EU To Face Imminent Collapse Of Information Sharing Plans

by Ulrika Lomas, Tax-News.com, Brussels

05 November 2002

The European Union's Ecofin Council (Finance Ministers) will hold its regular monthly meeting today face to face with the imminent failure of its savings tax information exchange plans. 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.

On Monday, UK Chancellor Gordon Brown made a last-minute attempt in London to persuade Switzerland to end its precious banking secrecy regime and agree to the exchange of information, but Swiss Economy Minister Pascal Couchepin said that he had refused outright in what he described as a 'difficult' sessionn with the Chancellor.

The Treasury (it would, wouldn't it) said the talks had been constructive. One option put forward was for a referendum among Swiss citizens on the issue, but Mr Couchepin said that would be politically unacceptable at present. Mr Couchepin told a press conference that he disagreed with Mr Brown's view that banking secrecy was an outmoded concept. He denied that the Swiss regime assisted money laundering and terrorist financing.

Switzerland has offered to strengthen its existing withholding tax regime as an alternative to information exchange, but so far the EU has not been prepared to discuss this alternative. Instead, the EU has threatened the Swiss with financial sanctions, something which caused furious reactions from Liechtenstein and several EU members, as well as Switzerland itself.

'Sanctions' however are no more than a paper tiger: does the EU propose to apply sanctions to the United States? Mr Couchepin said he would be surprised if sanctions happened. "Our banking secrecy does not break any international laws," he said. "A compromise is possible, but not with systematic exchange of information. We accept a system for exchange of information on a voluntary basis."

It's now unclear what the EU will do. Any kind of 'voluntary' information sharing program among just some EU member states amounts to a collective suicide note on behalf of their banking sectors. Yet the EU will be reluctant to back off altogether. Expect some kind of very tasty fudge, instead.

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