Swiss-EU Agreements

During a first-ever Swiss-EU Summit in Brussels on Wednesday, Switzerland and the EU signed nine bilateral agreements, ranging from tax to the free movement of people. The agreements were hailed by both sides as an important step forward in EU-Swiss relations. Commission President Romano Prodi and Swiss President Joseph Deiss stressed the mutual importance of such relations.

Switzerland's agreement to the long-awaited deal on the EU Savings Tax Directive is viewed in Brussels as a major step towards combatting tax evasion. The country had agreed to the accord on the provision that certain conditions were met, including its entry into the passport-free Schengen zone and its exclusion from certain exchange of information clauses under the Schengen agreement. Effectively, although Switzerland will join the Schengen area, it will not be obliged to share information about tax evasion; this had been a major concern for Bern, as tax evasion is not recognised as a crime in Switzerland.

The EU tax accord is scheduled to take effect from 1 January 2005, and is intended to clamp down on savings held by EU residents in countries and territories beyond the reach of its tax authorities. To allow the accord to take effect in January 2005, a deadline of June, 2004 was established as the date to have everyone on board, including identified third party states. Switzerland, like EU members Austria, Belgium and Luxembourg, last year agreed to levy a withholding tax on the savings and pass the money on to EU tax authorities. The rest of the EU adopted a plan to share information between their tax authorities. The Directive is being extended to the overseas territories of Britain and the Netherlands as well.

Luxembourg reportedly has been assured by EU member states that it would not be forced to abandon any banking secrecy rules which Switzerland would be permitted to keep under bilateral agreements. Effectively, this means Luxembourg-based banks can offer the same terms to savers as those situated in Switzerland.

With Switzerland on board, the EU appears confident that it will also win the agreement of four other tax havens in Europe -- Andorra, Liechtenstein, Monaco and San Marino.