Tuesday, October 25, 2011

European challenge to dodgy deals with Switzerland

Update: the statement issued by Commissioner Semeta is available here.

We note the following:

Member States are free to enter into international agreements with non-EU countries. But they must respect EU law and its principles governing exclusive EU competence.

Taking into account their wide scope, the bilateral agreements may also cover aspects already covered by the EU Savings Directive and/or the EU-Swiss agreement. Insofar as the bilateral agreements may prove to cover areas of exclusive EU competence, the Commission would take this matter very seriously. It would not hesitate to take the corrective steps if necessary.

In general, Member States must ensure that any bilateral negotiations they foresee or conduct do not cover aspects which are a matter of exclusive EU competence.

We strongly suspect that the bilateral agreements in their current form cover areas that are of exclusive EU competence and will impinge on the future performance of the Savings Tax Directive.

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Online news source Europolitics is reporting that later today European Commissioner Algirdas Semeta will be responding to a challenge to the legal status of the dodgy Swiss-UK deal on the grounds that the so-called Rubik agreements (designed to befuddle ordinary people) undermine European Union attempts to tackle tax evasion through the Savings Tax Directive:

MEPs question the compatibility of these Rubik agreements, set to enter into force in 2013, with EU rules on taxatin of savings income, which provides for a 35% withholding tax at the source (not in full discharge of liability) on interest earned on savings. More generally, they wonder whether states have the power to negotiate such bilateral tax agreements and whether the Rubik system may present an "obstacle" to revision of the EU savings taxation directive and of the EU's agreements in this area with Switzerland, Liechtenstein, Andorra, San Marino and Monaco. Will not Rubik agreements "have the effect of halting the move towards an automatic exchange of information for tax purposes," they ask.

The article also draws attention to how Austria and Luxembourg (and, predictably, Jersey) are using the Rubik agreements as a pretext for remaining outside the EU's automatic information exchange. It is more than likely that this is precisely what the UK government seeks to achieve: many of the Eurosceptics within the Conservative party are strong supporters of tax havens and tax dodging.

Read the Europolitics article here

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