OFF-SHORE CENTRES WORRIED BY EU SAVINGS BILL

Forbes.com

10 October 2003

By Lisa Jucca

BRUSSELS, Oct 9 (Reuters) - Off-shore centres are worried that EU rules for taxing income from savings will undercut them against key financial centres, such as Luxembourg or Switzerland, and won't improve global tax transparency.

The off-shore centres, which include fiscal havens such as the Bahamas, the Cayman Islands and the Isle of Man, have pledged to meet beefed up tax transparency requirements from the Organisation for Economic Cooperation and
Development by the end of 2005.

But the EU rules would allow financial rivals and fellow OECD member Luxembourg, Austria, Belgium and Switzerland to retain banking secrecy until at least 2010, five years more than the OECD deadline.

This is against an OECD pledge that all of its member would come in line with greater transparency requirements.

"(Off-shore centres) have acted in good faith. The OECD has praised our cooperation but is sadly unable to deliver it on its own members," Glenroy Forbes, chairman of the International Trade and Investment Organisation that
represents 17 off-shore centres said in a statement.

The ITIO is made up of financial centres that have voluntarily initiated a transparency dialogue with the OECD as opposed to non-cooperative tax havens such as Liechtenstein.

OECD MEETING

The OECD will hold a meeting with off-shore centres next week to assess the impact of forthcoming European Union rules on savings on global financial transparency.

Representatives of the off-shore centres and OECD countries engaged in tax information exchange will meet on October 14 at a closed-door meeting in Ottawa to discuss the issue.

"One of the objectives is to reconfirm on the side of the countries that are participating...that they are committed to a level-playing field," an OECD diplomat told Reuters.

"The participants will be examining the effect of the EU savings directive on the ability to achieve a level playing field."

In a bid to fight tax evasions, EU countries adopted in January new rules aimed at ensuring income from EU savings stashed abroad is properly taxed.

Under the new rules 12 out of the 15 countries will automatically share information on bank accounts details of EU citizens.

But banking strongholds Luxembourg, Austria and Belgium managed to guard their treasured banking secrecy in exchange for the imposition of a withholding tax that would gradually rise from 15 to 35 percent.

Switzerland, the main non-EU financial centre, has agreed to enter a bilateral tax treaty with the EU and would follow the same rules to be applied to Luxembourg, Austria and Belgium.

The new EU rules will only enter into force when other four non-EU centres -- Monaco, San Marino, Liechtenstein and Andorra -- have also signed the EU tax treaty.

But the issue has run into opposition from Liechtenstein, which is not a OECD member and has been indicated by the OECD as one of the few remaining real tax havens in the world.

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