Following his participation in the Economic and Financial Affairs (Ecofin)
meeting of the European Council on January 19, Giulio Tremonti, Italy’s
Minister of the Economy, demanded an improved distribution of withholding taxes
recovered between European states.
Under the Savings Tax Directive, withholding taxes within the European Union (EU) arise from interest earned
by EU residents on their investments made in another member state. The aim of
the tax is to ensure that anonymous citizens of one member state do not evade
taxation by depositing funds outside their jurisdiction of residence. The tax
is withheld at source by the country in which the investment is held and passed
on to the EU country of residence.
Most EU countries disclose the names of their account holders and the interest
that they have earned. However, some countries, including Austria and Luxembourg,
have objected to the disclosure of account holders' names on the grounds that
such a disclosure would be contrary to their bank secrecy laws.
In those cases, the objecting countries achieved an agreement whereby individual
account holders had the choice voluntarily to elect to waive bank secrecy and
authorize disclosure. Those individuals who did not make such an election would
see a withholding tax deducted from their bank and bond interest.
Currently that withholding tax is fixed at 20%, but will be increased to 35%
after July 1, 2011.
While the Ecofin meeting recognized imperfections within the current system,
and reached agreement on a draft directive aimed at improving and strengthening
cooperation between states on the recovery of taxes by an overhaul of the EU
directives, it seems that Tremonti’s patience has been exhausted.
He is reported to have said at the meeting that, in his opinion, countries
such as Austria and Luxembourg do not remit to Italy the amount of tax which
should be due on the levels of savings and other capital held in the banks of
the two countries. He threatened an Italian veto on all EU tax matters (where
unanimity is still required) unless clarification is forthcoming on tax recovery.
For example, he explained, if one was to believe the statistics emerging from
the payment of withholding taxes from those two countries in particular, the
capital of Italian residents held in Austria would not be greater than EUR3bn
(USD4.25bn), while such funds held in Luxembourg would not be greater than EUR2bn.
He has, therefore, explicitly requested the EU to produce an account of the
withholding taxes that Italy should have received.
LAWANDTAX-NEWS.COM
