A Staff Discussion Note (SDN) issued by International Monetary Fund has called for streamlining of cross-border withholding tax procedures to facilitate capital market union (CMU) in Europe. As put by SDN, "Investors look for company information backed by reliable audits and comparable accounting standards, and weigh the tax treatment of the investment. The level of withholding tax rates matters, but so too does the ease of obtaining withholding tax relief or refunds". Captioned 'A Capital Market Union for Europe', SDN dated Sep 10, 2019, notes that EU treaties enshrine capital mobility among the "four freedoms". The other three are: free movement of goods, services and labour. Notwithstanding these, European capital markets are split along national lines. In both banking & capital markets, the focus is domestic. This insularity has increased in recent times with a strong homeward retrenchment of bonds and bank loans; although, more encouragingly, cross-border equity claims have risen steadily.

SDN has relied on a new survey of practitioners. It highlights informational issues in securities markets and in withholding tax relief or refund procedures. The Note focusses on more-efficient withholding tax refund procedures. Survey participants noted that many investors may be subject to capital market taxes in both their country of residence and the country where the investment is realized, and that this double taxation limits appetite for such investments. Reducing delays and uncertainties in establishing eligibility for withholding tax exemptions was strongly favoured across the board.

SDN has pitched for three policy priorities, focused on the three barriers. First, transparency can be enhanced by requiring centralized, standardized, and ongoing reporting by all issuers; addressing challenges to the affordability of research on small issuers and unlisted firms;and streamlining cross-border withholding tax procedures. Second, regulation can be sharpened by centralizing oversight of systemic intermediaries; strengthening supervisory convergence tools to buttress investor protection where it falls short; taking further steps to support a cost-efficient, tax-effective, portable pension product; and pursuing close regulatory cooperation with non-EUcountries. Third, insolvency processes can benefit from a "name and shame" approach involving the setting of minimum standards and systematic monitoring of countries' progress in observing them. As put by SDN, "There is no roadblock—such steps should prove feasible without a new grand bargain".