Taxation of Financial
Services in the European Union
Summary
The European Commission
has a comprehensive strategy for the EU's future taxation
policy. Tax policy is intended to support broader EU policy
objectives such as the goal set by the Lisbon European Council
of making the EU the most competitive economy in the world
by 2010. But while the Commission believes that a large measure
of harmonisation is necessary in indirect taxation, in other
tax fields tax co-ordination does not imply harmonisation.
of tax rates. A key tax policy initiative is the Monti tax
package, which aims to ensure a minimum effective level of
savings taxation within the EU and to address concerns about
forms of tax competition between member countries which the
EU Commission regards as unfair. The commission's plan for
integrating financial services markets by 2005 are proceeding
more or less according to the timetable set out in 1999. Incompatibilities
in tax regimes of the member countries will become increasingly
visible obstacles to cross-border provision of financial services.
For example, there has been progress in agreeing an approach
on the draft Pensions Directive, but national taxation rules
remain a key obstacle to building an integrated single market
for pensions. The commission has stated that certain national
tax rules on pensions may contravene rights of free movement
of labour and capital as guaranteed under the EC Treaty, and
that it may ensure effective compliance through the European
court of Justice. Similar concerns about tax obstacles exist
in other areas, such as the Collective Investment Undertakings
(UCITS) industry, where promoters of these funds are discouraged
by national tax rules from selling UCITS in particular EU
countries. Preferential tax incentives forms of long-term
savings may also be acting as a barrier to a single market.
Such tax obstacles may stand in the way of a fully functioning
single Market for financial services.
