Commission staff working document - Presenting an economic evaluation of the effects of Council Directive 2003/48/EC on the basis of the available data - Accompanying document to the report from the Commission to the Council in accordance with Article 18 of Council Directive 2003/48/EC on taxation of savings income in the form of interest payments [COM(2008) 552 final]
Date: 2008-09-15
Institutions: European Commission
Subjects: application of EU law, exchange of information, impact study, interest, savings, tax on income, tax system

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 15.9.2008 
SEC(2008) 2420 

COMMISSION STAFF WORKING DOCUMENT 

presenting an economic evaluation of the effects of Council Directive 2003/48/EC on the 
basis of the available data 

Accompanying document to the 

REPORT FROM THE COMMISSION TO THE COUNCIL 

in accordance with Article 18 of Council Directive 2003/48/EC on taxation of savings 
income in the form of interest payments 

[COM(2008) 552 final] 

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COMMISSION STAFF WORKING DOCUMENT  

presenting an economic evaluation of the effects of Council Directive 2003/48/EC on 
the basis of the available data  

1 Scope, methodology and constraints 

This  annex  provides  quantitative  approaches  to  evaluate  the  functioning  of  Council 
Directive  2003/48/EC  on  taxation  of  savings  income  in  the  form  of  interest  payments 
(the "Directive") for the first report pursuant to Article 18 of the Directive. It analyses the 
evolution of certain proceeds from investments that are covered by the Directive or that 
contain elements falling within its scope. In addition, the analysis looks at the effects of 
the implementation of the Directive on some investment patterns. 

However, the analysis suffers from many shortcomings linked to definitions in the legal 
provisions of the Directive, to severe data limitations and to technical issues, all of which 
make  the  analysis  more  difficult.  The  issues  linked  to  the  legal  provisions  include  the 
facts  that  the  beneficial  owner  may  use  intermediate  structures  not  covered  by  the 
Directive or that the country of the paying agent may be different from the country where 
the funds are located.  

Data limitations create a major difficulty for evaluating the effectiveness of the Directive. 
Important  information  such  as  the  amount  of  foreign  and  domestic  interest  income 
reported by individuals to their Tax Administration in their personal income tax returns, 
or the number of beneficiaries who had tax withheld to be compared to those who opted 
to  disclose  information  in  Member  States  that  apply  a  withholding  tax,  have  not  been 
provided  in  many  cases  by  Member  States.  Typically,  Member  States  only  report  the 
levels  of  withholding  taxes  collected  or  the  information  exchanged  since  mid-2005. 
Longer time series, including the period prior to the introduction of the Directive would 
have made it possible to better assess its effects. Those long series are only available for 
items  that  cover  a  scope  larger  than  that  of  the  Directive  (e.g.  total  interest  payments 
received) or more specific items such as bank deposits (with the drawback that, while the 
Directive only covers interest payments to individuals, the data do not allow a distinction 
to be made between individual and corporate recipients). Taken together this leads to the 
problem that there is no ideal benchmark available that exactly covers the items falling 
within the scope of the Directive. The data analysis presented here will therefore take a 
more  descriptive  approach  and  explain  the  results  given  the  available  data.  Because  of 
this incomplete reporting, the Commission is not in a position to be more precise in its 
analysis. 

Finally, the analysis is also constrained by the difficulty of separating many concomitant 
effects.  The  Directive  is  aimed  at  enabling  Member  States  to  tax  their  resident 
individuals on interest income received in another Member State. To the extent that the 
income  covered  by  the  Directive  previously  escaped  taxation,  there  is  likely  to  be  an 
effect  on  the  vehicles  that  fall  within  its  scope:  investors  might  decrease  their  savings 
because of a lower net-of-tax interest rate; investors might reallocate their savings in the 
same  vehicle  but  in  another  country  (e.g.  one  not  subject  to  the  Directive);  investors 
might reallocate their savings towards other investment vehicles as the relative net-of-tax 
return has changed; and/or investors might evade taxation.  

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These  different  data  limitations  must  be  borne  in  mind  when  interpreting  the  results  of 
the analysis. The remainder of this section is organised as follows: the next sub-section 
looks at the evolution of interest payments in general. The third sub-section looks at the 
evolution of bank deposits. Next, the data collected from the Member States on exchange 
of  information  and  withholding  taxes  is  analysed.  The  next  two  sub-sections  look  at 
UCITS and at the cost borne by paying agents for adapting their system and applying the 
measures.  The  sub-section  on  costs  is  based  on  the  only  significant  result  of  a  broader 
consultation  of  representative  Trade  Associations  on  the  quantitative  impact  of  the 
Directive that the Commission Services had launched within the framework of the Expert 
group set up in 2007. For more details consult 

http://ec.europa.eu/taxation_customs/taxation/personal_tax/savings_tax/savings_directive_review/index_en.htm. 

Finally, the last section offers a statistical analysis of the impact of the introduction of the 
Directive on savings and on bank deposits. 

2 Descriptive sectoral accounts data 

A  first  step  in  the  analysis  is  to  use  Eurostat's  sectoral  accounts  data  to  follow  the 
evolution of interest payments vis-à-vis other types of savings income and the evolution 
of  household  recipients  vis-à-vis  financial  and  non-financial  corporate  recipients.  Two 
caveats shall be made. First, missing data do not allow the calculation of summary time-
series for years before 2000 and for seven Member States. Secondly, it should be noted 
that the Eurostat figures include many interest payments that do not fall under the scope 
of the Directive. One noticeable example is domestic interest payments. However, those 
figures  may  give  some  indications  about  the  relative  importance  of  interest  income  in 
comparison to other types of savings income and about the general evolution of income 
from savings. The figures for interest and dividends are reported in Table (1). No detailed 
statistics  are  provided  by  Eurostat  on  the  composition  of  the  remaining  part  of  the 
savings income generated by other types of financial instruments.  

