EU sanctions threat against Swiss banking secrecy

Switzerland has shrugged off the EU sanctions threat

Switzerland has shrugged off the threat of sanctions from the European Union should it refuse to relax its banking secrecy laws.

This content was published on September 7, 2002 - 16:26

Although the sanctions threat is unlikely to be carried out, Germany, France and Britain have urged the EU to apply more pressure on the Swiss over their banking laws.

That includes the creation of a list of potential reprisals - such as restrictions on capital movements from the EU into Switzerland and other sanctions against the Swiss banking sector - by next month.

The sudden - and unexpected - decision to get tough with Switzerland came at a meeting of EU finance ministers in Copenhagen on Friday.

Pascal Couchepin, the Swiss economics minister, on Saturday shrugged off the threat, describing his European negotiating partners as "reasonable".

Swiss holding firm

The threat follows growing frustration with Switzerland among several EU countries over the signing of a planned taxation agreement.

The EU is hoping to finalise a series of bilateral accords by the end of the year under which Switzerland would relax its banking secrecy laws to give EU governments access to their citizen's Swiss-held accounts for tax purposes.

Switzerland says it is prepared to provide information in cases of criminal tax fraud, but does not consider simple tax evasion to be a criminal offence.

Frits Bolkestein, the EU's top tax official, said he hoped the dispute could be resolved without resort to sanctions.

"I refuse to believe that the Swiss government will not want to help us in coping with tax evasion," the EU internal market commissioner said.

"It is still far too early to speak in such dark and dire terms," he reportedly said.

Switzerland cautioned that such talk by the EU cast a cloud over bilateral negotiations.

"We must be clear on the fact that no decision has been made [against Switzerland]," said government spokesman, Daniel Eckmann.

"But if the threats in this direction are really serious, then it isn't good for the climate of the negotiations," he said.

EU countries divided on issue

Under the proposed EU tax agreement, members will swap information on non-resident's savings.

However, tensions over the issue within the EU are increasing, because the planned tax deal can only work if third countries, like Switzerland, agree to similar deals.

EU negotiators believe an agreement with Switzerland would pave the way for further deals with tax havens Andorra, San Marino, Liechtenstein and Monaco.

While Friday's developments are the first hard-line threat against the Swiss, sanctions are still a long way off - largely because European countries remain divided on how to tackle the Swiss case.

Sanctions - as well as a new tax regime - require the unanimous support of the EU's 15 member nations.

Luxembourg opposes strong-arm tactic

Luxembourg said on Saturday that it would oppose using EU sanctions against Switzerland.

"The general exchange of information ... it is not worth it to begin a political war with the Swiss or with other third countries [for this]," said Luxembourg's minister for economic affairs, Henri Grethen.

Grethen said he prefers a Swiss proposal to impose withhold tax on EU residents' savings.


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