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EU, Switzerland reach deal on offshore tax fraud

The EU on Thursday cleared the path to a long-awaited deal with Switzerland on offshore tax fraud that will in return see the Alpine state join the bloc's passport-free zone, officials said.

Ambassadors from the 25 EU member states, meeting at weekly talks, agreed on a compromise on the savings-tax accord to win the backing of Luxembourg, which is keen to protect its own lucrative banking industry.

The deal is set to be formally adopted by foreign ministers on Monday and signed at an EU-Switzerland summit on Wednesday, finally enabling the bloc to implement its new tax rules after nearly a decade of talks.

"Basically all of the outstanding issues have been agreed and we will hold the summit in Brussels on May 19," a spokesman for the EU's Irish presidency said.

Swiss Foreign Minister Micheline Calmy-Rey hailed Thursday's breakthrough as "an important political step."

But she warned in an interview on Swiss television that "we will not negotiate on banking secrecy."

The EU wants to clamp down on savings held by its residents in countries and territories beyond the reach of its tax authorities. It must reach a deal by June to allow the accord to take effect next January.

But first it must reach equivalent deals with third countries, not least with Switzerland, the world capital of secret banking.

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 alternative adopted by the rest of the EU is to share information between their tax authorities. Switzerland and the EU trio were unwilling to do this for fear of eroding their banking secrecy.

Switzerland wanted an exemption from judicial cooperation in financial crimes that may in future apply to the 15-nation Schengen group. It does not recognise tax evasion as a crime. But Luxembourg was worried that its bankers might lose out if it was forced to accept such cooperation while Switzerland stayed out.
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