Table (1): Summary figures for various types of income from savings and recipients 

(1) 
Gross savings to GDP 
20.4% 
20.1% 
19.8% 
19.6% 
20.2% 
19.8% 
20.2% 
(5) 
Share of interest 
income of Households 
in total interest 
income 
20.0% 
19.6% 
19.4% 
19.7% 
19.4% 
18.1% 
16.9% 

(2) 
Savings income to 
GDP 
35.5% 
35.7% 
31.6% 
29.8% 
30.4% 
32.4% 
35.4% 
(6) 
Share of dividend 
income of Households 
in total dividend 
income 
52.8% 
51.1% 
51.2% 
51.8% 
51.3% 
49.7% 
48.8% 

(3) 
Share of interest 
income in total 
savings income 
60.6% 
60.2% 
58.1% 
55.4% 
53.2% 
53.0% 
55.7% 
(7) 
Share of interest 
income in 
Households' total 
savings income 
33.9% 
33.4% 
30.8% 
28.9% 
28.0% 
27.0% 
28.2% 

(4) 
Share of dividend 
income in total 
savings income 
29.9% 
31.9% 
33.3% 
35.7% 
36.4% 
37.0% 
35.1% 
(8) 
Share of dividend 
income in 
Households' total 
savings income 
42.6% 
44.0% 
45.1% 
46.7% 
48.2% 
48.9% 
47.8% 

year 
2000 
2001 
2002 
2003 
2004 
2005 
2006 

2000 
2001 
2002 
2003 
2004 
2005 
2006 

GDP-weighted averages for 20 EU Member States (series incomplete or not available for BG, CY, HU, LU, MT, RO, 
SE). Data for EL (2005 and 2006) are set as in 2004. Data for IE (2000 and 2001) are set as for 2002. Data for PL, PT 
and LV (2006) are set as for 2005. Source: Eurostat sectoral data. 

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First,  columns  (1)  and  (2)  of  Table  (1)  show  that  gross  savings1  have  been  relatively 
stable in percentage of GDP, while the amount of income from savings2 in percentage of 
GDP  has  followed  a  U-curve  between  2000  and  2006.  A  noticeable  element  from 
columns (3) and (4) is the steady decrease of the share of interest income in total income 
from savings between 2000 and 2005, matched by an increase in the share of dividends. 
This situation might be explained by relatively low interest rates, causing interest-bearing 
instruments to be less attractive. 

Second,  columns  (5)  and  (6)  show  that  the  share  of  household  recipients  in  both  total 
interest payments received and total dividends received is relatively stable between 2000 
and 2004 and drops in 2005 and 2006. A more detailed analysis shows that this drop is 
due to an increase in payments received by financial corporations. Figure (1) illustrates 
this for interest payments. 

Figure (1): Total interest payments received 

R
U
E
s
n
o

i
l
l
i

M

1800000

1600000

1400000

1200000

1000000

800000

600000

400000

200000

0

2000

2001

2002

2003

2004

2005

2006

Non-financial corporations

Financial corporations

Households

20 EU Member States (series incomplete or not available for BG, CY, HU, LU, MT, RO, SE). Data for GR (2005 and 
2006) are set as in 2004. Data for IE (2000 and 2001) are set as for 2002. Data for PL, PT and LV (2006) are set as 
for 2005. Source: Eurostat sectoral data. 

Finally, columns (7) and (8) display the share of interest and of dividends in households' 
total  income  from  savings.  The  figures  show  that  there  has  been  a  gradual  shift  from 
interest  toward  dividend  revenue  between  2000  and  20043.  Nevertheless  a  significant 
share  of  savings  income  is  still  made  of  interest  income.  This  evolution  is  shown  in 
figure (2). 

1 

2 

3 

Category B8G of the sectoral accounts. A finer distinction between savings from households and 
from corporations is not feasible because of poor data availability 
Category  d4  of  the  sectoral  accounts.  This  category  represents  'property  income',  which  is 
arguably  larger  than  savings  income  and  includes  interest  (d41),  distributed  income  of 
corporations  (d42),  reinvested  earnings  on  direct  foreign  investment  (d43),  property  income 
attributed to insurance policy holders (d44), and rents (d45).  
The  remaining  categories  are  property  income  attributed  to  insurance  policy  holders  (d44)  and 
rents (d45). Both are stable at respectively about 23% and 1% of the total revenues from savings. 
The category reinvested earnings (d43) is zero for households recipients. 

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Figure (2): Composition of income from savings for households 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

2000

2001

2002

2003

2004

2005

2006

Interest

Dividends

Reinvested earnings

Insurance Policy

Rents

GDP-weighted averages for 20 EU Member States (series incomplete or not available for BG, CY, HU, LU, MT, RO, 
SE). Data for GR (2005 and 2006) are set as in 2004. Data for IE (2000 and 2001) are set as for 2002. Data for PL, 
PT and LV (2006) are set as for 2005. Source: Eurostat sectoral data. 

In conclusion, the introduction of the Directive does not appear to have led to major 
changes in the composition of savings incomes. 

3 Evolution of international deposits (BIS data) 

3.1 The BIS bilateral data on international deposits 

This section investigates the possible effect of the Directive on international depositing. 
To this end, bilateral data from the Bank for International Settlements (BIS) on deposits 
from foreign bank and foreign non-bank depositors are used. Non-Bank depositors are all 
depositors which are either individuals or companies excluding banks. Deposits held by 
this group are called "non-bank deposits" in the following analysis. If the depositor is a 
bank the name of the deposit is accordingly "bank deposits". The quarterly data cover the 
period  Q1-2000  to  Q4-2007.  The  data  concern  deposits  in  all  currencies  and  are 
expressed  in  (million  of)  USD.  To  measure  the  effects  it  is  also  necessary  to  take  into 
account  the  agreements  concluded  with  five  European  third  countries  on  equivalent 
measures  to  the  Directive  and  with  ten  dependent  and  associated  territories  of  the  EU 
Member States on the same measures.  

