76 Taxation: Savings Directive
| Committee's assessment
| Politically important |
| Committee's decision | Cleared from scrutiny
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| Document details | (a) Draft Directive concerning a staged repeal of the 2003 European Savings Directive; (b) Draft Council Decision on the signing of an amending protocol to a taxation agreement with Switzerland, consequent on repeal of the European Savings Directive;
(c) Draft Council Decision on the conclusion of an amending protocol to a taxation agreement with Switzerland, consequent on repeal of the European Savings Directive
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| Legal base | (a) Article 115 TFEU; —; unanimity; (b) Articles 115, 218(5) and 218(8) TFEU; —; unanimity; (c) Articles 115, 218(6)(b) and 218(8) TFEU; —; unanimity
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| Department
Document numbers
| HM Treasury
(a) (36765), 7373/15, COM(15) 129
(b) (36782), 7759/15 + ADD 1, COM(15) 150
(c) (36783), 7784/15 + ADD 1, COM(15) 151
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Summary and Committee's conclusions
76.1 The European Savings Directive requires Member States to
disclose interest earned by a resident of another Member State
to that Member State, so allowing the relevant Member State to
check whether tax has been paid on that interest as appropriate.
The EU has an agreement with, amongst other third countries, Switzerland
to apply equivalent provisions. In March 2014 an amended European
Savings Directive was agreed. This is due to come into force at
the beginning of 2017. However, in the meantime a 2011 Directive
on administrative cooperation in the field of taxation was amended
in December 2014, in order to bring a new global standard for
automatic exchange of tax information into EU law. This amended
Directive overlaps and goes beyond the European Savings Directive.
76.2 In the light of this duplication, it was agreed
by Member States and the Commission during the negotiations on
the amended Directive that the European Savings Directive would
be repealed. Therefore the Commission proposes a draft Directive,
document (a), to apply a phased repeal of the European Savings
Directive as the amended Directive on administrative cooperation
comes into force. As a result of the proposal there would be no
period where Member States have to report ?under both Directives,
so reducing the burden on business and ensuring no unnecessary
duplication of effort.
76.3 The draft Council Decisions, documents (b) and
(c), are to allow the EU to sign and conclude an amending protocol
to its agreement with Switzerland to ensure that it is in line
with EU and international developments on international tax transparency,
in particular in consequence of adoption of the amended Directive
on administrative cooperation and the proposed repeal of the European
Savings Directive.
76.4 The Government explains to us, given the apparent
benefit for UK interests, its support for all three of these proposals.
76.5 Given its constitutional requirements, for Switzerland
to be able to commence first exchanges under the new standards
by September 2018, the amending protocol needed to be signed by
the end of May. So the Government also gave advanced notice that
it intended to vote for the Council Directive concerning signature
at the ECOFIN Council of 26 May, even though, regrettably, this
would override the scrutiny reserve.
76.6 We have no reason to question these practical
proposals and clear the documents from scrutiny. Moreover we accept
that the Government's action in relation to the scrutiny reserve
was in the circumstances justified.
Full
details of the documents:
(a) Draft Council Directive repealing Council Directive 2003/48/EC:
(36765), 7373/15, COM(15) 129; (b) Draft Council Decision on the
signing, on behalf of the European Union, of the Amending Protocol
to the Agreement between the European Community and the Swiss
Confederation providing for measures equivalent to those laid
down in Council Directive 2003/48/EC on taxation of savings income
in the form of interest payments: (36782), 7759/15 + ADD 1, COM(15)
150; (c) Draft Council Decision on the conclusion, on behalf of
the European Union, of the Amending Protocol to the Agreement
between the European Community and the Swiss Confederation providing
for measures equivalent to those laid down in Council Directive
2003/48/EC on taxation of savings income in the form of interest
payments: (36783), 7784/15 + ADD 1, COM(15) 151.
Background
76.7 The European Savings Directive (EUSD), Council
Directive 2003/48/EC, requires Member States to disclose interest
earned by a resident of another Member State to that Member State.
This allows the relevant Member State to check whether tax has
been paid on that interest as appropriate. The EUSD also contains
transitional arrangements, currently applied by two Member States,
under which they levy and exchange a withholding tax.
76.8 Following adoption of the EUSD the EU reached
agreement with Andorra, Liechtenstein, Monaco, San Marino and
Switzerland for these third countries to apply equivalent provisions.
Equivalent provisions have also been applied in the dependent
territories of the UK and the Netherlands.
