Savings Tax Directive Doomed Unless Swiss Cooperate, Says EU Presidency

by Ulrika Lomas, Tax-News.com, Brussels

15 July 2002

Speaking last week, the Danish Presidency of the European Union admitted that without Swiss cooperation on banking secrecy, the chances of passing the controversial directive on the taxation of non-resident savings interest before the end of the year are slim.

Speaking to the AFX news agency last week, an unnamed Danish source close to the negotiations admitted that: 'I don't see any possibility of agreeing that directive unless there is an agreement with Switzerland on this matter.'

However, this appears unlikely, as the two sides remain deadlocked on the issue of banking secrecy. Switzerland has offered to impose a withholding tax on the savings interest on non-resident account holders, a measure which they argue will achieve the EU's desired ends without forcing the alpine jurisdiction to compromise its strict banking secrecy rules.

However, this proposal is unacceptable to influential EU members such as the United Kingdom, and has therefore been rejected out of hand by the European Union. The 15 nation bloc is holding up negotiations on a second set of bilateral treaties with Switzerland in an attempt to force the jurisdiction to capitulate, but the Swiss authorities believe that they have offered a perfectly reasonable solution to the problem, and are not prepared to back down.

Referring no doubt to the demands of EU members such as Luxembourg and Austria - which are refusing to sign up to the savings tax information exchange agreement until non-members such as Switzerland and the United States do so - the EU Presidency source observed to AFX that: 'Many countries are hiding behind Switzerland.'

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