As a first step, data for BIS reporting countries referring to payments made cross-border 
to depositors in a EU Member State has been selected. It should be noted that not all EU 
Member States report to the BIS and that, therefore, the coverage is incomplete.  

Next, the data for the BIS reporting countries where the deposits are located have been 
divided into three categories:  

(a) EU Member States and third countries or jurisdictions that apply a withholding tax to 
interest paid to individuals who are residents of a Member State. This category includes 
Austria (AT), Belgium (BE), Luxemburg (LU), as well as Guernsey (GG), Jersey (JE), 
Isle of Man (IM) and Switzerland (CH).  

(b)  EU  Member  States  that  exchange  information  under  the  Directive.  This  category 
includes: Germany (DE), Spain (ES), Finland (FI), France (FR), Ireland (IE), Italy (IT), 
the Netherlands (NL), Portugal (PT), Sweden (SE) and the United Kingdom (UK).  

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(c)  Finally,  other  jurisdictions  that  do  not  apply  the  Directive.  This  category  includes: 
Australia (AU), Canada (CA), India (IN), Japan (JP), Turkey (TR), Taiwan (TW) and the 
United States (US).  

Because of substantial gaps in the information for the whole period, the observations for 
Bermuda, Brazil, Chile, Denmark, Greece, Mexico and Panama, have not been taken into 
account in the summary statistics, as they would distort the picture across years. Finally, 
Singapore (SG) and Macao (MO) have not agreed to disclose their bilateral data for the 
purpose of this study. 

3.2 Data limitations 

There are several problems inherent in the data. Firstly, two statistical breaks in reporting 
have a large impact on the totals. This is especially the case for the 1st quarter of 2003 
and for the 2nd quarter of 2006 for which large structural breaks appear for deposits by 
UK residents in the US. This break increases the share of non-bank deposits in the US 
substantially which in turn leads to a strong increase in the share of third countries which 
do  not  apply  the  Directive.  Secondly,  all  currencies  are  expressed  in  USD.  Exchange 
rates  with  the  USD  have  been  volatile  throughout  the  period  and  this  may  affect  some 
data.  Thirdly,  non-bank  deposit  data  include  both  individual  depositors  (subject  to  the 
Directive) and corporate depositors (not subject to the Directive). There is no information 
on the exact split between the two types of depositor. One indication is that, as reported 
in a previous section, the total amount of interest income received by households in the 
total  amount  of  interest  income  received  by  all  private  recipients  was  16.9%  in  2006. 
This share may vary across countries and years and there is no proper way to deal with 
this problem in the context of this analysis. 

3.3 Analysis 

At the end of 2007, external non-bank deposits  amounted to USD 627.6  billion for  the 
countries  applying  a  withholding  tax  (category  (a)  above);  to  USD  1,203.8  billion  for 
Member  States  applying  information  exchange  (category  (b)  above);  and  to  USD 
538.415 billion for third countries (category (c) above). 

First,  the  quarterly  growth  rate  of  non-bank  deposits  for  all  three  categories  has  been 
computed and is illustrated in figure (3). Because of the structural breaks, data for Q1-
2003 and Q2-2006 for third countries (category (c)) are not included4. A visual analysis 
of figure (3) does not allow detection of a common pattern for the growth of non-bank 
deposits  in  the  countries  covered  by  the  savings  taxation  measures  (categories  (a)  and 
(b)) compared to the third countries (category (c)).5 A difference between third countries 
(category (c)) and countries that applied the Directive (categories (a) and (b)) is that the 
volatility of growth rates is much larger for the former until 2004. After that point in time 
the  development  is  similar.  This  holds  also  for  the  years  after  the  introduction  of  the 
Directive. 

4 

5 

There are two major statistical breaks in the first quarter of 2003 and the second quarter of 2006. 
Those statistical breaks inflate the share of third countries at the expense of other categories. 
Controlling for the exchange rate does not change the conclusions. 

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Figure (3): Quarterly growth of non-bank deposits 

Growth rate of external non-bank deposits vis-à-vis directive countries in USD

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

2000 2000 2000 2001 2001 2001 2001 2002 2002 2002 2002 2003 2003 2003 2003 2004 2004 2004 2004 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007

r
a
e
y
r
e
p
%

40%

30%

20%

10%

0%

-10%

-20%

WT countries

Xinfo countries

Third countries

Source: BIS and own calculations 

Next, for each category ((a), (b) and (c) above) of BIS reporting countries, the evolution 
of  the  share  in  the  total  external  non-bank  deposits  made  by  residents  in  countries  in 
category  (a)  and  (b)  has  been  studied.  6  Notwithstanding  the  two  structural  breaks 
mentioned above7, figure (4) shows that the share of deposits in banks in BIS reporting 
countries  that  apply  the  withholding  tax  (category  (a))  has  decreased  from  35.0%  to 
29.3% between mid-2003 and mid-2005 but has been stable after the introduction of the 
directive. This was mainly to the benefit of third countries (category (c)). The respective 
shares  of  each  category  of  BIS  reporting  countries  have  been  relatively  constant  since 
mid-2005.  The  same  pattern  emerges  if  the  deposits  are  converted  from  US-Dollars  to 
Euro. This is done in order to control for possible distortions due to the reporting in US-
Dollars only and the volatility of Dollar-Euro exchange rate. The only major difference 
in this case is that the share of third countries is larger. However, the general trend does 
not change. 

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i.e. the 13 EU Member States that report to the BIS. 

Therefore, the shares from the fourth quarter of 2002 cannot be directly compared with the shares 
of  the  second  quarter  of  2003,  and  the  shares  of  the  first  and  third  quarters  of  2003  cannot  be 
directly compared either. 

