Swiss willing to sign up to EU tax deal

Kaspar Villiger said an agreement would be conditional on other bilateral deals being signed Keystone

The Swiss government intends to sign up to a European Union deal on savings tax, after EU finance ministers scrapped demands that banking secrecy be relaxed.

But the finance minister, Kaspar Villiger, said Switzerland wanted guarantees that it would not become a target of the OECD, which is cracking down on tax havens.

Villiger said Switzerland was ready to impose a withholding tax on EU citizens’ savings to ensure Brussels received its tax take, provided certain conditions were met.

For its part, the EU said it wanted a deal with Switzerland in place by March.

Villiger said any agreement with the EU had to recognise that Switzerland was not a “tax haven”, and would not therefore be subject to censure by the Organisation for Economic Cooperation and Development.

Villiger added that a deal with the EU would also be conditional on bringing a speedy conclusion to negotiations on a series of bilateral agreements on issues such as migration and asylum.

On taxation, indications were that both Swiss government and Brussels envisaged that Switzerland would follow the same system as that agreed by EU members, Belgium, Luxembourg and Austria.

That means EU citizens’ savings income in Swiss banks will be subject to a withholding tax of 15 per cent from 2004. The tax will increase to 20 per cent from 2007, and 35 per cent from 2010.

The finance ministry said at least 75 per cent of this sum would be transferred to the relevant tax authorities in the EU. But it made clear that no information would be passed on about account holders.

Tax evasion

“Administrative assistance linked to tax evasion continues to be out the question,” the ministry said in a statement. It added that an exchange of information would only be permitted in cases of tax fraud.

The ministry outlined its position a day after EU finance ministers agreed to a two-tier system on savings taxation within the Union.

Brussels had been trying to force all EU countries, as well as Switzerland, to share information about savings income to combat tax evasion. But EU finance ministers on Tuesday agreed to exempt certain states.

Compromise

Under the compromise agreement, 12 countries will move to an automatic exchange of information from January 1, 2004, while three – Belgium, Luxembourg and Austria – will maintain banking secrecy and instead impose a withholding tax on savings income.

The deal, which is virtually identical to an earlier Swiss proposal put to Brussels, was welcomed by Swiss banks.

“The European Union appears to have returned to the so-called coexistence model under which member states are allowed to choose between exchanging information and imposing a withholding tax,” Swiss Bankers Association spokesman, James Nason, told swissinfo.

Nason added that “Switzerland had made a very generous offer to the EU” and he saw “no room for further concessions in the Swiss offer”.

Brussels had been hoping to rid Europe of banking secrecy by 2011 and, in the draft agreement, EU finance ministers made clear that an automatic exchange of information was still their aim.

“Ministers have given the [European] Commission a mandate… to continue to press towards automatic exchange of information and to reach an agreement on the same basis which OECD member states are trying to get with tax havens,” Swiss tax negotiator, Robert Waldburger, told swissinfo.

More talks

They have told the European Commission to continue negotiations with Switzerland in an effort to persuade Bern to scrap banking secrecy.

Swiss participation is a prerequisite if Brussels is to have any hope of arm-twisting Belgium, Luxembourg and Austria into sharing information about savings income.

The reason is because those states have categorically refused to dump banking secrecy unless third states such as Switzerland do the same.

The EU’s intentions are causing particular concern among Swiss private banks, which worry that Bern will eventually give away too much to Brussels.

The secretary general of the Swiss Private Bankers Association, Michel Dérobert, welcomed the EU deal, but warned that Switzerland should seek guarantees from the EU before entering into any taxation agreement.

He said Brussels might sign a deal with Switzerland, and then use the OECD to continue pressuring Bern to scrap banking secrecy.

Many observers take a similar view since the OECD, which is concerned with stamping out tax evasion, is seeking transparency among financial institutions.

Dérobert said the private banks would want to inspect any deal with the Brussels before it was signed. Last week the association threatened to force a referendum on EU ties if the government gave away too much.

swissinfo with agencies

Tax brief

Villiger said Switzerland was prepared to impose a withholding tax on EU citizens’ savings income to ensure Brussels received its tax take, provided certain conditions were met.

But he reiterated that no information would be passed on about account holders.

Villiger’s comments came after EU finance ministers agreed to a two-tier system on savings taxation – allowing three Union states to retain banking secrecy.

The EU made it clear however that its long term aim was to rid Europe of banking secrecy, and that it would be continuing to pressure Switzerland to that end.

Swiss banks welcomed the EU deal, but warned that Brussels might try to undermine Swiss banking secrecy using the OECD.