Europe Playing ‘Cat and Mouse’ with Automatic Exchange of Information.

(EU Tax Commissioner Algirdas Semeta)

Just as the EU starts talks with Switzerland to revise their EU-Swiss Savings Tax Directive, based on planned changes to the EU’s own Savings Tax Directive, EU Tax Commissioner Algirdas Semeta has chided Austria and Luxembourg for playing ‘cat and mouse’ with the EU on the issue of automatic exchange of information (AEI), by refusing to lift their banking secrecy until the EU achieves a level playing field with Switzerland.

Commissioner Šemeta confirmed that the proposed start date for AEI is 2015; and that the overwhelming majority of EU countries agree that the EU must spearhead the campaign for AEI. In fact, as Šemeta pointed out, a “lack of consensus undermines the EU’s credibility as it could not seek to apply pressure at the international level for the adoption of AEI if it is unable to reach agreement internally.”

The problem is that Austria and Luxembourg,are competitors with Switzerland for investors desirous of maintaining ‘secrecy’ in their financial and other dealings; and do not wish to agree to anything that would give the Swiss an advantage in the market.

They are therefore refusing to abandon their secrecy regime until the EU gets Switzerland to do the same first.

While confirming the EU’s resolve to guarantee a level playing field with non-EU members in Europe by negotiating strong agreements, Šemeta understands that this cannot constititue a pre-requisite for reaching an accord within the EU.

Clearly Šemeta is concered not to have the issue of AEI turn into a stale-mate with countries embroiled in  a waiting game of ‘who blinks first’.

Still Šemeta is optimistic because he believes that the EU has new leverage with Switzerland that would compel them to negotiate with the EU to apply planned changes to its Savings Tax Directive.

In particular, he notes that Switzerland is “under great pressure to sign up to AEI, primarily as a result of the changed political environment, and the fact that automatic information exchange is due to become the global standard shortly.”

Moreover, the OECD is currently finalizing its proposed AEI concept, which it hopes will be adopted by G20 Finance Ministers in February, Šand, according to Emeta, if G20 Finance Ministers fail to unite behind the OECD’s proposal, the EU could as a last resort revert to the European Commission’s 2012 recommendation, advocating that countries unwilling to comply with international standards be placed on a so-called “black list” of countries deemed uncooperative in tax matters.

Such a measure could give rise to severe sanctions, including the termination of double taxation agreements.

Despite his optimism Commissioner Šemeta  knows he has precious little time.

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