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Figure (4): Share of BIS reporting countries by category in non-bank deposits 

Share of bank countries in non-bank deposits

100%

90%

80%

70%

60%

%

50%

40%

30%

20%

10%

0%

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

2002

2002

2002

2002

2003

2003

2003

2003

2004

2004

2004

2004

2005

2005

2005

2005

2006

2006

2006

2006

2007

2007

2007

2007

WT countries

Xinfo countries

Third countries

Source: BIS and own calculations 

Finally, we can compare the previous data with the share of external deposits from bank 
depositors.  This  is  done  in  figure  (5).  We  see  that  the  lion's  share  (about  70%)  is  for 
countries that apply information exchange and that the shares are stable over time. The 
large  share  of  countries  exchanging  information  (category  (b))  reflects  the  fact  that 
countries that host large financial sectors (such as the UK and Germany) belong to this 
group.  As  regards  the  share  of  non-bank  deposits  two  observations  can  be  made.  First, 
from a static point-of-view the share of external non-bank deposits in countries applying 
the withholding tax and in third countries (categories (a) and (c)) is about 35% of total 
external  deposits,  while  this  proportion  is  20%  in  countries  applying  exchange  of 
information (category (b)). Secondly, from a dynamic point of view, while the share of 
deposits made by external banks has not changed, there has been a slight decrease in the 
share  of  non-bank  deposits  in  countries  exchanging  information  (category  (b)).  These 
two  elements  could  suggest  that  non-bank  depositors  have  a  preference  for  countries 
maintaining some form of bank secrecy.  

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Figure (5): Share of BIS reporting countries in bank deposits 

Share of bank countries in bank deposits

100%

90%

80%

70%

60%

%

50%

40%

30%

20%

10%

0%

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

2002

2002

2002

2002

2003

2003

2003

2003

2004

2004

2004

2004

2005

2005

2005

2005

2006

2006

2006

2006

2007

2007

2007

2007

WT countries

Xinfo countries

Third countries

Source: BIS and own calculations 

In  conclusion,  for  deposits  of  non-bank  depositors,  there  has  been  an  observable 
shift  from  countries  within  the  scope  of  the  Directive  towards  third  countries. 
However, this development took place before the Directive came into force. 

4  Evolution  of  information  exchange  and  withholding  taxes  using  data  from  Member 
States and from other jurisdictions covered by the savings agreements 

4.1 Description of the data 

The EU Member States and other jurisdictions covered by the savings taxation measures 
deliver  data  on  the  tax  revenue  received  from  or  paid  to  other  countries  (if  the 
withholding  tax  is  applied)  and  on  the  information  shared  (number  of  individuals, 
country of residence, total income subject to exchange etc.). This data is available for the 
second half of 2005 and for 2006. UK is in a special position because its tax year ends on 
6 April, so its data refers to the period between 1 July 2005 and 5 April 2006. The data 
only contains the revenue covered by (and reported under) the Directive. Hence, the data 
does not give information about the evolution of non-covered items or on the structure of 
savings after the implementation of the directive. The reason is that the data provided by 
the tax authorities of the participating countries lists only savings income that has indeed 
been  disclosed  or  taxed  while  all  types  of  tax  evasion  or  other  reactions  to  taxation 
cannot be observed. 

The data contains information on:  

•  The  amount  of  withholding  tax  collected  by  countries  applying  such  a  tax,  split  by 
country  of  recipient  of  the  tax  payment  (but  no  information  about  the  number  of 
beneficial owners concerned). 

•  The  amount  of  interest  payments  and  sales  proceeds  sent  (bilateral  data),  if  possible 
with  a  breakdown  between  interest  payments  and  sales  proceeds,  as  well  as  a 
breakdown between beneficial owners and residual entities. 

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•  The  amount  of  interest  payments  or  sales  proceeds  by  type  (debt  claims,  interest 
accrued or capitalised coming from sales of debt claims or undertakings, interest from 
undertakings, annualised interest). 

•  The number of beneficial owners on a bilateral basis, the number of residual entities 
on  a  bilateral  basis,  the  number  of  paying  agents,  and  the  number  of  records 
exchanged between countries. 

4.2 Data Limitations 

Before discussing the figures below it has to be noted that the data provided by Member 
States and other jurisdictions covered by the savings taxation measures contain a critical 
number  of  missing  values.  This  leads  to  the  problem  that  the  data  must  be  interpreted 
with  caution  since  missing  values  significantly  reduce  the  number  of  observations  for 
certain  jurisdictions.  The  missing  value  problem  is  especially  critical  for  the  data  on 
information  exchange  discussed  in  section  4.3.  This  leads  to  the  problem  that  a 
separation  of  different  items  covered  by  the  Directive  is  not  possible.  For  example  the 
data does not permit a solid statement on the role of paying agents vs. residual entities on 
receipt. 

Furthermore,  there  is  a  total  lack  of  information  on  beneficial  owners  in  Austria  and 
Belgium. The same is true for most third countries. An exception is Luxemburg which at 
least reports the number of beneficial owners who opted for voluntary disclosure. While 
some countries reported on most items that fall under the scope of the Directive and the 
respective  agreements  there  are  many  countries  where  no  values  are  reported  or  where 
the figures for the second half of 2005 and the year 2006 differ so strongly that different 
reporting methods must have been applied. This can also be illustrated by the differences 
in reported values between countries. If all countries had used the same definitions and 
exchange  rates,  the  numbers  reported  by  the  sending  country  should  be  equal  to  the 
numbers reported by the country that received the information or the tax revenue. This is 
however not the case for each bilateral position. In the second semester of 2005 the total 
discrepancies  between  sent  and  received  values  amounted  to  0.9 million Euro.  In  2006 
this  value  was  still  above  0.5 million Euro.  Taken  together,  these  problems  reduce  the 
quality and the reliability of the data. The following descriptive explanations have to be 
read  in  the  light  of  this.  Furthermore,  only  the  revenue  effects  can  be  observed  since 
there is no, or only a very weak, link to the investment decisions that led to this outcome.  

