EU Savings Directive reform timeline delayed but Swiss announce intent to negotiate revised EU agreement
The proposal to revise the scope of the European Union Savings Directive (EUSD) failed to be approved at the ECOFIN meetings on 15 November and 10 December 2013. These revisions had largely failed due to concerns raised by Luxembourg that without the conclusion of negotiations with the thirdcountries (Switzerland, Andorra, Monaco, Lichtenstein and San Marino) to apply similar standards, that this would lead to potential capital flight. Nevertheless, these proposals were discussed at the European Council meeting on 19 and 20 December (the Meeting) and again the proposals failed to be agreed to.
Despite the proposals failing to be agreed to, there were two key developments. One arising out of the Meeting’s conclusions and the other from a Swiss development:
1. Re-set of time line
The initial stated aim set at an earlier European Council meeting had been that the proposed revisions to the EUSD should be agreed to by the end of this year but this has not been possible for the reasons noted above. The published conclusions paper “calls for speeding up the negotiations with European third countries and asks the Commission to present a progress report to its March meeting. In the light of this, the revised Directive on the taxation of savings income will be adopted by March 2014.” As such this again demonstrates the political pressure to agree to the proposals and that this will continue to be an agenda item at future meetings.
2. Swiss Federal Council adopts mandate to negotiate with the European Union
In a side development prior to the Meeting, the Swiss Federal Council agreed on 18 December to adopt the mandate for negotiations to the EUSD with the European Union. As such it seems that work will begin to progress on the central issue that is preventing unanimous agreement on the proposed revisions. However, it remains to be seen how quickly this process can move and whether the March 2014 deadline is realistic.
It should be noted that the European Council also recognized the work being performed by the OECD and other international fora – this being a reference mainly to the OECD’s initiative in creating a global standard for the automatic exchange of information. However, the published conclusions paper is silent as to whether such a global standard could replace the EUSD in the future.
It appears that given the broad political pressure and will to agree on revisions to the EUSD, it seems on balance that it is only a matter of time before the revisions are agreed to. A concern still remains that the various international initiatives, i.e., the OECD’s plans, the proposed revisions to the Directive on Administrative Cooperation among others, will mean duplicative reporting standards. This will inevitably lead to increased compliance costs over and above those that would exist under a single reporting standard. The hope still has to be that at some point there is a greater drive towards convergence of standards.
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