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EU lashes out at Swiss over taxation

The European Union has accused Switzerland of jeopardising a continent-wide deal on taxation, following the collapse of talks involving banking secrecy.

"Switzerland remains unwilling to come to political negotiations or even to engage in talks at a technical level," Frits Bolkestein, the EU's chief negotiator said on Tuesday.

Bolkestein, the EU Internal Market Commissioner, made the statement after a meeting of European finance ministers in Brussels, adding that he was "very disappointed" with Switzerland's refusal to budge on a series of bilateral agreements.

His comments came after the postponement of a key meeting between EU and Swiss negotiators scheduled for Wednesday.

The criticism heightens tensions between Switzerland and the EU in what is becoming an increasingly difficult debate, and confirms fears that talks between the two sides have become deadlocked.

Dispute on how to negotiate

The cause of the row is disagreement over how to resolve a set of ten treaties between the EU's 15 member states and Switzerland.

The EU wants to negotiate some of the treaties separately, whereas the Swiss are seeking to link all ten as a single package.

Most controversial is a dossier, on cross-border crime, which Brussels wants to discuss separately because the document includes the issue of tax evasion - something the EU sees as a crime, but Switzerland regards as a customs offence.

However for Switzerland, this document runs to the heart of one of the country's most sensitive issues - banking secrecy.

The EU wants access to details about its citizen's income from savings, in its battle to clamp down on tax evasion.

However the Swiss government says it cannot water down its banking secrecy laws by opening accounts to European authorities chasing "tax evasion" charges.

Instead, Switzerland has proposed levying a withholding tax on EU savings.

EU tax deal "needs Bern".

Bolkestein said Switzerland's refusal to separate tax from issues such as border crime had resulted in a stalemate, which now threatened a Europe-wide taxation agreement.

He said Switzerland's stance on the tax issue was being watched by other banking nations, particularly Liechtenstein, San Marino, Monaco and Andorra.

"As long as Switzerland is unwilling [to negotiate on tax] the other four countries remain unwilling too," Bolkestein said.

"The key to success is in Bern," he said.

For years the EU has worked to seal an agreement to tax its citizen's savings and investment held outside their home countries.

Two years ago EU finance ministers signed a deal obliging countries to impose withholding tax from 2003, or to exchange information.

But before the deal can take affect, non-EU countries such as Switzerland, must agree to play by similar rules, or else the prospect of capital flight becomes real.

Bolkestein said he was "very disappointed" at the absence of a breakthrough with Switzerland, despite "regular contacts" with Swiss finance minister Kaspar Villiger.

swissinfo with agencies

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