France raises stakes ahead of crunch savings tax talks

Date: 15/06/2000

By Simon Taylor

FRANCE is threatening to pull the plug on long-drawn negotiations over an EU-wide savings tax if finance ministers do not achieve a breakthrough at crunch talks this weekend.

French Finance Minister Laurent Fabius has warned his counterparts that he is not prepared to waste time on the issue after his country takes over the Union's presidency next month unless the logjam is broken this Sunday (18 June) at a special meeting on the eve of the Feira summit. "It is very difficult to see how this impasse can be broken, but the French threat might do something: either encourage people to compromise or convince them to hold out so the issue will be dropped for six months," said a senior EU treasury official.

The argument is pitting British Finance Minister Gordon Brown, who wants all Union banks to open their books to the tax authorities, against Luxembourg Premier Jean-Claude Juncker, whose country has long thrived on banking secrecy.

In the middle are most member states, which favour a 'co-existence model' allowing governments to choose between imposing a 20% withholding tax on interest paid to non-resident Union nationals or forcing their banks to give savers' home tax authorities details of their capital income.

Lisbon has suggested a compromise under which the Commission would draw up proposals after five years to swap the tax for a full exchange of information system. Brown has refused to accept this since the Commission's proposal would require EU governments' unanimous approval. He wants a 'sunset clause' guaranteeing that the tax would disappear after five years, but diplomats say Juncker cannot accept this.