The economics commission of the Swiss House of Representatives on Monday announced its support of banking secrecy, despite international pressure to end the policy.

The commission rallied with the government's position that Switzerland's tradition of banking secrecy was non-negotiable.

The commission, chaired by a Social Democrat member of parliament, Rudolf Strahm, held closed-door hearings in Berne with the finance minister, Kaspar Villiger, and representatives of the Federal Banking Commission and Federal Police Office.

In line with government policy, the commission said it would be prepared to negotiate banking policy with the European Union, if the 15 member states made a final decision concerning Swiss banking policy. However, it said the issue of banking secrecy would not be up for discussion.

A majority on the commission also voted for taxation of savings' revenue. They said, too, that it would not be in Switzerland's interests to attract money that had been deposited in the country to avoid European regulations.

After Monday's discussions, a second phase of talks follows on September 5 when a delegation from Sweden will come to Berne for talks on tax harmonisation and banking secrecy. Sweden is next in line to take over the six-month presidency of the EU.

Switzerland's policy of banking secrecy has come under pressure in recent months.

Leaders of EU countries, meeting in Portugal in June, decided to lift banking secrecy step-by-step for non-resident bank account holders. At the same time, the EU decided to open talks with non-EU members, including Switzerland, to try to settle the question of tax evasion.

Villiger has repeatedly said that Switzerland is open to dialogue in attempts to prevent tax evasion and has no interest in torpedoing the EU member states' fiscal cooperation plans.

However, he has emphasised that banking confidentiality is not up for negotiation. He said Switzerland would only take alternative steps if EU measures were to cover all member states' territories and if all the major financial centres outside the EU were to take similar steps.

The most important weapon against tax evasion in Switzerland is a withholding tax. Most forms of capital income are subject to this at a rate of 35 per cent, which is high by international comparison.

However, shareholders and recipients of interest payments resident in Switzerland are entitled to a full return of the withholding tax.

swissinfo with agencies

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