Switzerland has refused to budge on its offer of a withholding tax to the EU, after European finance ministers failed to agree on a new tax deal.This content was published on December 12, 2002 - 17:08
EU ministers - who met on Wednesday - will resume talks in the new year on a system to stem tax evasion.
The EU wants Switzerland to ease banking secrecy to guarantee the taxation of EU citizens' interest earnings held in Swiss banks.
However, the Swiss finance ministry said Switzerland stood by its offer of levying a withholding tax of up to 35 percent on interest earnings.
"Switzerland has put forward a proposal to the EU which would solve the problem of taxation of savings income in a fair and efficient way," the ministry said.
"This proposal... will remain in place."
Frustration with the Swiss position was again evident on Thursday, after Wolfgang Schuessel, the Austrian chancellor, said Switzerland must give more ground.
"I think it is now on Switzerland and other third countries to go one step forward. I think the question is still open," Schuessel said.
After this week's stalled talks, EU finance ministers said they would resume negotiations on January 21.
The delay puts new pressure on EU governments to do something about rampant tax evasion, and shatters a self-imposed deadline to win an agreement before year's end.
It also means Switzerland will face even stronger demands that it support the automatic exchange of information between states - an effective dismantling of the country's banking secrecy.
The 15-nation bloc is divided over the Swiss offer, as an alternative to the automatic exchange of account information with the EU.
Proponents of the EU tax deal believe any crackdown on tax evasion cannot be successful without the support of Switzerland.
Several EU countries, including Luxembourg, Austria and Belgium, have said they would not go along with the EU's plans to exchange information about residents' savings unless the Swiss are made to comply as well.
They say Switzerland would gain an unfair advantage if it retained banking secrecy, while they were forced to give it up.
For its part, Switzerland has staunchly maintained that watering down banking secrecy is not an option.
EU diplomats said Italy, Sweden and Spain had also expressed reservations on a possible deal as they believed the EU was being too generous with Switzerland.
Frits Bolkestein, the EU's commissioner for taxation, said he would be returning to Switzerland to clarify some details.
"There are clearly some uncertainties to be discussed with the Swiss," he said.
"These [discussions] will not be on [a] major part of the Swiss proposal but on technical details, which are still important."
Under the planned EU bill, 12 EU countries are expected to share information on savings held by their citizens from 2004.
Luxembourg, Austria and Belgium have been granted a transition period of seven years during which they would apply a withholding tax of 15 per cent intially and 20 per cent later.
All 15 EU states are expected to share information after 2011.
EU diplomats also said Britain had offered significant guarantees that its dependent territories, including off-shore centres such as the Cayman Islands and the Channel Islands, would fall in line and share information on taxable income.
banking secrecy facts
The Swiss government has long maintained that it will not negotiate over banking secrecy.
Switzerland's financial sector accounts for over 12 per cent of the gross domestic product.
The country manages about 35 per cent of the world's private and international offshore funds, estimated at $2 trillion (SFr2.89 trillion).
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