KPMG: Financial services and governments urged to collaborate in creating new international markets

The survey, “Future of the Saver” looks at taxation of savings in 12 large economies, and the work being done by international bodies both to open up the market in cross-border savings and to counter tax evasion. It suggests that the foundations of a new international system of regulation are now being laid.

“Romania has had several years of boom, which has generated serious economic imbalances. There has been too much borrowing and not enough saving and now that balance has to be changed,” said Niculae Done (photo), Tax Partner KPMG.

But governments and the financial services industry are being slow to adapt to this new system. They should work together to provide the mixture of opportunities and security that savers need.

Moves to create a truly international market in savings can be seen most clearly in the European Union, where the European Commission (EC) is taking legal action against governments whose tax systems continue to favor domestic savings over savings in other countries.

At the same time, European governments are cooperating to force financial services providers to give up information on savings deposited by people from other countries, and the Organization for Economic Co-operation and Development (OECD) has reported significant progress in its long campaign to change laws around the world to improve access to bank information for tax purposes.

“The challenge for governments is to embrace this international move to open borders for savings, and to bring some coherence to the many different ways that savings are taxed,” adds Done.

The financial services industry, he said, should to engage with government early on this project. “Future international savings products will have to be designed to include the additional costs of a much tougher disclosure regime, and greater transparency will become a requirement if financial services providers are to be allowed to operate in new markets. Companies wanting to do this should be co-operating with governments now to help shape the new rules,” Done says.

The survey looks in detail at taxation of savings in Argentina, Australia, Brazil, China, Germany, India, Japan, Singapore, Switzerland, Turkey, the UK and the US. It reveals a wide range of tax regimes, but few concessions to international savers.

European governments, spurred by the EC, have been changing their tax laws to allow cross-border distribution of investment funds. But progress on removing discrimination between domestic and foreign pension funds has been much slower, and many countries appear to be awaiting the outcome of EC legal proceedings against Belgium, Spain, Denmark, France, Ireland, Italy, Portugal and the UK before deciding what to do.

“Savers worldwide may be forgiven for thinking that the level of their return from savings has been a secondary consideration for governments anxious to avoid the worst effects of a recession,” said Done “This must change if savings ratios are to improve, and capital is to flow once more. Governments and the financial services industry have an opportunity to do this with the creation of a genuinely international savings market. This is an opportunity that should not be missed.”

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