4.3 Descriptive data analysis 

The main aim of the Directive is to enable Member States to tax interest income received 
by  their  resident  individuals  from  other  Member  States  through  an  exchange  of 
information. During a transitional period some of the Member States levy a withholding 
tax  instead  of  exchanging  information.  The  revenue  from  this  tax  is  shared  with  the 
Member State of residence of the beneficial owner of the interest income. 

The  agreements  with  the  third  countries  and  the  other  jurisdictions  build  on  either  of 
these two methods but in most cases they are unilateral in the sense that information is 
given  to  Member  States  (Anguilla  and  Cayman  Islands)  or  the  withholding  tax  levied 
shared with Member States (Andorra, Liechtenstein, Monaco, San Marino, Switzerland, 
and  Turks  &  Caicos  Islands).  Only  Montserrat  and  Aruba  (which  apply  reporting)  and 
Jersey, Guernsey, Isle of Man, British Virgin Islands and the Netherlands Antilles (which 

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levy a withholding tax) in their turn receive, from Member States, information or a share 
of the withholding tax levied. 

Accordingly,  countries  can  be  divided  into  two  groups:  Firstly,  countries  that  provide 
information, secondly, countries that levy a withholding tax and share the revenue with 
the country where the beneficial owner resides. In the following section available data on 
interest payments and sales proceeds reported or the amount of withholding tax shared is 
briefly described. 

4.3.1 Countries operating information exchange system 

The first group of countries is exchanging information as provided in Articles 8 and 9 of 
the Directive or under the respective Agreement. Table (2) shows the countries that apply 
an  information  exchange  regime  and  the  sum  of  reported  interest  payments  and  sales 
proceeds according to Article 9 of the Directive or under the respective Agreement. As 
expected, the largest economies hosting a large part of economic activities and financial 
centres report the highest values. The UK reported EUR 9.1 b for interest payments made 
from 1 July 2005 to 5 April 2006 (end tax year). In 2006, Germany sent information on 
interest  payments  amounting  to  almost  1.4  b  Euro  to  other  participating  countries.  A 
similar value can be found in France (1.5 b Euro). Data on information sent in 2006 is 
not available for Cyprus, Spain, Hungary, Italy, Sweden, Anguilla and Montserrat. 

Table (2): Interest payments and sales proceeds reported by countries using 
information exchange* 

EU Member States 

Cyprus 

Czech Republic 

Germany 

Denmark 

Estonia 

Spain 

Finland 

France 

Greece 

Hungary 

Ireland 

Italy 

Lithuania 

Latvia 

Malta 

Netherlands 

Poland 

Portugal 

Sweden 

Slovenia 

Slovakia 

United Kingdom 

Dependent and Associated Territories 

Anguilla 

Aruba 

Cayman Islands 

Montserrat 

2nd half 2005 
n.a. 

n.a. 

2006 

n.a. 

17.81 

660.73 

1392.06 

n.a. 

n.a. 

n.a. 

n.a. 

1.16 

4.40 

n.a. 

7.19 

568.14 

1512.54 

6.85 

n.a. 

258.87 

n.a. 

n.a. 

0.18 

1.02 

n.a. 

0.07 

n.a. 

n.a. 

n.a. 

1.87 

9132.49 

n.a. 

0.01 

8.81 

n.a. 

23.11 

n.a. 

770.72 

n.a. 

0.09 

0.65 

2.10 

795.69 

0.61 

0.56 

n.a. 

1.35 

4.76 

n.a. 

n.a. 

0.09 

18.02 

n.a. 

in million Euro 
*Amount of interest payments and sales proceeds under Art. 9 subject to exchange of 
information/ voluntary disclosure, (Beneficial owners and residual entities) 

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Table  (3)  shows  the  average  payment  reported  in  Table  (2)  divided  by  the  number  of 
beneficial owners that have been reported. All values are in Euro. Again there are many 
countries missing, nevertheless, the values give a first indication of the average size of 
payments.  The  largest  payments  per  beneficial  owner  can  be  found  in  Germany  and 
France.8  

Table (3): Reported average payments per beneficial owner 

EU Member States 

Austria 

Belgium 
Cyprus 
Czech Republic 
Germany 
Denmark 
Estonia 
Spain 
Finland 
France 
Greece 
Hungary 

Ireland 

Italy 

Lithuania 

Latvia 

Malta 

Netherlands 

Poland 

Portugal 

Sweden 

Slovenia 

Slovakia 

United Kingdom 

2nd half 2005 
n.a. 

n.a. 

n.a. 

n.a. 

2006 

n.a. 

n.a. 

n.a. 

174 

3,232 

6,559 

n.a. 

n.a. 

n.a. 

n.a. 

4,706 

341 

n.a. 

3,495 

n.a. 

n.a. 

102 

117 

n.a. 

5 

n.a. 

n.a. 

n.a. 

179 

n.a. 

n.a. 

761 

n.a. 

595 

6,375 

827 

n.a. 

5,677 

n.a. 

123 

102 

226 

n.a. 

44 

204 

n.a. 

191 

392 

n.a. 
 in Euro 

8 

Information on reported payments per beneficial owner is also available for Luxemburg. Unlike 
Austria  and  Belgium,  Luxembourg  delivers  information  if  beneficial  owners  opt  for  voluntary 
disclosure as described in Article 13 of the Directive in order not to be subject to a withholding 
tax. The average payment in 2006 is 10,373 Euro according to this source.  

