By Anna McLauchlin - 12th May 2004
The final hurdle to an EU law cracking down on untaxed savings was lifted on Thursday afternoon.
Switzerland and Luxembourg, who were effectively holding the savings tax law to ransom due to a spat over the Schengen agreement, have settled their differences, a source told Reuters on Thursday.
The EU law on savings tax - forcing banking authorities to hand over tax evaders - was actually agreed just over a year ago but could only come into force if by June 2004 five third countries including Switzerland also agreed to tax the interest on foreign savings.
All seemed to be going well until Switzerland suddenly announced it would not agree to sign the deal on savings unless the EU bowed to exemptions on banking secrecy under the Schengen agreement.
These exemptions finally agreed, Luxembourg - which has similar banking secrecy laws to the Swiss - threw a further spanner in the works saying it wanted the same deal as Berne.
The spat threatened to jeopardise not only EU relations with Switzerland but also the savings tax proposal which was already dogged by political wrangling right up until it was adopted last June.
But there should now be no obstacles to the law coming into effect on January 1 2005, although a senior Swiss tax negotiator has suggested the Swiss savings agreement could take up to 14 months to be approved.
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