EU savings directive to be repealed as agreement reached on automatic exchange

The proposal will bring interest, dividends and other income, as well as account balances and sales proceeds from financial assets, within the scope of the automatic exchange of information.

The European Commission has been trying for years to introduce this policy through an amendment to the EU Savings Directive, but progress has been slow because of opposition from Austria and Luxembourg, both of which feared it would handicap their banking industries.

Agreement in principle was reached on this amendment in March this year, but has not been transposed into member states' national laws.

On Tuesday, however, the European Council of Finance Ministers (ECOFIN) decided to implement the policy through amendments to a different directive – namely 2011/16/EU on administrative cooperation in direct taxation, also called DAC2. In essence, the amendment incorporates the recently published OECD common reporting standard into the directive.

This will be put into effect from 2017, although Austria is being given an additional year to apply the new rules. Moreover, Luxembourg's Finance Minister, Pierre Gramegna, made it clear that his country's acceptance was conditional on all other countries doing the same. 'We do this with the understanding that all are committed to a single global standard', Gramegna told his EU counterparts.

As a result of the ECOFIN agreement, the European Commission has abandoned its plans to amend the Savings Tax Directive and is proposing to repeal it instead. This process will have to be coordinated with the introduction of DAC2 to ensure that no new loopholes are created.

ECOFIN's president, the Italian Finance Minister, Pier Carlo Padoan, said the agreement marks the end of bank secrecy in tax matters in the European Union. Algirdas Šemeta, European Commissioner for Taxations and Customs Union, Audit and Anti-Fraud, added that 'bank secrecy is dead, and member states will fully cooperate in throwing open the traditional hiding places of tax evaders'.

'This sets the bar for our international partners and we can reasonably expect them to follow suit', he said. 'We can now believe that they will be vastly more ambitious than anything we could ever have hoped for when we started.'

Sources

• ECOFIN (press statement, PDF)
• European Commission
• European Commissioner of Taxation
• STEP lead story (24 March 2014)
• Pinsent Masons
• Deutsche Welle