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4.3.2 Countries levying a withholding tax 

Table (4): Tax revenue shared by countries with withholding tax regime 

EU Member States 

Austria 

Belgium 

Luxembourg 

Third Countries 

Andorra 

Liechtenstein 

Monaco 

San Marino 

Switzerland 

Dependent and Associated Territories 

British Virgin Islands 

Turks and Caicos 

Guernsey 

Jersey 

Isle of Man 

Netherlands Antilles 

2nd half 2005 
9.48 

7.51 

35.90 

3.50 

1.94 

3.75 

1.13 

2006 

44.32 

25.92 

124.59 

12.77 

7.08 

11.70 

7.47 

77.23 

255.92 

0.00 

0.01 

4.93 

13.26 

13.26 

n.a. 

n.a. 

0.02 

16.83 

32.15 

20.35 

n.a. 
in million Euro 

Table  (4)  displays  available  information,  for  the  countries  levying  a  withholding  tax, 
about the amount of revenue shared with the Member States. The major part of revenue 
from  the  withholding  tax  in  the  second  half  of  2005  and  in  2006  was  raised  in 
Switzerland  and  Luxembourg.  For  both  those  periods,  Switzerland  accounted  for  more 
than 45% of the total amounts reported as regards withholding tax shared; Luxembourg's 
share was 22%. Austria and Belgium accounted for 7.4% and 4.6%, respectively, while 
Jersey,  the  Isle  of  Man  and  Guernsey  contributed  6.2%,  4.6%,  and  3.0%.  All  other 
countries  have  very  low  shares.  There  is  no  information  from  the  Netherlands  Antilles 
about the amount of withholding tax shared. For the British Virgin Islands information is 
missing for the second half of 2005. 

Figure  (6)  shows  the  distribution  of  revenue  from  the  withholding  tax  levied  in  the 
second  half  of  2005  and  in  2006.  The  graph  only  takes  into  account  countries  which 
received  more  than  EUR  10  million  in  both  years  together.  Unsurprisingly,  the  largest 
countries  in  the  EU  received  the  largest  shares.  Germany  (de)  received  EUR 
192.7 million in 2005 and 2006, Italy (it) EUR 112.9 million followed by France (fr) and 
the United Kingdom (uk). A notable exception is Belgium (be) which received more than 
EUR  71  million.  This  is  due  to  the  close  ties  between  Belgium  and  Luxemburg.  The 
revenue received from Luxemburg accounts for 74% of the Belgian part of the revenue. 

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Figure (6): Withholding tax collection 

 Received Withholding Tax Revenue
2005 and 2006 in m Euro

105.2

71.6

22.6

112.9

13.7

62.8

48.8

be
es
gr
nl

192.7

de
fr
it
uk

Source: European Commission

In conclusion, the data on information exchange from EU Member States and other 
jurisdictions  show  that  reported  interest  payments  increased  significantly  between 
the second half of 2005 and 2006. Unsurprisingly, the largest payments can be found 
in  the  largest  economies.  The  quality  of  data  reporting  by  Member  States  to  the 
Commission needs to be improved. 

The data on withholding tax countries shows that Switzerland and Luxemburg are 
the  main  sources  of  withholding  tax  revenue  while  Germany,  Italy  and  the  UK 
receive the largest share of tax revenue. 

5 UCITS data 

Interest  payments  distributed  by  Undertakings  for  Collective  Investment  in  transferable 
securities  (UCITS)  are  generally  included  in  the  scope  of  the  Directive.  If  the  UCITS 
invests  only  marginally  in  debt  claims  (less  than  15%),  it  will  fall  outside  the  scope 
provided that the Member State where the UCITS is established has exercised the option 
of excluding such UCITS. Non-UCITS with legal personality do not fall under the scope 
of  the  Directive  at  all.  Non-UCITS  lacking  legal  personality  can  opt  to  be  treated  as 
UCITS,  and  in  such  case  they  would  fall  within  the  scope.  This  varying  treatment  of 
UCITS and Non-UCITS under the Directive makes them particularly important to study.  

Table  (5)  shows  the  evolution  of  UCITS  and  non-UCITS  as  well  as  some  of  their 
respective  subcategories  for  2002  to  2007.  The  interesting  feature  is  that  the  share  of 
UCITS and non-UCITS in the total has remained constant at 78% and 22% respectively. 
The only noticeable evolution is a gradual decrease of the share of UCITS investing in 
bonds  from  29%  to  19.5%  between  2002  and  2007,  mostly  to  the  benefit  of  those 
investing in equity. This shift has however occurred throughout the period and a possible 
impact of the Directive is therefore questionable. 

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Table (5): Evolution of UCITS and non-UCITS 

Billion EUR 
Total UCITS  
Among which 
Equity 
Balanced 
Bond 
Money Market 
Other 
Ireland* 

Total Non-UCITS 
Among which 
German Spezialfunds 
Closed-ended British 
Investment Trusts 
Open-ended French 
employees saving 
Luxembourg "other" funds 
Property funds 

31/12/2002  31/12/2003  31/12/2004  31/12/2005  31/12/2006  31/12/2007 

3,289 

3,705 

4,189 

5,170 

5,974 

6,203 

971 
433 
955 
615 
77 
239 

953 

480 
74 

48 

n.a. 
118 

1,163 
470 
1,034 
668 
84 
286 

1,345 
517 
1,045 
798 
139 
344 

1,822 
636 
1,190 
842 
217 
463 

2,222 
800 
1,251 
841 
277 
583 

2,227 
856 
1,208 
911 
355 
645 

1,054 

1,156 

1,396 

1,600 

1,723 

518 
82 

57 

n.a. 
136 

543 
86 

57 

28 
150 

618 
99 

67 

66 
167 

670 
105 

85 

93 
188 

691 
83 

85 

102 
199 

Source:  EFAMA  Quarterly  Statistical  Releases.  *  Ireland  gives  no  breakdown.  Figures  are  in  Billion  of 
Euros. 

In  conclusion,  data  do  not  display  a  different  pattern  for  UCITS  and  Non-UCITS 
instruments.  The  only  noticeable  evolution  is  a  gradual  decrease  of  the  share  of 
UCITS  investing  in  bonds  between  2002  and  2007,  mostly  to  the  benefit  of  those 
investing in equity. 

