Beginning next year, taxpayers in European countries will find it much harder to hide their savings from tax-collecting authorities by setting up savings accounts in other countries, the BBC reported yesterday.
Under a recent agreement, banks in 12 countries, including the UK, will share information with governments about customer accounts in an effort to uncover squirreled-away savings.
The well-known British tax havens of the Isle of Man, the Channel Islands of Jersey and Guernsey, and the Caribbean overseas territories will also take part.
Supporters say the new system could bring in billions of extra pounds in tax.
The plan represents something of a compromise. According to the BBC, there had been fierce opposition by Britain to the suggestion of a Europe-wide withholding tax on savings. It was not the notion of such a tax that was deemed objectionable, but that it would be set in Europe.
After five years of wrangling, EU finance ministers have agreed to the information-sharing system that Britain proposed.
“Today’s important agreement secures the principle of exchange of information on tax matters – not a one-size-fits-all tax harmonization,” said Chancellor Gordon Brown in a prepared statement. “After five years of detailed negotiation, today’s deal finally ensures that there will be no withholding tax imposed on the City of London.”
But three EU member states decided against sharing information across borders, opting to act in effect as tax-collecting agencies for the various governments.
Under the agreement, banks in Austria, Belgium and Luxembourg will not swap banking details, but will collect a 35 percent tax levied on the interest on savings and hand the revenues along to the relevant countries.
They agreed to this after Switzerland, which is not an EU member, consented to such an arrangement, following expressed concerns that that country would have an advantage if it remained outside the tax agreement. Switzerland, too, will collect a 35 percent tax on foreign investments, passing the money along to the different governments.
EU Commissioner Frits Bolkestein applauded the agreement. “This system ensures that EU citizens do pay their taxes on interest derived from savings held in other countries,” he exclaimed.
Bolkestein said there were technical details to be ironed out with Switzerland, but the system could be ready to launch at the beginning of next year.
