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Brussels, 19 April 2006

Clearing and settlement: Commission expert group examines EU fiscal compliance barriers to cross border securities trading

The European Commission’s Clearing and Settlement Fiscal Compliance expert group (“FISCO”) has issued a Fact Finding Study examining EU Member States' fiscal compliance procedures for clearing and settlement of cross-border securities transactions. The Study analyses how these procedures hinder the functioning of capital markets and increase the cost of cross-border settlement, particularly in relation to withholding and transaction taxes. The FISCO group will issue a further report proposing solutions by early 2007.

Internal Market and Services Commissioner McCreevy said: "The FISCO Study will help us to identify and tackle many of those fiscal compliance practices and procedures that are current barriers to more efficient pan-European securities trading in the EU. This is an area that was highlighted as one to be addressed by the group of financial experts chaired by Alberto Giovannini and is an area where we need to make further progress to help deepen financial market integration. "

Taxation and Customs Union Commissioner Kovacs added: "I fully endorse the importance of this Study and the need to reinforce the economic efficiencies of financial market integration by removing tax obstacles. And I look forward to the FISCO Final Report, which will propose possible solutions for the removal of barriers in taxation to cross-border securities trading within the EU."

Main conclusions of the Fact Finding Study

Withholding tax procedures

  • Withholding tax collection and relief procedures vary considerably among Member States. Different procedures often apply even to different classes of securities within the same Member State.
  • The complexity and administrative costs resulting from these differences may lead investors to forgo the relief to which they are entitled and may discourage cross-border investment for the same reason.
  • In several cases, procedural tax rules often prevent foreign intermediaries from obtaining direct access to the local Central Securities Depository (CSD), or at least do not allow them to obtain access under conditions similar to those applicable to local intermediaries.

Transaction tax procedures

  • Tax rules that impose tax collection responsibilities on settlement service providers do not always take into account the fact that securities transactions may be handled by several local or foreign settlement service providers. These rules do not allow all settlement service providers to collect transfer taxes under similar conditions.
  • This issue may put certain settlement service providers at a competitive disadvantage in comparison with others.

About the FISCO Group

FISCO, created in March 2005 (IP/05/434), gives advice on the removal of fiscal compliance barriers to the clearing and settlement of EU cross-border securities transactions. The key issues considered by the Group are 'Giovannini Barriers' 11 and 12 on withholding and transaction tax procedures respectively.

FISCO is composed of 15 high-level experts, mainly from private bodies and academia. The Commission will use FISCO's findings as a basis for discussion with Member States in line with its established policy of prior consultation on tax issues.

For more details of EU policy on clearing and settlement:

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