The 2010 deadline for introducing a savings tax package into the EU now looks unlikely to be met, according to EU Commission experts and members of the European Parliament.
In a first discussion of the package in front of the Economic and Monetary Affairs Committee earlier this week, one Commission tax official confessed that the early-2003 deadline for getting Switzerland and other leading financial centers outside the EU to adopt similar measures would be "difficult". Socialist Bloc MEP and Rapporteur on the Savings Package Fernando Perez Royo described the timetable for making agreements with third countries as "overambitious."
The Commission has been mandated to negotiate with centers such as Switzerland, Liechtenstein, Monaco and San Marino to get them to implement "equivalent measures" to the EU savings tax so that centers inside the EU, like Luxembourg will not be disadvantaged. Luxembourg and other EU banking secrecy states, such as Austria and Belgium, made the "equivalent measures" proviso a condition of their accepting the savings tax proposal, under which they will have to exchange information on non-resident savers by 2010.
But one Commission official close to the talks with third countries told Market News that if the 2003 deadline was allowed to slip the whole schedule, which is still dependent on grudging support from countries like Luxembourg, could also founder.
Still more threatening to the future of the package is the fact that while Switzerland would be willing to eventually accept a minimum withholding tax on non-resident savings as a possible way out, the Swiss authorities would not be ready to agree to the EU's exchange of information approach which is being forced on Luxembourg.
Swiss Economy Minister Pascal Couchepin told reporters on Wednesday that the EU should welcome the Swiss offer to impose a withholding tax on EU citizens who park funds in Switzerland to avoid EU savings taxes instead of exchanging information.
"For the first time in the history of civilization, a country which is not under the rule of another country is offering to raise taxation freely for other countries," the minister said.
The Swiss will not, however, compromise their banking secrecy as that in no way compromises ethical standards or allows money laundering.
Luxembourg MEP Astrid Lulling made clear that her country's financial sector would not be ready to accept such a halfway house from Switzerland. She insisted that only Swiss agreement to exchange information on non-resident investors would satisfy Luxembourg.
Under the agreement reached by EU leaders and finance ministers last year, all EU countries were obliged to exchange information on non-resident savers with the home country of the investor by 2003. But countries like Luxembourg, Belgium and Austria fought a rearguard action to safeguard their banking secrecy regimes but were told that eventually they too would have to adopt the information exchange approach by 2010 although they could adopt a minimum withholding tax instead for the period between 2003 and 2010. But these countries only agreed on condition that other competing financial centres outside the EU agreed so-called "equivalent measures" by the start of 2003. These countries included Switzerland, Liechtenstein, Andorra, Monaco and San Marino in Europe.