Germany and the UK will change agreements with Switzerland to combat tax evasion through secret bank accounts to comply with European Union laws, European Commission announced on Tuesday. The changes will mark a victory for the EU executive to coordinate measures against circumvention of taxation laws, restricting the ability of member states such as Greece to sign separate agreements with countries considered tax havens.
“After constructive discussions with Germany and Britain, they agreed to change agreements”, said a spokesman for the Commissioner for Taxation, Algirdas Semeta. The announcement put an end to several months of disputes between the EC, which has created a pan-European legal framework on tax evasion and two of the richest states in the Union. Swiss authorities hoped that agreements with Germany and Great Britain could become models for pacts with other European countries such as Greece, which wants to ensure that its citizens will not avoid taxes, particularly in times of crisis.
Switzerland was forced to complete such agreements in a bid to keep bank secrecy policy in place, underpinning its financial services industry, valued at $2,000 billion. EU regulations require a 35% tax on interest earned by EU citizens in savings made in Switzerland and the EC wants to extend the provisions. “It was agreed that capital gains under the EU-Switzerland agreement on interest taxation to be taken out of the scope of bilateral agreements”, said a spokesman of the German Ministry of Finance. She said that the tax applied to interest earnings will be 35%.
National tax authorities will still have the right to return a portion of such tax if a taxpayer declares the offshore funds. A British Treasury spokesman said that the institution discussed extensively with the Commission to resolve disputes. Semeta also warned other EU countries that want to conclude bilateral agreements of this kind, in a letter sent to all Union members. “Member states should refrain from negotiation, initiation, signing or ratifying an agreement with Switzerland or another country, which could undermine the EU rules”, wrote Semeta.
The Commission intends to seek the support of member states to negotiate a broader agreement with Switzerland on tax evasion. Switzerland is currently negotiating an agreement with the United States to improve transparency and resolving a dispute over the wealthy Americans that evade U.S. tax through Swiss banks.
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