Online version: http://www.lowtax.net/newsletter/ltx_focus_december09.asp

Dear Colleague,

The EU Savings Tax Directive: Cometh The Hour, Cometh The Man?

After the European Commission set out its wish-list for a new, improved (worsened, in other words) Savings Tax Directive in November, 2008, which included such impossibilities as the inclusion of Hong Kong and the USA, the European Parliament thought hard and produced a largely compliant - but extremely complex - opinion in April, 2009. In June, the EU Council issued an anodyne statement which appeared to welcome the Parliament's agreement to its plans. Since then there has been silence from Brussels. The truth is that unanimity on the proposed changes will be extremely hard to achieve, so that the STD, like many other contentious dossiers, has been kicked into the future to await the new regime that will operate now that Lisbon has been adopted, with the appointment of a new, expanded Commission, and the installation of a new President of the Union who will be able to use his powers and persuasive, consensual skills to bring the bickering pack of member states into line. That man is Belgian Prime Minister Herman Van Rompuy, who will assume the mantle on January 1, 2001. Well, we shall see. The EU will probably get there in the end, as it always does, but the new STD that emerges in one or two years' time may be very different from the original proposal.

The European Union Savings Tax Directive (STD), which went into effect on 1st July, 2005, in fact forms merely one part of a major tax reform package launched by the European Commission in 1997. As originally drafted, the STD aimed at a uniform 'information exchange' regime to apply across the Union, with all countries agreeing to report interest on savings paid to the citizens of other Member States to those States' tax authorities.

Because of resistance from EU Member States with strong traditions of banking secrecy, the Commission had to allow Austria, Luxembourg and Belgium to apply a withholding tax (at 15%) until at least 2009. Many of the UK's offshore financial centres have been forced to join the STD, along with the Netherlands Antilles, Aruba and some European centres (Andorra, Monaco, Liechtenstein and San Marino). Most of these places took the withholding tax route, as did Switzerland, which was the hardest nut for the EU to crack.

You can read the rest of the feature here: http://www.investorsoffshore.com/html/specials/std_december_09.html

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Kind regards,

Kate James