Bilateral negotiations grind to a halt

Switzerland says it has "offered a lot" to Europe Keystone Archive

Talks between Switzerland and the European Union on a second series of bilateral agreements have come to a standstill.

Despite engaging in no less than six rounds of negotiations, the two sides failed to agree on a harmonisation of legislation governing tax evasion and money laundering.

Rudolf Dietrich, the head of the Swiss negotiating team in Brussels, said he was disappointed by the outcome.

“I think Switzerland offered a lot,” Dietrich told swissinfo, “We offered solutions to all the existing problems, including the big issue of smuggling.”

The EU has been urging Switzerland for some time to close legal loopholes that allow Switzerland to be used as a financial haven for the proceeds from tax frauds such as cigarette smuggling.

Under Swiss law, cigarette smuggling is treated as a customs violation rather than a crime, which means that the Swiss authorities do not normally comply with requests for judicial assistance from other countries.

Cigarette smuggling is estimated to cost the EU billions of euros each year in lost tax revenue.

No agreement on fiscal crime

Dietrich, who is also director general of the Swiss Federal Customs Office, said the main stumbling blocks to an agreement were now over fiscal crime.

“Switzerland did make concessions,” he explained, “We offered to cooperate fully with fiscal crimes which merit a prison sentence, but the EU wants us to cooperate with offences which only merit a fine as well.”

“And now there is a new EU decision on tax evasion, which they want to be treated in a similar manner to money laundering.”

Dietrich said it appeared Brussels wanted Switzerland to simply conform to all EU financial legislation.

“They want us to adopt their standards just as if we were an EU member state,” he said. “In my opinion, Switzerland should be treated like a partner, and as long as we are not a member state, we should be able to have our own special rules.”

Banking secrecy threatened

A major Swiss concern is that complying with all EU legislation would undermine Switzerland’s own banking secrecy rules.

“Banking secrecy has a long tradition in Switzerland,” Dietrich explained, “and it is based on democratic decisions made in our country.”

But banking secrecy has also contributed to Switzerland’s reputation as a haven for dirty money, fuelled by high-profile scandals such as those involving the former Nigerian leader Sani Abacha. Internationally, Switzerland is often perceived as being reluctant to respond to criticism over the issue.

“I think people should look at what Switzerland has done rather than what it hasn’t done,” countered Dietrich. “In the area of fraud we made concessions which would have solved all the existing problems.”

“I think that’s the right way; we act to solve real problems,” he continued. “But the EU is acting in a more theoretical way: that in theory we should be treated as an EU member state, and adopt all EU laws.”

Stalemate

The stalled negotiations will now be referred to the Swiss government, which will have to decide whether Switzerland is prepared to make any further concessions relating to fiscal crime.

“It means the entire second set of bilateral agreements will have to be reconsidered,” explained Dietrich. “But I don’t think the agreements are genuinely at risk. It’s just taking a lot longer than we expected.

An EU diplomat, speaking on condition of anonymity, admitted that negotiations with Switzerland were always “very long and difficult”.

“The EU is not prepared to give Switzerland any special treatment, and Switzerland knew this right from the beginning,” he said. “The EU wants an agreement which complies with European standards.”

by Imogen Foulkes