Tuesday, 28 December 2010

Liechtenstein under EU pressure on taxation

Yesterday I wished for public EU information to be more readily available and specific about the remaining issues regarding the common travel area: Liechtenstein heading for Schengen area (27 December 2010).

In the blog post 'What does the EU want from Liechtenstein?' (25 December 2010) we noticed how central EU aims in tax matters are with regard to the Principality:

Council conclusions on EU relations with EFTA countries; 3060th GENERAL AFFAIRS Council meeting Brussels, 14 December 2010

The General Affairs Council (GAC) dedicated three and a half out of eight paragraphs to issues regarding taxation and relevant to the financial services industry in the Principality of Liechtenstein:

21. With regard to cooperation and information exchange in tax matters and the fight against fraud and tax evasion and any other illegal activity to the detriment of the financial interests of the parties, the Council welcomes the commitments taken by the Principality to implement OECD standards on transparency and on tax information exchange and to fight against fraud, and calls on Liechtenstein to continue its efforts in this area. The Council expects a quick and consistent implementation of these commitments in the relationship between Liechtenstein and the EU and all its Member States.

22. Concerning the taxation of savings, the Council welcomes the openness of Liechtenstein to launch negotiations on a revision of the savings taxation agreement to reflect the evolution of the corresponding EU acquis, once the EU has agreed the final text for its review of the savings taxation directive.

23. Considering that the EFTA Surveillance Authority has taken in recent years several decisions relating to state aid granted by Liechtenstein, the Council reiterates its recommendation of 2008 that Liechtenstein assesses all measures applied to industry, services and trade with respect to the definition of state aid provided for in the EEA Agreement, particularly in finance. The Council welcomes the intention of Liechtenstein to reform its tax legislation and looks forward to a reform compatible with state aid legislation. The Council will closely follow the implementation of this reform.

24. With regard to harmful tax practices, the Council encourages the Principality to continue discussions with the EU on the application of the principles and criteria of the EU Code of Conduct on business taxation.

Taxation and banking

I would have hoped for complementing quality information from the Council about the EU's aims regarding more controversial issues, such as cooperation against fraud and tax evasion, the revision of the savings tax agreement, state aid reform and curtailing harmful tax practices.

The European Union needs to take a more open attitude towards specifying the problems (as it sees them), defining its objectives and publishing reports on progress (or lack of it) in negotiations.

We can also hope for the EU's counterparts, in this case the Principality of Liechtenstein, to present their positions and arguments transparently.


DG Taxation and Customs Union

I have to admit that I found the web pages of the Commission service Taxation and Customs Union disappointing, because they did not offered clear thematic pages, country pages or search options.

The DG seemed to leave visitors only crumbs to pick here and there.

The first option is to go back to the annual report, almost a year old, but offering a background view:

Activities of the European Union (EU) in the tax field in 2009

The very first sentence of the report highlighted the aspirations of the EU with regard to Liechtenstein, and concrete issues concerning the Principality are mentioned in many places in the 30 page report:

Widespread tax evasion through the use of Liechtenstein foundations which came to light at the beginning of 2008 once again demonstrated the importance of international cooperation in the area of savings taxation.

With regard to fresher information, the only option seemed to be to trundle through the press releases published in 2010, but at headline level I found nothing relevant.

For those with a wish for a forward view commissioner Algirdas Šemeta spoke about the Commission Work Programme 2011 (CWP 2011) to the Economic and Monetary Affairs Committee of the European Parliament 30 November 2010.

Among other things, commissioner Šemeta said:

… I am working closely with the forthcoming Hungarian presidency to identify how to progress on the savings directive and on the anti-fraud agreements with third countries.

Third, as you know, I am convinced that we have to maintain our efforts in the fight against harmful tax competition both within the EU and with our international partners. We entered in constructive discussions with Switzerland and Liechtenstein on how to extend the principles of the Code of Conduct to those two "third" but "close" countries. I also plan to discuss the future of the Code of Conduct itself with the Member States during the next meeting of the Tax Policy Group.


Council: Tax policy

The Council offers a web page with links concerning Tax policy (Taxation of Savings Income), with links to Liechtenstein, but I have found no quality overview regarding tax discussions with the Principality.

All in all, the information from the Commission and the Council about taxation pressure on Liechtenstein comes in bits and pieces rather than in a comprehensive and user-friendly manner.



Ralf Grahn



P.S. On Se former à la communication européenne, or a bit easier Lacomeuropéenne, Michael Malherbe dissects the communication activities of the EU institutions as an expert engaged for citizens and consumers. His most recent blog post was a review of European communication in 2010.