Bankers attack EU and OECD over tax

Roth told reporters the OECD has undermined its own credibility Keystone

Swiss bankers have accused the European Union of dragging its feet over the introduction of a controversial withholding tax on EU citizens' savings.

This content was published on September 18, 2003 - 12:16

They also criticised efforts by the Organisation for Economic Cooperation and Development (OECD) to censure Switzerland for having “harmful tax practices”.

The Swiss Bankers Association warned the government on Thursday against making banks comply with the withholding tax, if the EU misses its 2005 start date.

“It is out of the question that Switzerland should be ready by the allotted date while nothing or very little has so far been done in other countries,” Urs Roth, CEO of the Swiss Bankers Association, said at the annual press conference in Zurich.

“We implore [the Swiss authorities] not to make Switzerland the model pupil, thereby placing it at a competitive disadvantage vis-à-vis other countries,” he added.

Switzerland agreed to an EU deal in January that would pave the way for Swiss banks to levy a withholding tax on interest earned by Europeans with Swiss accounts.

The deal followed a drawn-out battle between Bern and Brussels, which wanted Switzerland to join a pan-European taxation system. That would have forced Switzerland to share depositors' details with the tax authorities in their home country.

Switzerland strongly opposed the move, arguing it would have breached the country’s long-standing banking secrecy laws.

Time "running short"

Although the deal has been concluded, Swiss banks say they are becoming increasingly irritated by the EU’s failure to finalise details.

“It would appear that the Eurocrats in Brussels considered the matter closed and packed their suitcases for the long summer break,” Roth said.

“Neither the exact wording of the agreement between Switzerland and the EU has been published, nor has the agreement been officially signed,” he said.

"As a result, the [government] cannot present the proposed agreement to the Swiss parliament."

Roth said the EU’s silence meant time was becoming “extremely tight” if the withholding tax was to be introduced on January 1, 2005.

He warned that Swiss banks would keep a close eye on EU countries to ensure they stuck to their side of the deal.

Swiss bankers estimate implementation and administration of the withholding tax will cost them “hundreds of millions of francs”.

"And please note, we are doing the groundwork for the foreign tax authorities," Roth said.

Harmful tax practices

EU taxation is not the only contentious issue annoying Switzerland’s banks.

An OECD commission, known as the “Forum on Harmful Tax Practices”, is considering a proposal to censure Switzerland as a haven for holding companies.

The action has the potential to blacken Switzerland’s name. In effect, it would make the country an international pariah on taxation.

Roth said the move had damaged the OECD’s credibility because it was a clear case of high-tax countries, such as Britain, Germany and France, trying to undermine Switzerland’s competitive taxation regime.

“Switzerland must vehemently defend itself against concepts that clearly ignore a country’s democratic right to self-determination and are motivated primarily by political or competition considerations,” Roth said.

Thursday’s comments came ahead of Georg Krayer’s final appearance as the association's chairman on Friday.

Outgoing chairman reflects

Krayer, who will be replaced by the Geneva-based private banker, Pierre Mirabaud, rose to prominence defending Swiss banks during the 1990s controversy over Holocaust-era assets.

On Thursday he reflected on how the debate over Switzerland’s wartime past had been both painful and necessary.

“Not everything rebounds to our glory and honour,” Krayer said.

“Whether our morality is improved as a result, and we are not only smarter for it tomorrow but also wiser for all time, remains unclear.”

The Swiss Bankers Association was involved in a 1998 settlement between Jewish plaintiffs and Swiss banks, which resulted in more than a billion dollars being handed to an independent commission charged with distributing the money.

“I only add here the fact that, five years after the agreement, little over one-eighth of the settlement money has been paid to the beneficiaries,” Krayer said.

“What was fought under the banner of morality was also a battle for attention and acclaim,” he added.

swissinfo, Jacob Greber in Zurich

In brief

The Swiss Bankers Association claims the EU is dragging its feet on a withholding tax deal.

Swiss banks are due to start collecting the tax on EU citizen's accounts from the start of 2005, .

The tax is due to rise gradually to 35 per cent. Three-quarters of the tax collected will be passed on to the EU.

Bankers have urged the Swiss government not to force banks to comply if EU countries are not ready in 2005.

The Swiss Bankers Association also criticised an OECD proposal to censure Switzerland as a haven for holding companies.

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