The European Union's commissioner for internal trade, Frederik Bolkestein, has held talks with the Swiss finance minister, Kaspar Villiger, on EU plans to tax interests in foreign-held bank accounts.

Although Bolkestein said Switzerland's bank secrecy laws did not contravene EU policy on interest taxation, there was still pressure on Switzerland to stop being a haven for European tax dodgers.

The European Union wants to close the loophole which costs billions of Euro in lost tax revenue each year. The losses are incurred when people put money in foreign accounts and evade tax on the interest in that account.

Under Bolkestein's proposals, Switzerland could carry on maintaining its bank secrecy laws but would in return have to introduce some kind of capital gains tax on interest payments. His realism stems from the fact that Switzerland is not alone in providing secret accounts since Austria and Luxembourg also offer this service.

The finance minister, Kaspar Villiger, was keen to emphasise Switzerland's need to hold on to bank secrecy. He said, "The Swiss would far sooner appoint a new finance minister, than scrap bank secrecy laws."
However, Villiger also signalled he was prepared to look into ways of making tax dodging via Swiss bank accounts unattractive.

Yet it is not only relations between Brussels and Switzerland which has been put to the test on this issue. The EU itself is internally divided over taxation on interest payments. A special summit of EU-finance minister scheduled to take place in Porto could help to bring EU-member states closer together in this question.

swissinfo with agencies

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