The on-again, off-again European Union withholding tax on personal savings looks as if it may be on again.

The tax would probably affect Bermudians with savings accounts in EU countries.

In the latest development, the British may have won the nod for exemptions for the London Eurobond market for which they have been holding out almost all this year. The European Commission last week gave Britain its first hope of a breakthrough in the row.

The latest commissioner for the single market, Frits Bolkestein, said in his first Press conference that it would be sensible to exempt some existing bonds from the new tax. "We must see to it that these bonds issued would be excluded by a so-called grandfather clause,'' Mr. Bolkestein said.

Opponents of an EU-wide withholding tax were reportedly sceptical that exempting certain types of bonds would ease fears that the tax would decimate the international bond business, based in the City of London. Others have been hoping that all bonds might be exempted from the tax.

The UK government gave Mr Bolkestein's comments a cautious welcome but added "we are also concerned about new bond issues which we believe need also to be exempted because otherwise we believe there is a strong likelihood they would be completely and unnecessarily driven elsewhere''.

Mr Bolkestein stressed that he was speaking personally and that there had been no agreement with other EU countries. Capital is believed to have started leaching out of Europe ahead of the possible introduction of the tax.

The Finns, who hold the revolving EU Presidency, have promised to implement the law by year's end, although insufficient time remains for the complicated debate which is necessary to accommodate the differing views of all members of the Union.

The matter is to be discussed by EU finance ministers on Friday. The Commission is hoping the issue can be resolved in time for the Helsinki summit in December. At the end of June, then commissioner Mario Monti said he had "commissioned a specific study on (Ernst & Young's Dutch office) on the eurobond question, the results of which are due to be published soon.'' Nothing has been heard of the report.

If the tax were introduced, Bermudians with savings accounts in EU countries will, presumably, be liable to pay the tax on their interest earnings from countries within the EU, unless they obtain a certificate from the Bermuda Government exempting them from the tax.

Residents of other EU countries with deposits in Bermuda will have to choose between: Revealing their identities and the whereabouts of the deposits in order to obtain the exemption certificates; or Paying the tax.

BUSINESS BUC