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EU Turns Heavy Artillery On The Swiss

by Ulrika Lomas,, Brussels

04 July 2002

In an attempt to rescue bogged-down talks over information-sharing and banking secrecy, EU Commissioner for Taxation Frits Bolkestein met Swiss Finance Minister Kaspar Villiger in a (naturally) secret meeting yesterday in Basel.

The Swiss finance ministry refused to comment on the meeting, which it described as informal and closed.

After the UK's dependent territories Jersey, Guernsey and the Isle of Man gave in to UK pressure and agreed to join the EU's information-sharing regime, Mr Bolkestein sees Switzerland as the chief obstacle remaining. It's true that the information-sharing directive was also made dependent on agreement from the US, but that was in the Clinton era, and the EU probably doesn't have any realistic expectation that Congress will kow-tow to the EU with so many trade disputes souring the atmosphere.

So the EU's efforts are concentrated on Switzerland, although Kaspar Villiger is in no mood to listen. Following a G7 meeting last week in which German Finance Minister, Hans Eichel warned that Switzerland risked isolation if it refused to cooperate with the European Union on banking secrecy and savings taxation, and the somewhat unsuccessful recommencement of the bilateral treaty negotiations between Switzerland and the EU, Mr Villiger bemoaned the fact that the Swiss government's offer to impose a withholding tax on non-resident savings interest had been rejected out of hand. 'For this reason I vigorously reject the harsh criticism of some of my EU colleagues,' he fulminated, adding that: 'This kind of tone is not acceptable among friends.'

The Finance Minister told the general meeting of the Swiss Employers' Association that the integrity of the jurisdiction's finance centre was being called into question by a 'coordinated international campaign', and argued vehemently that Switzerland's banking secrecy laws are in no way designed to shelter terrorist financiers and money launderers. 'I have to ask myself whether our willingness to cooperate has paid off at all,' Villiger mused.

Under the proposed information-sharing regime, participating governments (27 prospective EU members plus Switzerland plus the UK's dependent territories) would report savings income to the tax authorities in the home states of depositors or investors. Thus, a Cypriot investing in a Swedish mutual fund would have to provide his tax references, and the fund would report returns to the Cypriot authorities. It sounds like a bureaucratic nightmare, but should do wonders for employment - unless savers desert en masse for Dubai, or the Cook Islands.

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