European Union finance ministers have failed to hammer out an agreement on combating tax evasion and will restart talks in the new year.This content was published on December 11, 2002 - 22:21
They want Switzerland to ease banking secrecy to allow the taxation of EU citizens' savings income in Swiss banks.
EU finance ministers meeting in Brussels on Wednesday said they would resume talks on January 21.
"It was impossible to reach a deal because some member states needed more time," said Thor Pedersen, the Danish finance minister who chaired the meeting.
However, Pedersen added that some progress had been made and he expected a deal to be reached in January.
The delay puts new pressure on EU governments to do something about rampant tax evasion, and shatters a self-imposed deadline to win an agreement before year's end.
It also means Switzerland is likely to face even stronger demands that it support the automatic exchange of information between states - an effective dismantling of the country's banking secrecy.
Karl-Heinz Grasser, the Austrian finance minister, said after the meeting that Switzerland would eventually need to open itself to the sharing of information.
"We are all of the opinion that what Switzerland has offered is not enough and that the pressure on Switzerland is to be increased so that something more substantial is put on the table," he said
The 15-nation bloc is divided over a Swiss offer to introduce a 35 per cent withholding tax on the interest earned by EU residents' savings in Swiss banks, as an alternative to passing information about their accounts to the EU.
Proponents of the EU tax deal believe any crackdown on tax evasion cannot be successful without the support of Switzerland.
Several EU countries, including Luxembourg, Austria and Belgium, have said they would not go along with the EU's plans to exchange information about residents' savings unless the Swiss are made to comply as well.
They say Switzerland would gain an unfair advantage if it retained banking secrecy, while they were forced to give it up.
For its part, Switzerland has staunchly maintained that watering down banking secrecy is not an option.
EU diplomats said Italy, Sweden and Spain had also expressed reservations on a possible deal as they believed the EU was being too generous with Switzerland.
Frits Bolkestein, the EU's commissioner for taxation, said he would be returning to Switzerland to clarify some details.
"There are clearly some uncertainties to be discussed with the Swiss," he said.
"These [discussions] will not be on [a] major part of the Swiss proposal but on technical details, which are still important."
Under the planned EU bill, 12 EU countries are expected to share information on savings held by their citizens from 2004.
Luxembourg, Austria and Belgium have been granted a transition period of seven years during which they would apply a withholding tax of 15 per cent intially and 20 per cent later.
All 15 EU states are expected to share information after 2011.
EU diplomats also said Britain had offered significant guarantees that its dependent territories, including off-shore centres such as the Cayman Islands and the Channel Islands, would fall in line and share information on taxable income.
banking secrecy facts
The Swiss government has long maintained that it will not negotiate over banking secrecy.
Switzerland's financial sector accounts for over 12 per cent of the gross domestic product.
The country manages about 35 per cent of the world's private and international offshore funds, estimated at $2 trillion (SFr2.89 trillion).