Elizabeth Burnie, tax partner at Deloitte, comments on the Directive and the implications for the EU:

"The European Savings Directive comes into force on 1st July 2005.  It is a pan European measure aimed at tackling the perceived evasion of tax by individuals resident within the European Union. The fundamental principle is that financial institutions which pay interest to individuals who are resident in another member state are required to report details of those payments to their own tax authority. These tax authorities will then exchange that information with the tax authority of the relevant individual. Certain territories will be operating a system of institutions withholding tax on the payments instead of collecting information for a transitional period.

"There a number of major issues arising from this legislation being introduced:

1. There will be a significant IT and administration cost involved in putting the systems in place to comply with the Directive - and many banks are still getting their systems ready.  This is likely to be most serious for organisations in the countries operating withholding tax because it will pose serious financial concerns if accurate withholding obligations cannot be operated post July 1st.
   
   
2. In many jurisdictions there is insufficient guidance from the relevant tax authorities as to what exactly is required of them.  In this regard, the level of detail provided by the HMRC (previously the Inland Revenue) is to be praised - even though in the UK areas of doubt still remain.
   
   
3. The Directive is being interpreted differently across the member states, and this may create an uneven playing field across the EU.  This is of particular concern to the funds industry, as described below.
   
   
4. The level of variance in the auditing of compliance by the various tax authorities of the locations affected is considerable. 

"As regards the overall business impact of the Directive, there is concern that it will result in inconsiderable loss of business across EU member states. This remains to be seen, but there is at least anecdotal evidence that there has already been movement of capital, especially to Singapore."

- ENDS -

About Deloitte

In this press release references to Deloitte are references to Deloitte & Touche LLP.

Deloitte & Touche LLP is the UK's fastest growing major professional services firm based in 21 UK locations, with over 10,000 staff nationwide and fee income of £1,246 million in 2003/2004. It is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.