European Commission President José Manuel Barroso commented after a meeting with Swiss Confederation President Eveline Widmer-Schlumpf, on 20 March in Brussels: “For the European Union, it is essential to take a step forward [with Berne], particularly on savings taxation”.

The touchiness of this subject on both sides is well known.

The Union would like to extend the scope of its directive, limited for now to interest income earned by non-residents, to legal structures and additional products. However, a final decision is not likely to be taken until Switzerland agrees to apply ‘equivalent measures’ and to adapt accordingly the savings taxation agreement it concluded with the EU in 2005.

The Commission submitted to the Council, in July 2011, a draft mandate for negotiations with Switzerland, but it has not been adopted yet due to the opposition of Luxembourg and Austria. These two states demand to be placed on the same footing as Berne. They refuse to be obliged to switch from the system of withholding at source, which enables them to preserve their banking secrecy, to the automatic exchange of information between tax administrations, unless Switzerland has to do the same.

Switzerland will not take that step. Widmer-Schlumpf reiterated, on 20 March, that she is “available” to renegotiate the agreement with the EU, but on Switzerland’s terms: there is no question of abolishing banking secrecy or making concessions to the Union on savings taxation without obtaining trade-offs in other sectors, in the name of the “comprehensive and coordinated approach” to relations with the EU taken by Widmer-Schlumpf.

How can the EU demand this sacrifice of Berne, considering that three member states, Germany, the United Kingdom and Austria, concluded bilateral agreements with Switzerland? Under these ‘Rubik agreements’, Switzerland will deduct at the source a tax in full discharge of all tax liability on different types of income. The agreements will also protect the sacrosanct ‘private sphere’ of German and British savers.

This is the principle, in any event, but in fact Swiss banking secrecy is being chiselled away elsewhere as well. Berne has made concessions on providing grouped information on presumed fraudsters, at the request of authorities, which has not escaped the notice of the Danish EU Presidency. Copenhagen suggests that Switzerland extend to the 27 the concessions it has made to Berlin and London – as well as the much more important concessions it has made to the United States.

On 20 March, Widmer-Schlumpf did not rule out this possibility. In any case, she said she was willing to negotiate a “framework agreement” with the EU on Rubik, which would set parameters for the bilateral agreements that Switzerland plans to conclude with other countries, Greece among them. The principle of withholding at source would of course represent the first of these parameters. Back to square one.