Czech minister defends Swiss tax haven status

(GENEVA) - Czech Foreign Minister Karel Schwarzenberg defended Switzerland on Sunday against threats by EU member states to put it on a tax haven blacklist, saying sovereignty is "worth more" than lost taxes.

"Certainly tax coffers here and there miss out on a couple of million euros... The independence of a country and the traditions of an independent, neutral Switzerland is however worth more than that," Schwarzenberg said.

"Why must one spoil that at all cost?" he added in an interview with the Swiss newspaper NZZ am Sonntag.

The Czech Republic holds the rotating presidency of the European Union, and Switzerland has come under intense pressure in recent months over its banking secrecy laws.

Switzerland also distinguishes between tax evasion, which is not a crime, and tax fraud, a criminal offence that involves forgery of documents. Critics say these provisions encourage tax evaders to hide assets in Swiss banks.

France and Germany are pushing for an international blacklist of tax havens to be drawn that would punish countries seen as uncooperative by having leading economies break off fiscal agreements with them.

Asked after an EU summit in Brussels in February whether Switzerland could be on the blacklist, French President Nicolas Sarkozy replied: "That depends on their response. But as things stand ... the answer is probably, yes."

Amid the pressure, Finance Minister Hans-Rudolf Merz will meet his Austrian and Luxembourg counterparts to "coordinate points of common interest," said an official statement, with the tax haven blacklist threat to be discussed.

The country's biggest bank UBS has also come under scrutiny due to a widening tax probe in the United States.

In February, UBS provided information on up to 300 clients to the US government and paid a fine of 780 million dollars to settle a case in which it was accused of abetting tax fraud by US clients.

The US government has since filed a separate lawsuit to try to force UBS to disclose the identities of 52,000 US customers who allegedly evaded taxes.

Swiss ministers have described the US moves as an "attack" on Switzerland.

Swiss Justice Minister Eveline Widmer-Schlumpf told NZZ am Sonntag that the United States "did not keep to playing rules" by seeking these names.

"The US has now started a fishing expedition by demanding the 52,000 client data. That goes against constitutional principles. I have reflected this to my American colleague... We view this as an attack on Switzerland," she said.

Swiss Foreign Minister Micheline Calmy-Rey said at a press conference on Friday that she told US Secretary of State Hillary Clinton that "it is very hard for Switzerland to accept such pressure on UBS," which is also "an indirect pressure on the Swiss authorities."

Calmy-Rey said it was against both parties' interests to avoid an escalation of the problem, as jobs in the United States and Switzerland are at stake.

"Difficulties at UBS could weaken the international finance system," she said.

UBS chairman-designate Kaspar Villiger made the same point about international attacks on Switzerland.

He told Swiss newspaper Le Matin Dimanche that the G20 blacklist threat should be taken "seriously". At the same time, weakened Swiss industries could also hurt Europeans.

"A million Europeans work in Switzerland ... and Swiss companies provide jobs to over two million people outside the country. All these show that those who punish us are punishing themselves," he said.