abstract: 'Since 1.7.2005 the EU Savings Tax Directive has ensured a minimum of

  taxation on foreign interest income by offering participating countries

  the opportunity either to apply a withholding tax or to exchange

  information on cross-border interest income. The aim of the paper is to

  examine why countries do not exchange information on interest income.

  The results suggest that the incentive to exchange information is

  weakened if the financial sector in a country is very profitable. A high

  profitability of the financial sector enables countries to maximize

  revenues from the corporation tax. A second reason for discouraging

  information exchange is related to the spillover effects on the domestic

  labor market. An inflow of financial capital is indirectly associated

  with the creation of employment and well-paid jobs. In its current form

  the savings tax directive enables individuals to avoid taxation, either

  by placing their income in non-participating countries or by investing

  in assets which are not part of the directive. Using German revenue data

  for 2005 and 2006 the paper shows that Germany receives significantly

  less revenue from countries applying a withholding tax. This result

  indirectly indicates that investors can take advantage of the

  directive''s loopholes. (C) 2008 Elsevier Inc. All rights reserved.'
affiliation: 'Schwarz, P (Corresponding Author), Sachverstandigenrat, Drosselweg 36,
  D-76829 Landau, Rhineland Palat, Germany.

  Sachverstandigenrat, D-76829 Landau, Rhineland Palat, Germany.'
author: Schwarz, Peter
author-email: schwarz10de@yahoo.de
author_list:
- family: Schwarz
  given: Peter
da: '2023-09-28'
doi: 10.1016/j.irle.2008.12.001
files: []
issn: 0144-8188
journal: INTERNATIONAL REVIEW OF LAW AND ECONOMICS
keywords: 'European Union; Interest taxation; Information exchange; Withholding

  tax; Tax havens'
keywords-plus: TAXATION; COMPETITION; FIRMS
language: English
month: JUN
number: '2'
number-of-cited-references: '29'
pages: 97-105
papis_id: 63b327b3dbb83649386b4f1e6abac416
ref: Schwarz2009whyare
researcherid-numbers: Vyacheslav, Gromyko/I-5054-2012
tags:
- review
times-cited: '5'
title: Why are countries reluctant to exchange information on interest income? Participation
  in and effectiveness of the EU Savings Tax Directive
type: Review
unique-id: WOS:000265969800003
usage-count-last-180-days: '0'
usage-count-since-2013: '7'
volume: '29'
web-of-science-categories: Economics; Law
year: '2009'