Europe’s ambitions for a fully integrated financial market have long been hindered by fragmentation, particularly in tax policies. Tanguy van de Werve, director general of Efama, has called for renewed urgency in addressing this systemic obstacle. For Van de Werve, harmonising Europe’s tax regimes is not just a technical adjustment but a fundamental step toward creating a unified and competitive investment landscape.
Since becoming director general of the European Fund and Asset Management Association in 2018, Van de Werve has been at the forefront of advocating for a more integrated and competitive financial landscape in Europe. In an interview with Investment Officer, he addresses the twin challenges of tax harmonisation and shifting Europe’s savings culture toward investment.
“Tax barriers help maintain the current home bias of many investors,” Van de Werve said, pointing to a critical obstacle in Europe’s fragmented financial ecosystem. Despite progress in areas such as regulatory frameworks, the lack of harmonised tax policies continues to discourage cross-border investment, undermining the goals of the Capital Markets Union (CMU), the EU’s ambitious but so far underwhelming plan to harmonise capital markets that was launched in 2015.
‘Faster’ is promising
A promising initiative that emerged this year is the ‘Faster’ Directive, which aims to streamline and simplify withholding tax procedures across member states. While Van de Werve welcomes this development, he stresses that it is only a partial solution. “The implementation is now in the hands of Member States, and we very much hope they can deliver on this vision of fast-track procedures,” he said.
Beyond withholding tax reforms, he argues that policymakers must focus on creating a more comprehensive approach that incentivises long-term investments. The European Long-Term Investment Fund (Eltif) could be a case in point. These funds, designed to channel retail savings into long-term projects like infrastructure and private equity, thrive in countries such as France and Italy, where tax benefits are provided for long-term investments. In contrast, countries like the Netherlands, which lack such incentives, have seen little to no uptake of Eltifs.
“The Eltif 2.0, in democratising access to private markets, brings with it the ability to reach a broader range of retail investors than previously possible. Ensuring these new Eltifs are accessible and attractive to investors is key,” Van de Werve said.
This, he said, also requires rethinking traditional distribution models by adapting Ucits-style approaches for alternative investment funds, fostering collaborations and leveraging technology and FinTech solutions. Investor education remains vital to help retail investors understand the opportunities and limitations of long-term investments.
Education needed
Industry organisations like Efama, in collaboration with regulators, could develop educational initiatives to bridge this gap.
“European households have one of the highest savings rates in the world but relatively low investment levels,” Van de Werve said, adding that reforms can help foster a stronger investment culture. “
National pension tracking systems make clear to individuals that relying on their government pension will not be sufficient and incentivise them to save for their retirement and increase their pension assets. “Auto-enrolment for occupational pensions can help overcome inherent inertia and normalise this type of retirement saving,” he said.
Van de Werve also stresses the importance of financial literacy. “
A strong financial education curriculum, starting at a young age, can turn financial planning into a good habit,” he said. Initiatives like employee share ownership could further help individuals familiarise themselves with equity markets and the benefits of investing.
“You would be amazed how quickly people can change their supposedly cultural habits when provided with the right incentives, especially tax incentives. Whether debt-ridden European countries will be willing to give such incentives, that’s another debate.”
Employee share ownership schemes can boost retail participation by helping employees better understand the advantages of equity investments. However, the complexity of mandatory disclosures and onboarding processes often deters potential investors, Van de Werve said. Simplifying these procedures, along with leveraging digital tools to enhance the customer experience, could make investing more accessible and appealing.
Examples show boosting retail is possible
“Denmark, Sweden, the Netherlands and the UK have shown us that increasing retail participation in capital markets is possible,” he said. “And I would certainly not exaggerate the importance of cultural differences in this context. You would be amazed how quickly people can change their supposedly cultural habits when provided with the right incentives, especially tax incentives. Whether debt-ridden European countries will be willing to give such incentives, that’s another debate.”
Multi-faceted approach
Encouraging citizens to better prepare for retirement requires a multi-faceted approach. Van de Werve sees a need to emphasise the opportunity cost of holding savings in low-yield bank accounts compared to the long-term benefits of investing in higher-yield assets.
To this end, Edama advocates for the new European Commission and Parliament “to promote an investment culture that acknowledges the importance of taking on calculated risk, particularly for younger savers, to improve retirement outcomes,” he said.
European asset managers risk losing their global edge if problems such as strict regulation, market fragmentation and operational inefficiencies are not addressed quickly. Van de Werve warned that these obstacles seriously threaten the industry’s competitiveness, and put European asset managers at a disadvantage against their international competitors, in particular those in the United States.
“European asset managers need an enabling regulatory framework to compete on an equal footing with international peers,” Van de Werve said, pointing out that US funds manage a significantly larger share of investments, which strengthens their competitive position. Without swift and decisive reforms, Europe risks falling further and further behind, he said.
