Although progress was made, the extraordinary ECOFIN meeting of 11 December failed to reach a concluding agreement on the planned common rules on savings taxation.
The planned bill would require the unanimous support of all 15 Member States. The aim of the law would be to stem tax fraud and tax evasion and also to help the Member States' governments increase their revenues by sharing information on taxable income from savings across the borders.
The latest effort for a deal was thwarted by bank secrecy strongholds of Luxembourg and Austria, who insisted that Switzerland and five other non-EU finance centres (the US, Andorra, San Marino, Liechtenstein and Monaco) must also lift their banking secrecy practices. Otherwise, argued the two countries, capital would escape to banks in these "havens".
Switzerland, which operates an estimated three trillion dollars' worth of capital management industry, rejected automatic information exchange and would only agree to levying a 35 per cent withholding tax.
The issue will now be discussed again on 21 January 2003. The deadlock means that the EU has missed its self-imposed 31 December 2002 deadline for adopting a tax package, which also includes a Code of Conduct on company taxation and a Directive on interest and credit. In January, the finance ministers also will aim to achieve common rules for the taxation of energy products.