Liechtenstein has just announced the latest sums it has collected under the terms of the European Savings Tax Directive. It was a measly €7.8 million.
OK, yes, that is what the report says:
According to the Liechtenstein administration, the withholding tax levied on interest income paid to European Union (EU) taxpayers in the Principality amounted to around CHF9.6m (EUR7.8m) in 2010. This figure compares to approximately CHF14.4m (EUR11.7m) derived from the withholding tax in 2009, the administration states.
In accordance with the European Savings Tax Directive, which entered into force on July 1, 2005, and provides for the taxation of interest earned, the Principality of Liechtenstein imposed a withholding tax of 15% in the first three years on the interest income of EU investors. Since July 1, 2008, following a 5% rise, the increased withholding tax rate of 20% has applied.
OK, so we can, as Ritchie does, make some assumptions about how much capital that represents.
Working backwards this is 20% tax on €40 million interest. Assuming 2% interest, this is tax on interest income on € 2 billion capital (which may seriously overstate the case: German bonds paying over 3% p.a.).
Fair enough then, EU taxpayers have €2 billion in Liechtenstein banks.
Liechtenstein banks have € 140 billion assets under management.
So tax was levied on 3% of assets. Generously assuming only 40% of assets were fixed income then the savings tax is less than 10% effective in Liechtenstein which is no surprise with nearly 100,000 foundations, trusts, companies and anstalts in the Principality.
Ah, no, this isn\’t right (what a surprise with a Murphmeister post, eh?). It is individuals (and possibly companies, not sure, but think not) who are EU taxpayers who are subject to the with holding tax. Foundations, trusts and companies which are incorporated in Liechtenstein are not subject to it.
For of course they are not EU taxpayers, are they?
What is clear is that the case for reform of the European Savings Tax Directive is overwhelming given this massive failure of the existing arrangement to tackle serious tax abuse.
So it\’s tax abuse if not European Union taxpayers don\’t pay European Union taxes is it?