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There is apparently deadlock within the 15 countries of the EU over the implementation and detail of the proposed 20% withholding tax on effective offshore savings.



The UK proposal involves exemption from the tax for institutions by the suggestion of a 40,000 Euro (£28,500) threshold. The aim of this would be to ensure that only private investors (in the main) suffered the withholding tax. It is in this area that the perceived abuse is being carried on according to those countries keen to bring in the withholding tax.



The big fear amongst those opposing the withholding tax is that savings, both institutional and individual, will move outside of the withholding tax zone if the tax is introduced. The history of other countries attempting to introduce withholding taxes on certain domestic savings (ironically Germany is one obvious example) would seem to support this view.




COMMENT



The important point here, as with all EU tax change, is that all 15 countries must agree for the change to be implemented. It is this fact that may be the main impediment to more sweeping tax convergence/harmonisation. The low tax EU jurisdictions that attract so much of the EU&#39s savings and investment business are, of course, immensely interested in developments on this issue. It is thought by some that if the withholding tax is introduced it could represent the &#34thin end of the wedge&#34 and no low tax products/regimes will be safe.


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