Finance: Luxembourg and Austria have vetoed proposed changes to EU tax information sharing schemes, to the dismay of Brussels.
During this week’s meeting of the council of European finance ministers, the European Commission proposed revamping the 2003 EU Savings Directive and separate agreements with five non-EU countries.
Under the Savings Directive, 25 out of 27 EU countries automatically exchange information about investment income with each other; Luxembourg and Austria apply a withholding tax at the source that is then paid directly, but anonymously, to other member states on behalf of taxpayers.
Under the separate agreements, authorities in Switzerland, Andorra, San Marino, Monaco and Lichtenstein apply a withholding tax in a similar fashion as Luxembourg and Austria. According to European Commission figures, Switzerland forwarded €330,136,640 to EU countries in 2010, for example.
Brussels had wanted to renegotiate both sets of deals in light of the bilateral tax information sharing deals that have been signed in recent years, such as those between Switzerland and Germany and between Luxembourg and Germany.
However, finance ministers from Luxembourg and Austria blocked the opening of negotiations, which requires unanimous approval from all EU nations. That earned sharp words from the man who was pushing for the changes.
“I am extremely frustrated that we could not reach agreement today,” Algirdas Šemeta, the European Commissioner for taxation, told a press conference in Brussels on Tuesday. “I will be blunt. The position that Austria and Luxembourg have taken on this issue is grossly unfair. They are hindering 25 willing member states from improving tax compliance and finding additional sources of income. They claim that they are protecting their own national interests. This excuse does not stand up.”
Yet, the commission’s plan was not “precise,” Bloomberg News quoted Luxembourg’s finance minister Luc Frieden (photo, left) as saying after the meeting. He said “no one could tell us” what events were driving the proposed changes and how exactly they would be implemented. “And secondly there was no real debate,” among European finance ministers.
“I’m besieged from all sides and you know me: I will stand my ground,” Austria’s finance minister Maria Fekter (photo, right) was quoted by the news agency as saying.
However, during the same meeting EU ministers did agree to the Šemeta’s plan to study harmonising VAT rules across member states.