Swiss Banking Secrecy Rules Hang In The Balance As EU Negotiations Loom

by Ulrika Lomas, Tax-news.com, Brussels

15 May 2001

European Union tax talks, due to take place this month, will see Switzerland and the EU come head to head to discuss Switzerland's refusal to give up its precious banking secrecy rules.

In January this year, during a meeting of the Ecofin Council, Sweden's Finance Minister Bosse Ringholm confirmed that the EU had written to Switzerland asking for a start to be made on negotiations (to which EU members committed themselves in December) to develop an information-sharing regime on savings instruments and assets belonging to EU nationals. At the time a number of very discontented private bankers across Switzerland called upon the government and the Swiss Bankers Association to stand firm against the EU.

Both the government and Swiss bankers are fiercely protective of their revered banking secrecy laws. Swiss Economics Minister, Pascal Couchepin, has reiterated his country's stance on several occasions saying that Swiss secrecy laws are 'not negotiable' and that they do not hinder free trade.

The EU plans to crack down on tax evasion by imposing a tax on cross-border savings and will require banks to report on the interest accrued by their customers. But Switzerland is finding it difficult to go against the grain of hundreds of years of traditional banking secrecy and is worried that the industry will lose its competitive edge if secrecy laws are relaxed.

Swiss bankers are adamant that their laws do not foster money laundering and tax evasion activities: 'We don't want to be a haven for tax evaders, but not at the price of abandoning bank secrecy,' said Urs Roth, president of the Swiss Bankers Association. Mr Roth is also of the opinion that tax evasion in Switzerland is prevented to a significant degree by the witholding tax which makes certain that taxes can be collected while maintaining the individual's rights of privacy. A compromise could be reached in this way: 'by modifying the existing withholding tax, it would be possible to introduce in Switzerland a measure for the prevention of tax evasion deemed equivalent by the EU,' he has argued.

The EU's announcement of its decision to pressure the Swiss government into relaxing its banking secrecy laws and clamp down on tax evasion probably did not help matters much during Switzerland's recent referendum when an overwhelming 77% majority of Swiss voters rejected a proposal to enter into membership negotiations with the EU. Traditionally, Switzerland has been severely protective of its independence to the point of refusing to become a member of the United Nations for fear of relinquishing too much power to the multinational agency. Switzerland's neutrality, low taxes and its strong currency are too precious to the country to risk losing.

Thus the EU, which will not be able to instal its own information-sharing regime unless the Swiss and the Americans go along with the plan, will have to be aggressively persuasive in its negotiations. However, Switzerland - a non-EU member - is a land-locked country surrounded by EU states, and is keen to discuss a range of trade-related issues such as the elimination of cross border controls: so the talks are set to be very interesting indeed. A date for the negotiations is expected to be decided upon within the next three weeks.

Recommended