Swiss unlikely to put savings tax directive to referendum
Recent reports suggest that the passage towards implementation of the European Union’s Savings Tax Directive in Switzerland will be smoother than some may have feared, as the Swiss government indicated that a referendum on the agreement is unlikely.
In comments made after a regular meeting of finance ministers from countries in the European Free Trade Area, Dutch Finance Minister Gerrit Zalm revealed: “The Swiss minister made us happy by informing us that everything was well underway with the savings (tax) agreement.”
The EU had initially intended the directive, which seeks to facilitate the sharing of bank interest information between national tax authorities, to come into effect on January 1, 2005.
However, the adoption date was pushed back to July 2005 to allow sufficient time for the Swiss parliament to ratify the ‘Bilaterals II’ treaties, which include adoption of the Savings Tax Directive. Although the EU had insisted the start date would definitely be July 2005, some commentators had said that the possibility the Swiss government might have been obliged to put the treaties to a referendum could have added a further delay. However, Swiss Finance Minister, Hans-Rudolf Merz, who was also present at the EFTA meeting, assured ministers that this would not be the case.
“He did not expect a referendum in Switzerland on this issue, so that was a very comfortable communication from his part,” Zalm revealed.
Crown dependencies sign savings tax directive agreement
Jersey and Guernsey and the Isle of Man have now signed their withholding tax agreements to the EU Savings Tax Directive. They spent some time completing deliberations on whether to sign a withholding tax or exchange of information treaty, but have now signed on the dotted line.
The Directive demands the exchange of information on investors’ accounts or, initially, a withholding tax on the interest earnings of non-residents. The withholding tax ‘transitional period’ is forecast to be up to 2011, by which point the EU hopes that all Member States and jurisdictions will apply automatic exchange of information.
G20 agree to harmonised tax information sharing initiative
The G20 group of major industrialised nations and emerging economies recently rubber-stamped an initiative aimed at standardising the exchange of tax information across national borders.
The agreement, reached at the G20 summit in Berlin, means that all governments will adopt the standard OECD protocol when exchanging information on tax matters, a move that German Finance Minister, Hans Eichel, declared was a “big step forward” in the fight against harmful tax practices.
A joint communiqué released by the group of G20 governments, which is currently chaired by Germany, stated that: “We reaffirmed our commitment to fight the abuse of the international financial system in all forms.” It continued: “To this end, we have committed ourselves to the high standards of transparency and exchange of information for tax purposes that have been developed by the OECD’s Committee on Fiscal Affairs as set out in the attached statement.”
The statement went on to add that effective exchange of information will be conducted through legal mechanisms such as bilateral treaties, and urged jurisdictions outside of the OECD to “follow our lead and take necessary steps” to allow access to banking and entity ownership information. In addition to the G7 group of nations, the G20 includes Argentina, Australia, Brazil, China, India, Indonesia, South Korea, Mexico, Russia, Saudi Arabia, South Africa and Turkey.
Incoming EU tax chief supports company tax base harmonisation
The European Union’s Tax Commissioner-in-waiting, Laszlo Kovacs, revealed recently that he is in favour of harmonising the corporate tax base across the union, although he rejected a proposal supported by the French and Germans for more centralised setting of tax rates.
Speaking at his confirmation hearing in the European Parliament, Kovacs stated that the creation of a uniform system for the calculation of corporate tax “would eliminate the current cross-border company tax problems such as double taxation.” However, the former Hungarian foreign minister stopped short of advocating the placing of more control over tax rates in the hands of the Commission, arguing that “fiscal competition is not damaging as such.”
“I support a degree of tax competition between member states. I do not see a need for community action on corporate tax rates,” he commented, referring to complaints from France and Germany that large corporate tax cuts in the new member states of Eastern Europe amount to unfair tax competition.
Responding to Franco-German fears that the widening east-west tax gulf will lead to falling levels of investment, Kovacs argued that the corporate tax rate is not the overriding factor in a company’s decision to invest abroad.
“Movements (by companies) are not generated by tax levels,” he told parliament. “Taxation is only one of the determinants of investment decisions,” he added.