ECONOMY

EU gets deal on taxing hidden savings; Luxembourg, Switzerland keep secrecy

BRUSSELS (Reuters) – The European Union removed a major obstacle yesterday to a deal on taxing savings hidden abroad after EU envoys agreed to guarantee Swiss banking secrecy to obtain the Alpine state’s cooperation. «We have an agreement and we will hold an EU-Swiss summit on May 19,» a spokesman for the Irish presidency said. An EU diplomat called the deal an agreement in principle, as three countries had some reservations, but said they were minor. He said the draft deal guaranteed equivalent treatment between Luxembourg and Switzerland, two countries whose banking industries have many foreign clients. Although not an EU member, Switzerland had to be involved, as many EU citizens keep cash hidden there. The EU wants the rules to apply from 2005. Switzerland had linked cooperation on taxing savings to being part of the EU’s Schengen area for the free movement of people and goods. But it wanted assurances it would not have to apply laws on fighting tax evasion, not a crime in Switzerland. Luxembourg wanted the same deal so as not to lose banking industry clients to Switzerland. It had otherwise threatened to bloc the entire plan, which it could have done as EU rules require unanimity in tax matters. The EU needs to end its tax negotiations with Switzerland and other non-EU financial centers before the end of June if it wants to introduce the new system on January 1, 2005. Under the savings tax plan, member states and their dependent territories will either exchange bank details or levy a tax of up to 35 percent on income from savings. Luxembourg, like Switzerland, has chosen to levy the tax rather than share tax information with EU partners.