Definite progress has been made by the European Council at Feira on a withholding tax agreement, after this long-standing attempt to deal with international tax evasion was tentatively linked to a possible lifting of bilateral sanctions against Austria. The decision will ease the way towards other measures relating to taxation and allow international negotiations on the matter to proceed. The skill and competence of the Portuguese presidency has ensured this summit has been able to register progress in many areas of the European Union's running agenda, including the Inter-Governmental Conference to prepare it for enlargement and the creation of a defence capability.
The German government has been especially concerned to combat fiscal degradation arising from the use of tax havens and national banking secrecy laws. That has made it a leading player in the pursuit of an EU withholding tax regime. But objections from the British government, which sought to protect the City of London, and from Luxembourg and Austria, which sought to hold on to banking secrecy, have held up progress. Gradually, a compromise emerged which combines two methods of meeting the overall objective - either by providing information on non-resident accounts to national authorities, or by agreeing to impose a common tax on such investments.
This summit saw further progress towards agreeing timetables and securing international agreement. But Austria's refusal to consider changing its strict banking secrecy laws, which apply to residents and non-residents alike, blocked the road at Feira. Its attitude enraged some of the other delegations, notably the Germans. After yesterday's deal, they were much happier. Although there is no firm commitment, there is relief all round at signals that the Austrian government could change its attitude on dealing with non-resident accounts.
Whatever about the diplomatic niceties and denials of any linkage between the tax and sanctions issues, a political understanding has been reached allowing Austria to sign up for the summit declaration on the basis that a real effort will be made by the outgoing Portuguese presidency to reach an understanding on how the sanctions might be lifted. They were imposed when the conservative leader, Mr Schussel, agreed to enter a coalition with the far rightwing Freedom Party. As a result of this summit, there is now a fair chance that they could be lifted next year.
It will fall to the French EU presidency from July to December to bring most of the substantive work in progress dealt with at Feira to a conclusion. Their priorities are described in an International Report published today with this newspaper. The Taoiseach, Mr Ahern, expressed the Government's general satisfaction with this summit. But he voiced some disquiet about precisely what President Chirac has in mind when he talks of how those willing and able will show the way by using new flexibility rules which will now be discussed in the IGC. The success of the French presidency will be determined in no small measure by its ability to allay such disquiet.