Manoeuvring over Rubik is in full swing. The European Commission is pressuring Germany and the United Kingdom to change the bilateral fiscal agreements they have worked out with Switzerland. If they refuse to do so, it will open infringement proceedings against Berlin and London by the end of the year. The texts have already been drafted.

The Rubik agreements make provision for the introduction in Switzerland of a withholding tax in full discharge of all tax obligations on the assets placed by German and British residents in this country and on the income they continue to collect on these assets in the future in a variety of forms (interest, dividends, capital gains, etc).

The Commission’s Legal Service considers that Berlin and London have overstepped their competences by signing these agreements, which protect the anonymity of fraudsters and whose scope partly interferes with EU rules on the taxation of savings income – and the agreement between Berne and the EU in this area. There are also certain “technical problems” inherent to the Rubik system. The rate of withholding on income from these assets paid to Germans, for example, is set at 26.375%, compared with 35% under the savings taxation agreement. The tax will also constitute full discharge of tax liability. Germany and Britain have also agreed to give Swiss financial service providers easier access to their market.

The Commission’s legal experts therefore recommend the opening of proceedings against Berlin and London before the EU Court of Justice for failure to fulfil obligations.

To avoid that option if possible, since it would create a poor impression in the midst of the severe eurozone crisis, Taxation Commissioner Algirdas Semeta and his staff are trying to convince Germany and Britain to thoroughly renegotiate their agreements with the Swiss.

Over and above the problem of competence raised by the agreements, the Commission fears that they could have a harmful impact on the renegotiation of the EU’s Savings Taxation Directive, now under way. Luxembourg and Austria, which are demanding to be placed on an equal footing with Berne, have already used Rubik as a pretext to stall the talks. The Polish EU Presidency has therefore decided to shelve the matter until the Swiss problem is solved. There have been multiple meetings in this connection in recent days.

Semeta met German Finance Minister Wolfgang Schäuble, on 8 November, and will meet Swiss Finance Minister Eveline Widmer-Schlumpf on the 25th. Meanwhile, the Commission’s experts have already met Berlin’s experts and will meet British experts, on 18 November.

Depending on the outcome of these meetings and follow-up by Switzerland, Germany and the United Kingdom, the Commission will decide whether or not to embark on infringement proceedings, theoretically by the end of December.

The EU executive hopes to see Berlin and London make haste, to keep such agreements with Switzerland from spreading, which could lead to an uncontrollable situation. Greece has already launched talks with Berne for a Rubik agreement. Widmer-Schlumpf approached the finance ministers of Belgium, the Netherlands and Luxembourg, on 8 November, and met their French counterpart, Francois Baroin, on 17 November in Paris.

To prevent this risk, Semeta has personally already warned Baroin against giving in to the Swiss temptation – because Rubik represents manna from heaven for countries struggling to fill their coffers, which are assured of recovering billions of euro without any effort.

Italy, now governed by former European Commissioner Mario Monti, and which was behind adoption of the Savings Taxation Directive, has also been warned about the problem.