Finland seeks end to savings tax impasse

Date: 08/07/1999

By Tim Jones

FINLAND has called on fellow EU governments to consider the scope for exempting mutual investment funds from a Union-wide tax on interest.

Helsinki is exploring the willingness of member states to buy off Luxembourg's opposition to the European Commission's six-month-old savings tax plan.

The Grand Duchy is the EU's financial centre for 'undertakings for collective investments', allowing people to buy units or shares in savings companies which then sink their cash into specified assets.

In a paper prepared for a high-level meeting of national tax officials tomorrow (9 July), the Finns ask governments: "In which cases do these undertakings fall within the scope or should the scope of the directive be clarified?"

Under the Commission's proposal, member states could choose between introducing a 20% tax on interest paid to non-resident EU-nationals or forcing banks to inform individuals' home tax authorities about

interest paid to them.

Luxembourg insists that investment funds, which would fall under the scope of the tax if more than 50% of their assets were held in fixed-income investments, should be exempted from the law.

But an attempt by former Luxembourg Christian Democrat MEP Astrid Lulling to strike funds from the scope of the directive was voted down by the European Parliament.

Luxembourg is angry that other member states appear to be bending over backwards to meet British concerns over the effect of the tax on the London market for foreign-currency eurobonds while ignoring their pleas over funds.

But some governments, led by the French, are fiercely opposed to exempting the Grand Duchy's highly developed fund market from the tax, especially since some features - such as currency management funds - appear specifically designed to lure away tax-euro.

Keyword: Undertakings for collective investments.