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. Last Updated: 07/27/2016

EU Battles Bank Secrecy Culture

BRUSSELS, Belgium -- European Union finance ministers met Tuesday to try to resolve a long-running dispute over how to stem the hemorrhage of revenues lost to tax evasion.

The ministers tried without success to agree on a system to exchange information on income from savings held by EU residents to crack down on cross-border cheats who deprive cash-strapped governments of much needed funds. They are set to meet again next week. A deal has so far been impossible, as the proposal depends on whether Switzerland agrees to ease its cherished banking secrecy, something Berne is refusing to do.

Diplomats said EU finance ministers were divided over an offer from Switzerland to withhold tax on EU residents' savings as part of the proposal. The bloc's executive had been asked to hold further talks with Berne.

Some delegations also wanted Britain to further clarify whether its dependent territories were prepared to go along with the EU proposals.

Luxembourg, one of several EU countries whose own banking secrecy rules are under threat, said last week it may veto an EU accord because it was unhappy with a compromise offered by the Swiss.

Luxembourg Economy Minister Henri Grethen, in further downbeat comments Tuesday, said:

"On the basis of what I have seen until now, it's not realistic to think we'll find a solution ... not today, not tomorrow, if Switzerland doesn't make a move."

EU officials had met late into Monday night in an attempt to prepare the ground for an accord at Tuesday's ministerial talks.

On the savings tax issue, finance ministers have so far given mixed signals about chances of striking a deal. While some said they were hopeful, those set to lose their own banking secrecy laws -- Luxembourg, Austria and Belgium -- said conditions were not yet right.

Under a proposed law, EU states would automatically exchange data about non-residents' savings. Austria, Luxembourg and Belgium were granted a seven-year transition period during which they would impose a withholding tax on savings instead of exchanging data.

The EU requires unanimous backing for the law, which is also conditional on Berne and five other financial centers outside the EU agreeing to adopt "equivalent measures" on sharing information.

But tax evasion is not a criminal offense under Swiss law, so Berne is prepared to share information less systematically than agreed at EU level.

Defiant in the face of EU pressure, Swiss Economics Minister Pascal Couchepin said his country had every right to defend banking secrecy and was in no hurry to broker a tax deal.