The U.K. and Germany must modify their tax arrangements with Switzerland so they don’t interfere with broader savings-income tax accords, said European Union Tax Commissioner Algirdas Semeta.
“I am confident that a satisfactory outcome will be found,” Semeta said today in a letter to Danish Economy Minister Margrethe Vestager, whose country holds the EU’s six- month rotating presidency. The European Commission, the EU’s regulatory arm, has been involved in “very constructive” talks with Germany and the U.K. to resolve the issue, he said.
When countries make bilateral tax agreements with other nations, EU policy calls for them to leave out any areas covered by a common European framework, Semeta said. In the case of savings income, the bloc has existing information-exchange rules and is working on additional measures related to interest payments, ownership stakes and the 27-nation EU’s relationship with Switzerland, he said.
Semeta also called for “a process of active peer pressure” on tax and spending policies as countries work to balance their budgets.
“Confronted with fiscal imbalances, EU member states are faced with very difficult decisions,” he said today at the Brussels Tax Forum. Budget deficits are “huge and require action on the revenue side,” particularly within the 17-nation euro region, he said.
Semeta said the financial crisis has shown the need for stronger cooperation on tax policies. He hailed last week’s recommendations by EU leaders to continue work on a range of tax proposals, from a financial-transaction levy to coordinated energy and corporate taxation.
“A coordinated approach to all areas of fiscal policy is vital for a strong euro and our collective growth,” Semeta said. “It is now time to reassess the role of tax-policy coordination in the context of the monetary union.”
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