6 Information on costs 

The  consultation  with  Trade  Associations  represented  in  the  Expert  group  on  the 
quantitative aspects of the Directive led to very little data (the results of this consultation 
are available at: 

http://ec.europa.eu/taxation_customs/taxation/personal_tax/savings_tax/savings_directive_review/index_en.htm). 

The European Banking Federation shared the results of a survey indicating that, based on 
reports  from  40  paying  agents  in  6  countries,  the  average  cost  of  introducing  the 
application of the Directive are EUR 2 million per business unit and the recurring costs 
are EUR 100,000 per business unit.  

7 Technical analysis 

This section seeks to estimate the possible effect of the introduction of the Directive on 
variables such as the level of interest received by households and on the share of interest 
in the total property income of households. Again, many caveats need to be made. First, 
the category of interest covered by the data is larger than that covered by the Directive 
and it is not known which percentage of the data actually concerns payments subject to 
the  Directive.  Secondly,  changes  in  explanatory  variables  will  influence  different  types 
of  interest  payments  in  different  ways.  For  example,  domestic  inflation  will  have  a 
different  impact  on  domestic-source  interest  received  than  on  foreign-source  interest. 
Thirdly, data on interest received by individuals are only available for some EU countries 
and  for  1995-2006.  This  means  that  the  effects  can  only  been  seen  for  the  last  year  or 
two.  Fourthly,  the  effects  of  introduction  of  the  Directive  can  only  be  captured  by 
introducing  a  binary  explanatory  variable  that  takes  the  value  one  in  the  country-year 

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pairs  for  which  the  Directive  is  in  force.  Because  there  are  only  one  or  two  years  for 
which this variable applies and because the geographical coverage of this variable does 
not vary, the variable may also simply act as a fixed effect for a group of countries during 
the last year of observations, picking up some unobserved effects that are common to EU 
Member States during this year. 

Table (6) shows the results of the regressions for the effect of the Directive on interest 
received  by  households9.  Regressions  (1)  to  (3),  show  that  the  estimated  effect  of  the 
introduction of the Directive is heavily dependent on the specification of the model. In 
particular,  simply  changing  the  proxy  for  the  size  of  the  country  from  the  level  of 
population to the level of GDP turns the effect  of  the  Directive  on  the  level  of  interest 
received  by  households  from  a  positive  and  significant  effect  into  a  negative  but  non-
significant one. It also turns out that the results are very sensitive to the inclusion of some 
controls. For example, omitting inflation in the regressions washes out the significance of 
the  Directive  variable  in  all  regressions.  This,  combined  with  the  wrong  sign  for  some 
controls  place  doubts  on  the  statistical  significance  of  the  result  that  introducing  the 
Directive decreased the share of interest in the property income of households.  

Before explaining in detail the single regressions, it should be stated that the econometric 
analysis  does  not  detect  any  major  effect  of  the  Directive  on  the  dependent  variables 
explained  above.  The  share  of  interest  received  by  households  in  the  total  interest 
received by individual and corporate recipients has decreased but this is mainly due to an 
increase in financial corporations' receipts. Equally, the share of interest in total property 
income received by households has declined in favour of dividends but this phenomenon 
started already in 2000. A regression analysis of the effect of the Directive on the level 
and the share of interest received by households shows some negative effects but those 
are not statistically robust. 

Regressions (1) to (3) use the logarithm of the amount of interest received as dependent 
variable, while regressions (4) to (6) use the share of interest in the total property income 
received by households instead. The regressions include some control variables. The size 
of the country is supposed to have a positive effect on the amount of interest received by 
its households. This size is proxied by the logarithm of the population in regression (1) 
and  (4).  As  an  alternative,  the  logarithm  of  nominal  GDP  is  used  in  the  other  four 
regressions.  Next,  inflation  is  expected  to  have  an  ambiguous  effect  on  the  amount  of 
interest received by individuals. On the one hand, inflation increases the amount of any 
payment over time. On the other hand, interest payments are usually fixed and therefore 
investors  may  decide  to  shift  to  other  investment  vehicles.  GDP  growth  is  expected  to 
have  a  negative  effect  on  interest  received  because  investors  may  prefer  to  choose 
investment vehicles which will include better returns such as stocks. Finally, the interest 
rate on deposits is used as a proxy for the interest rate. It is expected to have a positive 
effect  on  the  level  of  interest  received.  Its  effect  on  the  share  of  interest  is  more 
ambiguous  because  the  return  on  other  investment  types  may  follow  the  same  pattern. 
Finally,  all  regressions  include  year  dummies  to  control  for  unobserved  year-specific 
effects that are common to all countries in the sample and all regressions except (3) and 
(6) include country dummies to control for unobserved country-specific that are common 
for all years. 

9 

category "d4s14_s15 received" of the Sectoral Accounts 

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Table (6): Effect of the Directive on Interest received by Households 

Variables 

(1) 
Log interest 

(2) 
Log interest 

(3) 
Log interest 

Directive  

Log population  

Inflation 

interest 

Deposit 
rate 
Real GDP growth 

Log nominal GDP 

Constant 

.347 
(2.67)** 
-13.459 
(5.96)** 
-.005 
(0.85) 
.046 
(4.97)** 
-.023 
(0.85) 

194.249 
(6.07)** 

Time dummies 
Y 
Country dummies  Y 

Observations 
R-squared 

188 
0.99 

-.160 
(.99) 

-.095 
(.45) 

-.009 
(1.52) 
.048 
(5.60)** 
-.030 
(1.43) 
2.019 
(7.37)** 
-18.804 
(4.62)** 

Y 
Y 

188 
0.99 

-.015 
(1.82) 
.040 
(4.19)** 
-.020 
(0.84) 
1.323 
(37.25)** 
-8.025 
(15.33)** 

