The Savings Taxation Directive, together with the related agreements with European non-EU countries and Member States' dependent and associated territories, provides for systematic cooperation on interest income among the tax authorities of Member States, helping them to collect taxes due to them by their residents. It is one of the legislative instruments of the European Union in its fight against tax fraud and tax evasion.
The Savings Taxation Directive ensures the availability of information (or a consistent share of tax revenue from those Member States, or non-EU jurisdictions, that still provide cooperation in the form of a withholding tax) to national tax authorities on interest and similar savings income received by their residents from paying agents (e.g. banks, investment funds and other financial institutions) established in other Member States.
In 2010, the Directive produced the following results:
- A total amount of interest payments of 11.4 billion euros (2009: 12.1 billion) was made subject to exchange of information among national tax authorities in the EU;
- 504.8 million euros (2009: 547.3 million) of withholding tax was paid to the Member States of residence of beneficial owners by those Member States and other countries that still provide cooperation in the form of a withholding tax thanks to the Directive.
In addition to the information obtained by tax authorities, the Directive, together with the related agreements, has proven to have a clear preventative effect, that is, to encourage the honest reporting of income by taxpayers and to provide useful indicia for tax administrations for specific controls and audits on taxpayers based on risk assessment.