Swiss President Responds To EU As Possible Savings Tax Solution Is Mooted

Ulrika Lomas, Tax-news.com, Brussels

02 March 2001

At the beginning of the week, we reported that Chris Patten, European Commissioner for External Affairs, had written a strongly-worded letter urging the Swiss government not to delay negotiations on customs fraud and the savings tax. The Swiss president, Moritz Leuenberger, has spent the week responding to the letter and making clear his dismay that Mr Patten has attempted to link Swiss/EU bilateral agreements with the negotiations on customs fraud or withholding tax.

Mr Patten had spoken of the "worry" that the ratification of bilateral treaties between the EU and Switzerland, currently under consideration, could be threatened if Switzerland does not bow to EU demands that it tax the savings of citizens of EU member states and fight corruption at Swiss borders.

In an interview with German newspaper Frankfurter Allgemeine Zeitung this week, the Swiss President said: 'If the EU Commission attempts to offer Switzerland a deal, this would contradict all prospective gains from bilateral negotiations and the assertions of EU member states. The most dangerous aspect of such a suggestion would be less the lingering approval for the bilateral treaties than the damage to the EU's image as a reliable negotiating partner in our country. I understand that the Commission is employing all means available. In the end, the Commission must be cautious not to scar our intention of joining the EU.'

When asked how he would explain the almost constant criticism of Switzerland as a haven for tax evaders and fraudsters (which the government categorically denies, of course), Mr Leuenberger stated: 'Switzerland is neither a member of the EU nor the UN, but we are striving for membership in both organizations. The world and the EU watch us with eagle eyes. Many criticize - openly or subtly - that Switzerland plays a parasitic role. We do not want to play this role. Precisely in regard to fighting bribery - we do not want to be the nexus for international smuggling and its money and have signaled to the EU that we are ready to go just as far as the EU in creating rules to fight bribery.'

Moritz Leuenberger said that he was keen to find a solution that would keep the EU happy and at the same time allow Switzerland to shake off any association with tax evasion. He said that the government was not in the habit of pointing the finger at other jurisdictions to take the focus off itself, but simply wanted to find a solution that fitted in with the EU's ideal of an exchange of information on non-resident savings income so it can be taxed in the person's country of origin.

Given that Switzerland has been defending so vigorously its principle of banking secrecy, the chances of a solution being reached would appear pretty remote, and yet the Swiss have been mooting new fiscal measures to defuse EU pressure over tax evasion without compromising their beloved banking secrecy.

According to reports in the Swiss press this week, experts have proposed a new tax on the interest accrued on foreign assets held in Swiss bank accounts. This would mean that any EU national holding an account in Switzerland would have to pay tax on the interest generated by their assets. The money generated by this new tax would be kept in a Swiss holding account on behalf of the EU.

The idea has not yet been approved, and merely follows a feasibility study commissioned by the Swiss Finance Ministry. There are fears that such a system could be costly to put in place and its possible effects on the Swiss banking industry are unclear. Finance Minister Kaspar Villiger said the government was not willing to commit itself to such a solution until the agenda for future bilateral talks with Brussels had been agreed.

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