09 September 2002

ECOFIN meeting 6-7 September - Taxation of Savings

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During last Friday’s informal ECOFIN meeting of the EU Finance Ministers and the EU Commissioner for Taxation and the Customs Union was mostly spent discussing taxation of savings in foreign banks. Switzerland is reluctant to conclude an agreement on exchange of information on the deposits of its banking clients.

”The international development is moving in the direction of exchanging information. It is, therefore, important that the EU and the USA should lead the way in this area, ” the Danish Minister for Finance, Thor Pedersen, stated at the beginning of the press conference on Friday.

EU Commissioner Bolkestein drew attention to the fact that also the OECD points out that there is a need for exchange of information. Mr Bolkestein wants an agreement with Switzerland ”as soon as possible”. Even though a solution to the issue with Switzerland has not yet been found, both Thor Pedersen and Frits Bolkestein are optimistic, although a round of high-level negotiations held in Brussels on 03 September between the EU and Switzerland made no progress in finding an agreement on the taxation of savings.

Bolkestein on Friday for the first time warned the Swiss of heavy sanctions if they continued to refuse to exchange information on savings held by EU-residents. The sanctions suggested could have gone so far as to prevent Switzerland from freely moving capital around the EU.

'The (EU) treaty...contains articles which would give the EU the possibility to take certain measures to induce Switzerland to agree (on exchange of information),' Bolkestein told reporters on Friday. 'What the EU is asking is the most normal thing in the world: namely that EU citizens pay taxes,' he added. Switzerland accepts exchanges of information in cases of criminal investigation. But ”apparently tax evasion is not illegal in Switzerland,” said the EU Commissioner.

The chances the European Union will issue sanctions against Switzerland over its refusal to lift banking secrecy are looking slimmer after Luxembourg said it would oppose such move. 'The general exchange of information...it is not worth it to begin a political war with the Swiss or the other third countries (for this),' Luxembourg Minister for Economic Affairs Henri Grethen told Reuters in an interview at the margins of an informal meeting of EU finance ministers. Luxembourg, Belgium, and Austria have signalled they will only begin exchanging information if the Swiss do so as well.

EU officials said France, Britain and Germany were among those willing to press ahead with sanctions to break the current deadlock and force Berne to share some information. Finance ministers are expected to discuss the possibility of imposing sanctions on Switzerland at the next ECOFIN meeting on 8 October.

See Commission press release

© Graham Bishop