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Annex
Key elements of the framework set by ECOFIN Council in its 1 December 1997 decision regarding harmful effects of tax competition and taxation of savings
To ensure a minimum of effective taxation of savings income within the Community and to prevent 'undesirable distortion of competition', the Council calls upon the Commission to present a proposal for a Directive on the taxation of savings. The Council considers that the following points might form a basis for that proposal:
- The scope of such a Directive could be limited to interest paid in one Member State to individuals who are resident in another Member State.
- As a first step toward effective taxation of savings income throughout the Community, such a Directive could be based on the 'coexistence model', under which each Member State would either operate a withholding tax or provide information on savings income to other Member States. A Member State might combine the two.
- Any withholding tax on interest payments made to residents of other Member States could, in principle, be levied by the paying agent. The arrangements for checking the residence for tax purposes of beneficiaries should 'not be too cumbersome'.
- The provisions of such a Directive should take into account the need to preserve the competitiveness of European financial markets on a global scale.
The Council should review the issue before adopting such a Directive.
In May 1998, based on this resolution, the Commission issued the current proposed Directive under the title 'Proposal for a Council Directive to ensure a minimum of effective taxation of savings income in the form of interest payments within the Community'.
