EU savings tax agreement could hit Swiss banking secrecy

European leaders reached the long-awaited agreement during a two-day summit in Portugal Keystone

Switzerland's banking secrecy could be under threat after European Union countries concluded a long-awaited deal on the taxation of cross-border savings.

Under the draft proprosal, EU members would be able to exchange information on non-resident account holders. The aim is to reduce tax-evasion and to help combat fraud and organised crime. The deal is set to be implemented within the next ten years, if finalised in two years’ time.

Switzerland has been watching closely, as two EU members, Austria and Luxembourg have banking secrecy regulations similar to its own. Austria and Luxembourg did finally agree to the deal, which could place some limits on those regulations, but only after drawn-out negotiations at a summit in Portugal.

Although Switzerland is not a member of the European Union, the draft proposal says trade partners outside the EU are expected to comply. This would include not only Switzerland, but also Liechtenstein, Monaco, San Marino, Andorra and the United States.

Switzerland currently deducts tax on savings at source, but if it were to comply with the EU proposal, it would have to register all foreigner-held assets with the EU, clearly conflicting with its banking secrecy laws.

Brussels correspondent, Regula Schmid, said Switzerland could rely on Austria and Luxembourg for support on the issue of banking secrecy.

“As long as they can keep a kind of coalition together, as long as there are several important countries that don’t give up banking secrecy, Austria and Luxembourg will not agree to do it inside the EU. Then banking secrecy will hold out.”

The Swiss government has stated its intention to join the EU in the long-term, and Schmid says Swiss banks will be put under pressure, if the proposal goes ahead, to give up banking secrecy as well. However, during negotiations Austria insisted it wanted to retain banking secrecy at least for its own citizens.

“If they (the Swiss) are serious about wanting to join, then they will have to look very closely at what Austria is doing”, Schmid said. “A split between banking secrecy for residents, and lifting of the banking secrecy for non-residents could be a way out.”

In a first reaction, Swiss banks moved to stall any change.

“Banking secrecy is not up for discussion, as has often been reiterated by the Swiss government,” said a spokesman for the Swiss Bankers’ Association.

swissinfo with agencies