76.9 An amendment was agreed to the EUSD by the Member
States in March 2014 which expanded the categories of information
to be reported in Directive 2014/48/EU. This amended EUSD is due
to come into force at the beginning of 2017. However, in the meantime
the Directive on administrative cooperation in the field of taxation
(DAC), Directive 2011/16/EU, was amended in December 2014. This
amended Directive, Council Directive 2014/107/EU, brings the new
global standard for automatic exchange of tax information (known
as the Common Reporting Standard) into EU law. It overlaps and
goes beyond the EUSD.
The documents
76.10 In the light of this duplication, it was agreed
by Member States and the Commission during the negotiations on
the amended DAC that the EUSD would be repealed. Therefore the
Commission proposes a draft Directive, document (a), to apply
repeal of the EUSD for 27 Member States, including the UK, from
1 January 2016 when the amended DAC comes into force. In the case
of Austria the amended DAC does not come into force until 2017,
so the Commission proposes that repeal of the EUSD would not come
into force for Austria until 30 June 2017.
76.11 The obligation for paying agents and Member
States to pass through information received prior to the repeal
to other Member States and the obligations in respect of beneficial
owners would continue, to 5 October 2016 and the end of 2016 respectively.
76.12 As a result of the proposal there would be
no period where Member States have to report ?under both the EUSD
and the amended DAC. This would reduce the burden on business
and ensure no unnecessary duplication of effort.
76.13 The draft Council Decisions, documents (b)
and (c), are to allow the EU to sign and conclude an amending
protocol to its agreement with Switzerland to ensure that it is
in line with EU and international developments on international
tax transparency, in particular in consequence of adoption of
the amended DAC and the proposed repeal of the EUSD. The Commission
says that its proposals would minimise costs and administrative
burdens both for tax administrations and for economic operators
and increase tax transparency in Europe by binding Switzerland
to the new international standards.
76.14 Given Swiss constitutional requirements for
ratification, for Switzerland to be able to commence first exchanges
under the new standards by September 2018, the amending protocol
needed to be signed by the end of May.
The Government's view
76.15 In his Explanatory Memorandum of 1 June 2015
about the draft Council Directive, document (a), the Financial
Secretary to the Treasury (Mr David Gauke) comments that:
· repeal
of the amended EUSD would result in no loss of information to
the UK;
· the
EUSD would be switched off when the DAC is switched on; and
· this
would reduce what would otherwise be additional reporting burdens
on UK financial institutions that result from the differences
in how information is exchanged and from differences in timing.
76.16 In his Explanatory Memorandum of 27 May 2015
about the draft Council Decisions, documents (b) and (c), the
Minister says that:
· following
agreement of the revised DAC, the Commission, on the basis of
a previous mandate to update the existing Savings Agreements,
has been negotiating with Switzerland, Monaco, Liechtenstein,
Andorra and San Marino so that they also adopt the new global
standard, together with the Member States;
· the
first to complete these negotiations with the Commission is Switzerland,
which would ensure Switzerland is in line with EU and international
developments on international tax transparency;
· these
proposals would ensure that Switzerland is in line with EU developments
and would increase tax transparency in Europe; and
· this
will help the UK realise the expected yield from these new agreements.
The Minister's letter of 21 May 2015
76.17 In accordance with the House's Scrutiny Reserve
Resolution, the Minister wrote apologetically to explain the Government's
intention to override the scrutiny reserve in relation to the
draft Council Decision concerning signature of the amended agreement,
document (b). Noting that these proposals were published after
dissolution of the last Parliament and that for Switzerland to
be able to commence first exchanges under the new standards by
September 2018, the amending protocol needed to be signed by the
end of May, the Minister says that:
· the
proposal was to be taken at the ECOFIN Council of 26 May;
· as it
was subject to a unanimous vote UK support was necessary for adoption
of the proposal; and
· the
Government intended to vote in favour of the proposal at that
Council
76.18 The Minister explains further that, given the
constitutional requirements for ratification, meant for Switzerland
to be able to commence first exchanges under the new standards
by September 2018, the agreement with the EU would need to be
signed by the end of May:
· if
this deadline were missed then it was likely the agreements would
not, due to Swiss constitutional procedure, be signed for another
12 months;
· if this
lead to a delay in exchange of information, this would delay expected
yield for the UK and the other Member States; and
· given
this and the impact that delay would have on the UK national interest,
the Government believed it right to support this proposal, while
fully recognising that this regrettably represented a scrutiny
override.
Previous Committee Reports
None.
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