Monday, November 17, 2008

The European Commission proposes changes to eliminate tax evasion

The European Savings Tax Directive is the best international attempt to crack down on tax evasion. Unfortunately, it is full of loopholes. See our analysis of it here.

A new EU report on Nov 13 shows some encouraging progress:

"The European Commission has adopted today an amending proposal to the Savings Taxation Directive, with a view to closing existing loopholes and eliminating tax evasion. Since 2005, the Savings Directive ensures that paying agents either report interest income received by taxpayers resident in other EU Member States or levy a withholding tax on the interest income received. The Commission proposal seeks to improve the Directive, so as to better ensure the taxation of interest payments which are channelled through intermediate tax-exempted structures. It also proposes to extend the scope of the Directive to income equivalent to interest obtained through investments in some innovative financial products as well as in certain life insurances products."

It goes some way towards addressing the problem, but there's still far to go.


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