EU Sees Breakthrough In Talks With Switzerland Over Savings Tax Directive

by Ulrika Lomas, Tax-News.com, Brussels

17 May 2004

Much to the relief of the European Union, agreement was provisionally reached with Switzerland over the implementation of the EU Savings Tax Directive at a meeting on Thursday.

The Swiss government had agreed the text of the Directive, but refused to sign it until assurances were given by the European authorities that the Schengen agreement on cross-border crime would not force it to compromise its banking secrecy by reporting on tax evasion, which is not a crime in Switzerland.

A further fly in the ointment was Luxembourg, which announced last week that it could not sign up to any deal where Switzerland was allowed to maintain a competitive advantage from which it was excluded.

However, according to reports, a compromise was reached at Thursday's meeting whereby Switzerland will provide legal assistance under the terms of the Schengen agreement in cases relating to indirect taxes such as customs, VAT, and alcohol and tobacco levies, but will be exempted from providing such assistances in cases of direct taxation.

Luxembourg has reportedly been assured that it will not be required to make any sacrifices in terms of banking secrecy which Switzerland and other countries are not also prepared to make.

The Financial Times, however, revealed that progress may not be as smooth as anticipated, due to the necessity for lengthy debate on the agreement by Swiss lawmakers.

Confirming this last week, Switzerland's chief international tax negotiator, Robert Waldburger warned that:

"From the Swiss point of view, it's impossible that the January 1 2005 date will work."

"If everything goes really well, parliamentary approval in Switzerland will take 12 to 14 months," he suggested, according to the FT.

Talks on the Directive remain to be concluded with several smaller jurisdictions, including Liechtenstein.

Recommended