U.S. and EU Discuss Tax Savings Directive

On September 26, 2002, Glenn Hubbard, chairman of the White House Council of Economic Advisers, told a meeting of conservative political groups this week that the U.S. would not agree to European requests for board sharing of information on savings accounts held in the U.S. by foreigners. The U.S. will refuse to co-operate with the European Union?s saving directive - a decision that could delay the EU?s four-year attempt to agree on rules governing the taxation of non-residents? savings. On September 26, 2002, despite the Hubbard announcement, the European Commission said it remained confident it would reach an agreement with the U.S. on an information exchange on interest-bearing savings income. The European Commission views the U.S. agreement to participate before the end of the year as vital to the success of the proposal. The EU sees the savings directive as a key part of the EU?s plans to create a single financial market. If the EU is not able to achieve agreement on savings taxation, the EU believes it will suffer a setback to its efforts to combat tax evasion and money laundering. In December 2001, EU members agreed to automatically exchange information on the interest paid to non-resident holders of savings accounts, thereby allowing each government to tax the savings of its own citizens. The UK supported this approach after it had vigorously opposed a previous plan for a EU-wide ?withholding tax? on interest from cross-border savings.