TAXATION PUT ON BACK BURNER.

"It's not urgent," commented Luxembourg Finance Minister Luc Frieden, on 7 December 2010. Hungary will doubtless take him literally. At any rate, adoption of the outstanding elements of the taxation governance package apparently will not be one of the priorities of its European Union Presidency.

The Belgians achieved a partial success in 2010. On 7 December, the 27 finance ministers sealed a political agreement on strengthening administrative cooperation in the field of taxation (see Europolitics 4099). The hardest part is still to come, however: working out a compromise on revision of the directive on savings taxation, and consequently the EU's agreements in this area with Switzerland, Liechtenstein, Andorra, San Marino and Monaco.

TOUCHY SUBJECT

The matter is particularly touchy because it has been linked to the opening of negotiations between the EU and these five countries on application of OECD standards on the exchange of information on request between tax administrations, which is also stalled. The deadlock stems from the fact that conclusion of agreements on this point would oblige Luxembourg and Austria to switch to the system of automatic exchange of information and thus give up banking secrecy in the framework of rules on savings taxation. Luxembourg and Vienna demand to be treated on an equal footing with Switzerland, which has no intention of opting for total transparency.

Budapest is probably even less inclined to try to sort out this problem because at the Ecofin Council, on 7 December 2010, the European Commission announced that it would postpone, until mid-2011, a report on implementation of this regulation in the Union and the five non-EU countries. The EU executive responded thus to charges of "infringement" of the savings taxation directive made by Italy against the United Kingdom and Germany.

These two countries have agreed to open bilateral talks with Berne on the Rubik project'. Switzerland has proposed to Germany and the UK to legalise...