Thursday, May 15, 2008

EU Savings Tax Directive - Part 2

We have just blogged on the meeting of European finance ministers on the Savings Tax Directive - a vitally important, if flawed, tool against international tax evasion. We can report significant progress. As an EU Council press release says, the Council:

"Underlines the importance of implementing, on as broad a geographical basis as possible, the principles of good governance in the tax area, i.e. the principles of transparency, exchange of information and fair tax competition. . . Good governance in the tax area is not only an essential means for combating cross-border tax fraud and evasion, but can strengthen the fight against money laundering, corruption, and the financing of terrorism."

The Council now wants good governance on tax to be included in agreements reached with countries outside the EU . . . (EU member states) "will improve international cooperation in the tax area, facilitate the collection of legitimate tax revenues, and develop measures for effective implementation."

The International Herald Tribune has reported on this, under the headline 'EU considers toughening offensive on tax havens.'

"EU commissioner responsible for taxation, Laszlo Kovacs, said he would propose an extension to the scope of the EU's directive on the taxation of savings, which applied primarily to bank accounts. This could be done by expanding the list of products covered, perhaps to include trusts or foundations, or by applying the law to legal entities rather than just individuals, Kovacs said. On Wednesday Germany's finance minister, Peer Steinbrück, highlighted the way in which investment foundations circumvent the current EU savings tax directive, which applies only to individuals.

"They are founded to cheat the tax authority," he said."

This kind of progress is essential. The IHT noted that Germany alone loses some 30 billion Euros per year from tax evasion.

Predictably, the tax haven vested interests were out in force. Luxembourg continued its deeply shameful pursuit of delay, arguing that changes would need lots, and lots, of time (as the IHT noted, . TJN's Richard Murphy saw right through Luxembourg's tactic:

"Luxembourg might just as well said: 'Luxembourg makes a living from stealing other EU member’s taxes and therefore does not want the EUSD tightened.'

It is time for reasonable people to realise, as Murphy rightly points out, that countries like Luxembourg are prime suppliers of corruption services. They need to be stopped, and the EU needs to do it. Here is another opportunity to get involved: a forthcoming EU report.

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