EU threatens to sue UK over Swiss tax deal

THE EUROPEAN UNION is threatening to sue the UK over its tax agreement with Switzerland.

European Commission lawyers have said that the deal was in breach of European Union (EU) laws that are tougher on tax evasion. Chancellor George Osborne has been warned that he must renegotiate the deal or face a writ from the EU.

The deal will protect the secrecy enjoyed by UK residents with accounts in Switzerland in return for a large percentage of the capital in their accounts and a withholding tax. Germany negotiated a similar deal and, prompted by domestic pressure, has begun a new round of talks with Switzerland, the Financial Times reports.

The EU claims that the deal contradicts the EU Savings Directive and undermines its negotiating mandate.

Algirdas Semeta, the EU's tax commissioner, told the Financial Times: "If we are unable to sort out these problems, then it is clear that as guardians of the treaty we have to proceed with the instruments that are in our hands."