Discriminatory dividend taxation

The EU Commission has sent letters of formal notice to Italy and Finland about their rules under which dividends paid to foreign pension funds may be taxed more heavily than dividends paid to domestic pension funds. Italy and Finland are asked to reply within two months. These letters constitute the first step of the infringement procedure of Article 226 of the EC Treaty. Similar letters have been sent to the Czech Republic, Denmark, Spain, Lithuania, the Netherlands, Poland, Portugal, Slovenia and Sweden on 7 May.

640% of GDP

That would be the steady state equilibrium size of a Finnish model pension fund, assuming an elderly dependency ratio of 44% by 2050, up from currently about 23%. This is one of the interesting numbers that yet another central banker, Mr Erkki Liikanen of the Bank of Finland, has quoted in his recent address to the Conference of Social Security Actuaries and Statisticians.

There is a lot of interesting food for thought in that speech. I have just one question mark concerning the conclusions, where Mr Liikanen claims that "the volumes needed for financing pensions mean [that] the system will always have to be based on a public PAYG scheme". We think that always is an awfully long time. Mr Liikanen does not specify why funded systems should be unable to reach the required level of funding in the course of a generation or so.

Transposition issues in Finland [FIN]

Nordic Region Pensions & Investments News had an informative story on the debate about the Pensions Directive transposition in Finland (and other countries), which is evidently in place, albeit to a minimalistic extent. It seems however that the debate is far from concluded, thus modifications to the transposing legislation are to be expected within the year.

Commission takes action

The EU Commission has issued a reasoned opinion against Belgium, Cyprus, Czech Republic, Finland, France, Italy, Lithuania, Slovakia, Slovenia, Spain and the United Kingdom for non- or partial transposition of the Pensions Directive into their national law, thereby capturing all the member states that it has identified earlier for lagging. The next step in the infringement proceedings according to Art. 226 EU Treaty would be court action in front of the ECJ after two months time (via IPE).