EUROPE – Accountancy firm PricewaterhouseCoopers believes the European Court of Justice’s recent judgement in the Danner case may hinder the prospects of a single European market for pension products by five years or more.
"Contrary to appearances, we believe that the Danner judgement will not assist European mobile workers, and may set back the prospects of a single European market for pension products,” says PwC partner Trevor Llanwarne.
The Danner verdict on October 3 had been widely seen as giving impetus to a single market in supplementary pensions.
The case involved German-born Rolf Dieter Danner and challenges as contrary to an article of the EC Treaty a Finnish law that taxes pension insurance contributions made in Finland to a foreign institution.
Danner claimed that Finns wishing to contribute to a scheme outside the country do not receive the same treatment as those paying into domestic schemes. The case focused on whether Finnish legislation violated Article 59 of the European Treaty which deals with the freedom of services.
PwC’s Llanwarne says that the European Court of Justice’s ruling that European Union member states cannot discriminate between local and cross-border pension plans “is unlikely to significantly reduce the pension costs of mobile workers”.
PwC has identified that the judgement leaves many important questions unanswered and may actually set back the prospects of a single European market for pension products by five years or more.
The first question PwC has identified is that the ruling apparently leaves the option open for individual EU states to assess an overseas pension plan against their own criteria for tax relief.
The second issue, PwC says, is that the ruling appears to permit member states to continue to tax the contributions as long as they exempt the pension. This could result in double taxation for an individual who returns to their home country.
Llanwarne says: "European Commission policy proposals include the creation of a single market for pensions in Europe. This includes the possibility of operating pan-European pension plan.
“The tax treatment of cross-border pension contributions is a major obstacle in these proposals and the Danner judgement has not helped reduce the size of the hurdle."