Widening of EU Savings Directive

The European Commission is reported to have said that it wants to extend the European Union Savings Directive (EUSD) to Hong Kong, Singapore, Japan, Macao, Bahrain, Dubai, Canada and the Bahamas. The EU savings directive provides for countries to automatically deduct witholding tax (at 20% from July 2008) on interest and other savings income or alternatively to pass details of interest earned to the 'home' countries of the person earning the interest. Currently countries apply the scheme as follows: Withholding tax option Channel Islands Isle of Man Belgium Luxembourg Austria British Virgin Islands Turks and Caicos Islands Switzerland Andorra Monaco Liechtenstein San Marino Exchange of info option UK Ireland France Germany Italy Spain Portugal Greece Sweden Finland Denmark Cyprus Czech Republic Estonia Hungary Latvia Lithuania Malta Poland Slovakia and Slovenia Anguilla Cayman Islands Montserrat However EU tax officials are dissatisfied with the tax take from the scheme particularly in traditional tax havens in the EU and dependent territories in the Caribbean such as Anguilla, the British Virgin Islands (BVI) and the Cayman Islands. Figures show a high of US$100 million from Switzerland through US$4 million from Guernsey to less than fifty thousand United States dollars from the BVI. They are therefore worried that investors have transferred cash fron Europe and its dependencies, where the EUSD has been enforced, to Hong Kong and Singapore in particular. The EU tax commissioner is therefore in talks to extend the application of the directive. Having said that it's said that Singapore and Hong Kong are dead set against implementing the directive. No dount they will point out that, through mutual legal assistance treaties and tax information agreements, they, and many other countries, including the entire Caribbean region, already cooperate in providing information on tax evasion. But, tax avoidance remains a legitimate tool of financial planning!