds, life insurance products etc) that are not covered. Although it is proposing the creation of another positive list of savings tax equivalent products in the spring, the report now suggests introducing “criteria” to include “any revenue from securities ensuring total or almost total protection of capital and returns defined in advance” in the directive's remit. These securities may very well consist of something other than debt, such as share dividends, for example. The Commission is also examining different tax treatment of so-called “non-coordinated” undertakings for collective investment in transferable securities (UCITS), whether these undertakings have a legal personality or not. The report indicates that “this unequal tax treatment between different categories of placement fund in the EU is not in the interest of the single market”. (M.B./transl.rh)