Increased tax co-operation in the balance

The combined efforts of the European Commission and Sweden, which holds the presidency of the Council of Ministers, to secure greater co-operation against tax evasion are being stymied by disagreements between member states.

The Commission is being forced to reopen an anti-fraud agreement with Liechtenstein in order to secure approval from the member states of proposals for greater exchange of banking information.

Sweden is trying to broker a deal between the governments to reform the EU’s savings tax directive, a piece of legislation that obliges member states to share information on the interest that foreign bank-account holders earn on their savings. Sweden also wants to revise separate legislation covering other kinds of co-operation between tax authorities. It is expected to push for agreement, which has to be unanimous, at a finance ministers’ meeting on 2 December, the last that will be held under its presidency.

But Josef Pröll, Austria’s finance minister, said that he was “not too optimistic” that a deal would be reached in December.

Both the Austrian and Luxembourg governments have said that the reforms, as currently drafted, could leave them at an unfair competitive disadvantage compared to other countries. They are concerned especially that the revised legislation might be used as the basis for information-sharing agreements with jurisdictions outside the EU. and that they would be forced to dilute their traditions of banking secrecy.

Pröll criticised the use of trusts in the UK’s Channel Islands to allow investors to remain anonymous.

“If we are to give all our information to all the other countries automatically then we have to clarify what’s going on in trusts,” he said. “My target is to have a level playing-field for all the partners.”

He said that Anders Borg, Sweden’s finance minister, had to “give a clear signal for us and our wishes in detail, otherwise we cannot accept it [the legislation] in December”.

The Commission believes that the two governments are blocking the Liechtenstein agreement because a partial derogation that they have from the savings tax directive will end if Liechtenstein, Monaco, Andorra, San Marino and Switzerland reach agreements with the EU to share tax information.