The conclusion of bilateral tax agreements between Switzerland on the one hand, and Germany and the United Kingdom on the other, is creating real havoc in the European Union. Luxembourg and Austria, in any case, used it as a pretext to block any compromise, on 22 September, on revision of the EU's savings taxation directive and it's agreements in this area with Switzerland, Liechtenstein, Andorra, San Marino and Monaco.

Members of the Council's working group on taxation debated on that date the so-called 'Rubik agreements' (see Europolitics4269) that provide for the anonymous legalisation of untaxed assets stashed in the past by German and British residents in Swiss banks and the effective taxation of all income on wealth and capital gains that are taxable in their home country in the future (see below and 4269).

Berlin and London had presented the agreements to the Commission the day before the meeting of the working group and the executive will examine them to determine whether they are compatible with EU legislation. If this is not the case, the Commission will consider the possibility of initiating legal action against the two countries.

Meanwhile, Luxembourg and Austria have already decreed that the conclusion of these bilateral agreements "completely" changes the situation at European level and has to be taken into consideration in the process of revising EU rules on savings taxation.

Keen to protect their banking secrecy, Vienna and Luxembourg insisted yet again, on 22 September, on the need to be given the same treatment as Switzerland. There is no question, in their minds, of being forced to switch from withholding at the source to automatic information exchange if Switzerland does not follow suit.

In this context, Luxembourg and Austria once again opposed the Commission's grant of a mandate for renegotiation of the EU-Switzerland agreement on savings taxation, which would oblige Berne only to apply "equivalent" but not identical measures to those in force in the Union. Germany and Britain consider that the withholding system contained in the Rubik agreements, which protects Swiss banking secrecy, is "equivalent on a long-term basis" to that of automatic information exchange.

Italy is also stalling, but for different reasons.

Before revising the savings taxation directive and the related agreements with non-EU states, it argues, the 27 should put in place a surveillance system with sanctions to monitor application of existing legislation.

Italy also argues that there is a need to prevent the conclusion of bilateral agreements like Rubik unless the preferential treatment they give certain countries is extended to all EU member states.

The savings taxation item has been removed from the agenda of the 4 October Ecofin Council.