Are you sure?

Luxembourg says EU savings rules must be reopened

  The European Union’s rules on taxing deposits held outside a home state must be redrawn after moves by Luxembourg and other countries to apply global rules on tackling tax evasion, the Grand Duchy said on Tuesday.

Luxembourg Treasury and Budget Minister Luc Frieden said the country’s decision to adopt OECD rules for exchanging information with other countries on tax cases should be used by all EU states. The EU executive’s plan for revising the bloc’s rules on savings tax and exchange of information between member states go further than the OECD standards adopted last week by Luxembourg.

Germany in particular has been pushing hard to crack down on what it perceives as tax havens and prompted the EU executive to come up with a draft reform of the EU savings tax rules. But unanimity among the bloc’s 27 countries is required in all EU tax matters, therefore giving Luxembourg a veto.

Luxembourg took the decision to adopt OECD rules after pressure from the G20 group of nations to crack down on what it sees as tax havens. “If that is the worldwide standard and if all the countries agree to that, then I think it would be strange if the EU member states that are part of the G20 say something different,” Frieden told the Reuters Fund Summit.

“We agreed together with Swizterland, Singapore, Hong Kong and others to change to an exchange of information on demand but that must then be the standard applicable everywhere,” Frieden said.

“So these things, in light of recent developments, have certainly to be rediscussed,” Frieden said. “A lot of things are being discussed at the table. If you start a negotiation, all the aspects have to be rediscussed,” Frieden added.

Under the EU savings tax rules agreed in 20005, Luxembourg, Austria and Belgium declined to exchange information and reveal names of account holders but agreed to levy a withholding tax that is handed to the saver’s home state. All other EU states agreed to exchange information about accounts.

EU Tax Commissioner László Kovács has proposed widening the scope of the rules to include trust funds and other types of investments as the current rules only cover bank deposits, a move Frieden said he would back.

Kovács has also made a separate proposal to force all EU states to exchange information automatically upon request so that no country can hide behind any bank secrecy rules, a measure aimed at Austria and Luxembourg.

The current withholding tax will rise to 35%, a rate seen as punitive, and Belgium has already said it will switch to the exchange of information system. Frieden said this planned hike in the withholding tax must be reconsidered.

“When we agreed to this directive in 2005, Germany for instance was against a withholding tax. In the meantime, Germany introduced a withholding tax for its citizens of 25%,” Frieden said. “We have to discuss whether 25% is the appropriate level or 35%, or why in Germany you can have 25% but if you go to another EU country it’s 35%,” Frieden said.

In a swipe at other EU states such as Germany, he said neighboring countries were laboring under the wrong “concepts” when it came to defining tax havens. “We continue to believe Luxembourg is not a tax haven. I have written confirmation from the OECD that Luxembourg does not qualify as a tax haven,” Frieden said. (Reuters)