Brown launches new attack on bank secrecy

Banking secrecy has become the main stumbling block in forging closer ties with the EU Keystone Archive

Britain's finance minister, Gordon Brown, has warned that countries which do not lift banking secrecy in tax matters are facing isolation.

This content was published on June 4, 2002 - 18:41

His remarks - seen as an attempt to put further pressure on "offshore" banking centres such as Switzerland - were made at a meeting of European Union finance ministers in Luxembourg.

He used the occasion to announce that the Channel Islands of Guernsey and Jersey - British dependent territories - planned to introduce laws allowing for the exchange of information on the savings income of EU citizens.

"Jersey and Guernsey have agreed to pursue the same policy being followed by the other 15 member states of the EU and have agreed that exchange of information is the only way forward and will legislate accordingly," he said.

He added that the Isle of Man, another a British tax haven in the Irish sea, was likely to follow suit.

Punishable offence

Under Switzerland's banking secrecy laws, exchange of information is a punishable offence and tax evasion is not considered a criminal act.

However, Brown said on Tuesday that countries that did not lift banking secrecy could find themselves out on a limb.

"Those who are not prepared to introduce [the exchange of information] will find themselves being increasingly isolated against the growing consensus of the international community," he warned.

The Swiss finance minister, Kaspar Villiger, has stated repeatedly that banking secrecy is not negotiable and has supported the idea of a withholding tax on interest accrued in accounts held in Swiss banks by EU citizens.

Stumbling block

The Swiss stance has been a major stumbling block to the formal start of a second round of bilateral negotiations with the EU which are seen as an alternative to membership.

The most problematic of the ten dossiers is that covering cross-border crime. Brussels wants to discuss this separately because it includes tax evasion and therefore has implications for Swiss banking secrecy.

The spokesman for Swiss Bankers Association, James Nason, told swissinfo that the proposed withholding tax was a good compromise. "Switzerland has made a very generous offer to implement a withholding tax based on a paying agents model that would cream off the tax that the EU seeks.

"At the same time it has the advantage of protecting the private sphere of the individual and the EU knows that this offer is on the table. The Swiss are convinced that this is a genuine equivalent measure," he added.

Battle among financial centres

Nason said the reason the EU was resisting a withholding tax had "nothing to do with taxation".

"What's really at stake here is a battle for supremacy among financial centres. Several years ago in a speech, Gordon Brown promised the city of London that he would never let the EU introduce a withholding tax because overnight this would have destroyed the Euro bonds market in London," he commented.

"It was a diplomatic coup for Britain to swing the EU members round to an exchange of information. That's very well for the club members but people outside the club have been asked to take "equivalent measures."

"The Swiss have offered a very generous and genuine equivalent measure that if the EU had any sense it will accept," he said.

EU echoes sentiment

European finance ministers echoed Brown's comments in a gently-worded letter to Swiss president Kaspar Villiger.

The letter urged Switzerland to reopen talks on taxation issues as soon as possible.

The ministers also said Switzerland should remind itself that it remains an integral part of Europe, and cannot see itself as a tax haven.

by Robert Brookes with agencies

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