| Author (Person) | McLauchlin, Anna |
|---|---|
| Series Title | European Voice |
| Series Details | Vol.11, No.23, 16.6.05 |
| Publication Date | 16/06/2005 |
| Content Type | News |
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By Anna McLauchlin Date: 16/06/05 Tax-dodgers beware. From 1 July a new EU law on savings means that capital stashed abroad can no longer be hidden from the taxman. But experts say that there are still ways of keeping the taxman at bay. The law, passed in June 2003, aims to crack down on those who evade tax by shifting interest-bearing assets to another member state. In the past this has been particularly easy because interest payments to non-residents are often not taxed and because tax authorities have traditionally been entrenched in their national activities. From July, however, it is a different story. In all but three of the EU member states, tax authorities will automatically exchange information on cross-border interest payments to private investors residing in other EU member states. For a transitional period, Austria, Belgium and Luxembourg will levy a 'withholding tax' - a tax on savings' interest, sent directly to the national tax authority - on foreign savings which will rise from 15% in July to 20% in July 2008 and then 35% in July 2011. But EU ministers' hopes that they will receive millions more euros in tax revenue could be dashed, experts say, not least because there are several ways of getting around the new law. As usual, the richest get the best deal. Banks in Switzerland have already begun to advise their best clients to put their money into a unit trust - similar to a mutual fund but more bank-like in that the funds are not actively managed. As only individual investors are subject to the EU savings tax law, their money will automatically be exempt. Another option, say the experts, is to take advantage of the transitional period for 'grandfather bonds' in the savings directive, which until 2010 are also exempt from the new rules. Under the directive, these 'grandfather bonds' are both national and international bonds that were issued before 1 March 2001 and have not increased since 1 March 2002. A more risky approach is to shift cash entirely out of the EU, for example to financial centres in Asia. It is an obvious choice but if a war breaks out your money is not necessarily as safe as it might be in Europe. "Certainly I would not advise my clients to put all their eggs in one basket," says one Frankfurt-based economist. The potential for avoiding the penalties imposed under the savings directive could be one of the reasons that, in many of the member states where tax amnesties for repatriated funds were granted in anticipation of the new law, the money collected was way below expectations. In Germany for example, the government initially said it was expecting around €8 billion to be collected as a result of its 2005 amnesty. Instead it got a relatively paltry €1.2bn. In Belgium it was a similar story. Estimates of €850 million. Article anticipates the entry into force of the EU Directive on taxation of savings income on 1 July 2005. |
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| Source Link | http://www.european-voice.com/ |
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| Subject Categories | Business and Industry, Taxation |
| Countries / Regions | Europe |
