EU plays tough ahead of tax talks with Swiss

Finance Minister Widmer-Schlumpf welcomes EU tax commissioner Semeta in Bern Keystone

The European Union has called on Switzerland to agree to swift and unconditional negotiations on the introduction of an automatic exchange of banking information – doing away with banking secrecy to crack down on tax evasion by foreign asset holders.

“It is widely accepted that the era of banking secrecy is over. Resisting the clear international trends for more transparency and information sharing is pointless,” EU tax commissioner Algirdas Semeta told journalists following talks with Swiss finance minister, Eveline Widmer-Schlumpf, in the Bern on Monday.

Semeta said Switzerland could gain trust and international acceptance if it agreed to stronger tax rules based on an automatic exchange of information.

“We can reinforce the strong relationships between Switzerland and the EU by aligning our strategies to fight against tax evaders,” he said.

Brussels was hoping that Switzerland will give it a high priority and act fast he added.

Semeta rejected suggestions that the tax talks could be linked with other current issues, notably the Swiss financial industry’s concerns about losing access to the EU market.

European tax matters

Switzerland and the EU in 2004 reached an accord on the taxation of savings income. Part of a second set of bilateral treaties enforced in 2005, it introduces a withholding tax on foreign assets respecting client confidentiality rules.

Switzerland concluded separate deals with EU members Austria and Britain introducing taxation at source, but a similar accord with Germany failed.

The EU have repeatedly criticised the preferential Swiss tax treatment of holding companies based in Switzerland.

The Swiss government last week came out in favour of promoting the automatic exchange of banking data at a global level as an alternative to the withholding tax system.

Following pressure from the OECD, Switzerland in 2009 agrees to adopt international standards on administrative assistance in tax matters. It offers assistance not only in cases on tax fraud, but also in some cases of evasion.

Conditions

Finance Minister Widmer-Schlumpf, for her part, reiterated that the Swiss government was interested in talks on an extension of a bilateral accord on a tax on savings with the EU.

She was adamant that non-EU member Switzerland was seeking non-discriminatory access for Swiss banks and insurance companies to the market of the 27-nation bloc.

She also stressed the need to settle tax issues of the past with the EU.

Widmer-Schlumpf said Switzerland wanted to actively promote the creation of a global banking standard for transparency. It was crucial for Switzerland to have a level playing field in the finance industry within and beyond the EU.

Over the next three months the finance ministry is to examine an offer by Brussels to open formal negotiations.

Understanding

German Finance Minister Wolfgang Schäuble adopted a more conciliatory tone speaking on a Swiss public television news programme on Monday evening, saying that – unlike the United States – Europe would not make any threats against Switzerland.

“It is not easy for a nation which for so long has had its own traditions and experiences to change them,” he admitted. “But global developments, globalisation, mean great changes for all of us.”

He said that after the failure of the tax agreement between Switzerland and Germany – blocked by the German Senate in November 2012 – it was necessary to find a solution at a European level.

“I have no doubt at all that we shall succeed,” he said.

OECD

Last week the Swiss cabinet decided to work with the Organisation for Economic Co-operation and Development (OECD) towards global rules to crack down on tax dodgers – further easing banking secrecy concerning foreign clients of Swiss banks.

A government-appointed commission of experts, led by economist Aymo Brunetti, also recommended that Switzerland should officially scrap banking secrecy regulations for EU clients.

However, the cabinet insisted an automatic exchange of banking data is not the only option: it hopes to continue the system whereby Switzerland imposes a withholding tax.

The finance ministry will prepare a report by autumn defining a detailed government strategy for the financial market and the future of banking secrecy.