EU Proposes Tax Amnesty To Force Switzerland Into Savings Tax Plan

by Ulrika Lomas, Tax-News.com, Brussels

06 November 2002

Yesterday's meeting of the European Union's Ecofin Council (Finance Ministers) discussed the possibility of an EU-wide tax amnesty as a way of breaking down Switzerland's dominance as a home for savings cash, in the face of the country's continued refusal to abandon its traditional banking secrecy in favour of the information-sharing regime the EU is trying to instal.

The directive to implement information exchange was made dependent on agreement by Switzerland and the US to join the program by the end of 2002; and the last ten days has seen both countries adamant that they will do nothing of the sort. A number of other countries both inside and outside the EU agreed to join in, but made their inclusion conditional on the adherence of Switzerland and the US. This is the case, for instance, for most of Europe's 'dependent territories' such as Jersey and the Isle of Man.

Apparently the assembled ministers on Tuesday hoped that by proposing such an amnesty they might shock Switzerland into dropping its opposition to information sharing. Dream on, Brussels! An Italian initiative last year which offered to tax money repatriated from Switzerland at only 2.5% succeeded in attracting just €30bn held by Italian savers in Swiss bank accounts, thought to represent less than 10% of such savings. And some EU countries, such as Germany, are though unlikely to agree to an amnesty since tax evasion is counted as a serious crime.

Switzerland has offered to extend its 35% withholding tax on interest payments and share the revenue with EU countries, provided that those countries within the EU that are proposing to levy a withholding tax of their own (allowed in the run-up to eventual information-sharing in 2010) set it at a higher level that the suggested 15%.

Frits Bolkestein, the EU Internal Market Commissioner who is responsible for the negotiations with Berne, says that Switzerland's offers on withholding tax are a step forward, but is holding out for thorough-going information exchange. The amnesty proposal would be a means to this end.

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