EU's Internal Market Commissioner Appeals for End to Savings Tax Dispute

Strategic Insights -

European Union's Internal Market Commissioner Frits Bolkestein is set to visit London to urge an end to the long-standing dispute over the proposed savings tax between Britain and Brussels. The two-year-old issue has pitted Britain against every other EU state, with the exception of Luxembourg. Bolkestein will appeal to Chancellor Gordon Brown to accept the Commission's proposal, emphasizing the benefits of cooperation and highlighting the "remarkable similarities" between Britain's and the Commission's programmes for economic renaissance. The Commissioner has also acknowledged making concessions to achieve a compromise, but has been met with criticism from other member states.

Key Takeaways:

  • Frits Bolkestein, EU's Internal Market Commissioner, will visit London tomorrow to appeal for an end to the savings tax dispute.
  • The dispute has been ongoing for two years, pitting Britain against every other EU state except Luxembourg.
  • Bolkestein will urge Chancellor Gordon Brown to accept the Commission's proposal, which offers the City of London's $3 trillion eurobond market in exchange for providing names and addresses of foreign investors to national tax authorities.
  • Britain has rejected the proposal, arguing it would place a costly administrative burden on the highly competitive market.
  • Bolkestein has proposed an alternative exchange of information on foreign investors, but Commission sources have described it as a "non-starter" and "very disappointing".
  • The dispute centers around a proposed 20 percent tax on interest payments to foreign investors to counter cross-border tax evasion.
  • Bolkestein has acknowledged making concessions to achieve a compromise, but has been criticized by other member states.

Statistics:

  • £3 trillion (approximately $4.5 trillion) - The value of the City of London's eurobond market.
  • 2 years - The length of time the savings tax dispute has been ongoing.
  • 20 percent - The proposed rate of tax on interest payments to foreign investors.
  • $4.8 trillion - The estimated value of the global bond market.

Sources:

  • The Times, Copyright (C) 2000.