Navigation

EU to delay new tax regime

The Swiss have been taking flak over the new banking rules swissinfo.ch

The European Union is to delay the introduction of new tax rules on the savings of its residents until mid-2005.

This content was published on June 23, 2004 - 15:36

The move has been partly blamed on the Swiss government, which says it cannot implement the changes by January 1.

Switzerland, which is not an EU member, has strongly rejected any blame, arguing that the bloc has not clarified crucial details of the new system.

A meeting of EU ambassadors in Brussels on Tuesday agreed to a six-month postponement.

“The enforcement is postponed to July 1, 2005,” an EU diplomat said after the meeting.

Swiss bankers are also angry that Switzerland is being made a scapegoat.

“It’s just not fair to blame Switzerland,” James Nason, a spokesman for the Swiss Bankers Association, told swissinfo.

Withholding tax

Nason said Swiss banks had spent the past year preparing for the new tax system, which will require them to levy a withholding tax on interest earned by EU residents with savings held in Switzerland.

Up to two-thirds of those funds will then be returned to tax authorities in the account-holders' home country.

While details of the tax system have been agreed, much of the small print remains unclear.

“Just like banks in the EU, we’re waiting for definitions from Brussels,” said Nason.

“We need a definition of 'interest', we need a definition of 'EU taxpayer', we need a definition of 'paying agent', and thousands of financial products have to be defined,” he added.

Switzerland agreed to the withholding tax in exchange for protecting its banking secrecy.

The EU, led by countries including Britain and Germany, originally wanted Switzerland to join a pan-European taxation system in which account-holders' details were automatically shared among different tax authorities.

Switzerland last month signed a series of bilateral agreements with the EU which guarantee banking secrecy but commit the Swiss to charging a withholding tax.

The new pan-European tax structure was due to be put in place by January 1, 2005, something many financially-pressed central governments were eager for in order to stem tax evasion as soon as possible.

January 1 not feasible

But Swiss officials told the European Commission on Monday that "in no case" could they complete parliamentary procedures in time to make the EU's original January 1 deadline.

They added that July 1 was potentially feasible but only in the absence of a referendum in Switzerland.

An anti-EU coalition, including the Campaign for an Independent and Neutral Switzerland, has already indicated it will demand a vote on the issue.

Under Switzerland's direct democracy system, Swiss voters have the right to overturn government decisions. In effect, the seven-member federal government can wield far less power than its EU counterparts.

"There's a problem because two very different political systems have crashed head on," Nason commented from the Bankers Association headquarters in Basel.

"The European Commission is used to exercising power through directives. That is not the Swiss idea of democracy, and the Swiss are insisting that the EU respects their long-established democratic procedures," he added.

The EU ambassadors' decision is due to be rubber-stamped by EU ministers next week.

swissinfo with agencies

In brief

EU ambassadors have decided to postpone to July 1, 2005, the introduction of a directive to crack down on cross-border tax evasion.

Non-EU member Switzerland has denied any blame for the delay, arguing that its parliamentary procedures could not be completed on time.

The Swiss Bankers Association says some of the small print in the agreement needs defining more precisely.

End of insertion

Articles in this story

This article was automatically imported from our old content management system. If you see any display errors, please let us know: community-feedback@swissinfo.ch

In compliance with the JTI standards

In compliance with the JTI standards

More: SWI swissinfo.ch certified by the Journalism Trust Initiative

Contributions under this article have been turned off. You can find an overview of ongoing debates with our journalists here. Please join us!

If you want to start a conversation about a topic raised in this article or want to report factual errors, email us at english@swissinfo.ch.

Share this story

Change your password

Do you really want to delete your profile?