Basel, 10 September 2004 – In its official assessment of the Bilateral II agreements with the EU the Swiss Bankers Association says it is satisfied with the results and judges the overall package of agreements favourably. Bank client confidentiality is guaranteed for the long term in all agreements of relevance to the Swiss financial centre.

After a detailed examination of all dossiers of relevance to Swiss banking - namely the taxation of savings income, Schengen/Dublin and fraud dossiers - the Swiss Bankers Association (SBA) believes the agreements preserve the interests of the Swiss financial centre. “The results of the negotiations are balanced, the concessions are justifiable and bank client confidentiality has been preserved for the long-term” says Urs P. Roth, the Association’s Chief Executive. The Bilateral II agreements follow on logically from the first round of agreements which have proved their worth and have the full support of Swiss banks.

With regard to the taxation of savings income dossier, Switzerland has agreed to introduce a withholding tax for the EU from 1 July 2005. The tax will apply to interest payments made to anyone liable for tax in the EU and is an alternative to an automatic exchange of information. This generous offer on the part of Switzerland will ensure that the country is not used as a loophole to circumvent the EU’s taxation of savings income directive. The main demands of Swiss banks were that both financial privacy and international competitiveness be preserved and these demands have been fulfilled. Swiss banks are therefore in general satisfied with this agreement, although introducing the withholding tax will entail considerable costs. Of crucial importance is the fact that at the end of the transition period there is no obligation to switch to information exchange. Furthermore, Switzerland will profit as a location for enterprise. Interest, dividends and royalty payments between associated companies in Switzerland and the EU will not be subject to taxation. Switzerland will at one stroke be on a level playing field with competitors domiciled in the EU when it comes to providing services for companies within the same group.

In the fraud dossier, cooperation between Switzerland and the EU in connection with indirect taxes is to be strengthened, enabling the fight against large-scale organised smuggling to be conducted even more effectively. This includes the smuggling of goods, the misappropriation of subsidies and offences involving VAT that harm the economic interests of the EU or Switzerland. The agreement provides for a targeted, rather than general, expansion of administrative and judicial assistance in the area of indirect taxation. Switzerland is thereby making a valuable contribution to the international fight against crime and at the same time enhancing the excellent reputation of its own financial centre. To secure the banking industry’s support for the agreement it was important that clients should not have to fear any loss of legal protection and important Swiss legal principles - such as the principle of speciality and proportionality - should be respected. With regard to bank client confidentiality, foreign authorities will have no powers above those that the Swiss authorities themselves already have.

The importance of the Schengen/Dublin dossier stems not so much from financial reasons but rather from political and security considerations. Joining the Schengen/Dublin systems will allow Switzerland to step up important cooperation in security and asylum issues. The Schengen Agreement and Dublin Convention are treaties that are still evolving. For this reason Switzerland demanded and received a so-called “opt out“ provision should these treaties ever attempt to extend judicial assistance to direct taxes. This means that Switzerland is not bound to implement any future provisions in this area and at the same time would not have to pull out of the agreement. Bank client confidentiality thus receives additional protection in an international treaty and the Schengen/Dublin agreements are therefore positive for the Swiss financial centre.

Note to Editors
Full details of the SBA’s position on Bilateral II will be given at the autumn press conference on 15 September 2004 in Zurich.

Contacts
Thomas Sutter	James Nason
Head of Communications Switzerland	Head of International Communications
Swiss Bankers Association, Basel	Swiss Bankers Association, Basel
Tel. +41 61 295 92 06	Tel. +41 61 295 92 15
Fax +41 61 272 53 82	Fax +41 61 272 53 82
www.swissbanking.org	www.swissbanking.org