EU Warns Switzerland That Bilateral Negotiations May Stall Over Savings Tax Issue

by Ulrika Lomas, Tax-News.com, Brussels

02 October 2002

Recent reports have suggested that the European Union is prepared to stall progress on negotiations in other areas if the Swiss government does not comply with its wishes on savings tax information exchange.

During the new round of bilateral talks which started again last month, the Swiss authorities variously offered to impose a withholding tax on the savings interest accrued by non-resident account holders, put forward the possibility of allowing banking clients to choose between information exchange and withholding, and discussed the extension of a clause in the country's - not yet ratified - double tax agreement with Germany, which allows for information exchange in specific cases of tax fraud.

Despite this, however, the EU Observer news service revealed on Monday that the ECOFIN meeting of European Finance Ministers will review the progress (or lack thereof) which has been made in negotiations on the savings tax directive when it next meets on October 8, but that if - in the eyes of the EU - there has been no further progress before then:

'Negotiations on Schengen (the EU borders agreement), the Dublin Convention (on immigration), free trade in services and participation in certain audio-visual programmes risk being stalled'.

The news service went on to quote EU External Relations Commissioner, Chris Patten as observing at Monday's External Relations Council meeting that:

'There is a fear that they [the Swiss government] are picking and choosing what they like from the acquis. I can't tell you hand on heart that we are making progress across the board.'

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