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Introduction
I am pleased to present a report commissioned by the Edmond Israel Foundation and prepared by Promethée, a Paris-based think-tank, on the Directive proposed by the European Commission on the taxation of interest payments.
In May 1998, the European Commission, based on a mandate of the Council of Ministers, submitted a proposal for a Directive to "ensure a minimum of effective taxation of savings income in the form of interest payments within the Community". The professional market associations, ISMA, IPMA and banking associations reacted strongly to the proposal, not least because of the inclusion of eurobonds.
Against this background, the Edmond Israel Foundation decided to launch an independent report, based on interviews with market participants and regulators. The report puts the proposed Directive in a more general framework of the changing and globalizing markets and the competitiveness of the EU financial centres.
The main conclusions and recommendations are to:
- Set up a high level group within Europe to reflect upon and make proposals on tax convergence after the euro;
- Engage market participants, notably professional associations such as IPMA and ISMA in a dialogue, also on the treatment of eurobonds;
- Engage the OECD partners in a co-ordinated effort to establish an OECD wide withholding tax, possibly with some regional rate differences that could fit into the global financial infrastructure needed for the smooth functioning of global financial markets.
The Edmond Israel Foundation hopes that the report will contribute to a constructive debate on tax harmonisation and on the creation of a more level playing field in Europe after the introduction of the euro.
I would like to take this opportunity to thank all the interviewees for their valuable contribution.
André Lussi
Chairman of the Edmond Israel Foundation