Y 
N 

188 
0.95 

(4) 
Share 
interest 
-.253 
(3.98)** 
1.104 
(1.10) 
-.003 
(1.59) 
-.002 
(1.29) 
-.014 
(2.21)* 

-19.689 
(1.08) 

Y 
Y 

177 
0.90 

(5) 
Share 
interest 
-.220 
(3.96)** 

-.002 
(1.18) 
-.002 
(1.07) 
-.015 
(2.30)* 
-.033 
(0.30) 
.920 
(0.94) 

Y 
Y 

177 
0.89 

(6) 
Share 
interest 
-.113 
(1.33) 

-.003 
(0.84) 
.008 
(2.61)** 
-.014 
(1.68) 
-.003 
(0.23) 
.550 
(2.61)* 

Y 
N 

177 
0.20 

Source. Eurostat, Sectoral Accounts. Robust t-statistics in parentheses. * significant at 5%; ** significant 
at 1%. The significance level indicates the level of Type-I or "false positive", that is the percentage chance 
that the coefficient is shown as different from zero, while it is in reality zero. 

In conclusion, regression analysis does not show a statistically significant and robust 
effect  of  the  Savings  Directive  on  the  level  and  the  share  of  interest  in  the  total 
property income received by households. 

Data 

External loans and debt 

Inbound  and  outbound  interest 
and dividends 

Amount  of  withholding  tax,  split 
by  country  of  residence  of  the 
beneficial owners 

article  11(5)  of 

Amount of withholding tax levied 
under 
the 
Directive,  split  by  country  or 
Territory  of  establishment  of 
residual entities 

Description 
Bilateral external loans and debts 
of  the  banking  sector  in  40  BIS 
members 
For  the  EU-27,  the  amount  of 
inbound  and  outbound  interest 
and  dividend  payments 
for 
individuals and corporations 
States, 
For 
all  Member 
Dependent 
Associated 
and 
Territories  and  Third  Countries 
having  opted  for  the  withholding 
tax  mechanism,  total  amount  of 
tax  revenue  shared  from 
the 
withholding  tax,  split  by  MS  of 
residence 
beneficial 
owners 
This 
item  concerns  Austria, 
Belgium  and  Luxemburg  as  well 
as  the  following  Dependent  and 
Associated Territories: Guernsey, 
Jersey,  Isle  of  Man,  Turks  and 
Caicos, British Virgin Islands and 
the Netherlands Antilles. 

the 

of 

Source 

BIS (restricted basis) 

Eurostat 
Statistics 

Sectoral 

Account 

Member States 

Member States 

Amount of interest payments and  For 

all  Member 

States,  Member States 

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proceeds 
of 

subject 
information 

Data 
to 
sales 
exchange 
/ 
voluntary  disclosure,  split  by 
country  of 
the 
including 
beneficial 
residual entities 

residence  of 
owners 

Amount  of 
interest  payments 
of 
to 
subject 
information / voluntary disclosure 
under  Art.  9,  split  by  country  of 
residence of the beneficial owner 

exchange 

Amount  of  sale  proceeds  subject 
to  exchange  of 
/ 
voluntary disclosure under Art. 9, 
split  by  country  of  residence  of 
the beneficial owners 

information 

interest  payments 
Amount  of 
of 
exchange 
subject 
to 
information 
voluntary 
/ 
disclosure,  split  by  country  of 
establishment  of  residual  entities 
- Art. 4.2 

Amount of sales proceeds subject 
/ 
to  exchange  of 
voluntary  disclosure  under  Art. 
4.2, 
of 
by 
establishment of residual entities 

information 

country 

split 

interest  or  sales 
Amount  of 
proceeds  subject  to  exchange  of 
information 
voluntary 
/ 
disclosure, split by the categories 
of  Directive 
of  Art. 
2003/48/EC 
UCITS 

8.2 

Deposit rate 

Nominal GDP 
Real GDP growth 

Population 

Inflation 

of 

sales 

all  Member 

all  Member 

all  Member 

Description 
Associated 
and 
Dependent 
Territories  and  Third  Countries, 
amount  of  interest  payments  and 
sales proceeds, split by country of 
residence of the beneficial owner 
and  establishment  of  the  residual 
entities 
States, 
For 
Dependent 
Associated 
and 
Territories  and  Third  Countries, 
amount  of 
interest  payments 
(excluding  sales  proceeds)  split 
by  country  of  residence  of  the 
beneficial owner - Art. 9 
States, 
For 
Dependent 
Associated 
and 
Territories  and  Third  Countries, 
proceeds 
amount 
(excluding 
interest  payments), 
split  by  country  of  residence  of 
the beneficial owner - Art. 9 
For 
States, 
Associated 
and 
Dependent 
Territories  and  Third  Countries, 
amount  of 
interest  payments 
(excluding  sales  proceeds),  split 
by  country  of  establishment  of 
residual entities - Art. 4.2 
States, 
For 
Dependent 
Associated 
and 
Territories  and  Third  Countries, 
amount 
proceeds 
(excluding 
interest  payments), 
split  by  country  of  establishment 
of residual entities - Art. 4.2 
For  MS  exchanging  information, 
amount  of  interest  payments  or 
sales 
to 
exchange  of  information  split  by 
the  categories  of  art.  8.2  of 
Directive 2003/48/EC 
Level of UCITS and non-UCITS 
Deposit  interest  rates for  EU and 
BIS countries 
Nominal GDP 
Real GDP growth 

all  Member 

proceeds 

subject 

sales 

of 

Number of inhabitants 

Deflator of GDP 

Source 

Member States 

Member States 

Member States 

Member States 

Member States 

Financial 

International 

EFAMA 
IMF 
Statistics 
Ameco 
Eurostat 
Eurostat, 
CIA 
NationMaster.com 
Computed from nominal and real 
GDP growth 

Factbook, 

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