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To: Jon K. who started this subject	12/12/2002 1:47:32 PM
From: Softechie	Read Replies (1) of 29604

THE SKEPTIC: If In Doubt, Blame It On The Brits 12 Dec 11:11 By Anita Greil A DOW JONES NEWSWIRES COLUMN ZURICH (Dow Jones)--The European Unions' failure to carve out a plan to efficiently levy a tax on savings income across member states has left Switzerland and tiny Luxembourg as easy scapegoats. The pair's insistence on keeping their banking secrecy laws, however, deflects the blame from the one country whose forceful defense of its own financial center brought about the current standoff in the first place. When the E.U. came up with its draft plan for a harmonized savings tax across the union in 1997, the United Kingdom was the only country to resist the Commission's proposal to let member states chose between exchanging information among tax authorities or levying a withholding tax on interest rate income. The U.K.'s resistance to the withholding tax model is based on fears that this would mark the end of the Eurobond market, which is based in London. Until the Feira summit in the summer of 2000, the U.K. had taken the heat for standing in the way of a compromise among E.U. members because it had insisted that a harmonized taxation policy must be based on information exchange alone. At the summit, a compromise was seemingly found. The plan was to allow member states to have it either way for a transition period, after which all members would switch to an information exchange system alone. What seemed but a detail then has now become the main hurdle to any agreement at all. The goal was to close tax loopholes and avoid a massive capital drain by tying in countries such as Switzerland or the U.S. and convincing them to impose equivalent measures. Since then, the focus has shifted to Switzerland - and semantics. While the Swiss have taken the "equivalent" aspect of the draft literally - hence the offer of levying a relatively high 35% tax at the source - those E.U. countries that have their own banking secrecylaws prefer to translate "equivalent" into "equal" and, understandably, refuse to unilaterally loosen their own client protection laws. It seems like the solution might be to go back to the original plan - a model that lets different systems operate in tandem and takes the interests of all member states into account. -By Anita Greil, Dow Jones Newswires; +41 1 211 6588; anita.greil@dowjones.com (END) Dow Jones Newswires 12-12-02 1111ET

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