ZURICH—Switzerland, angered by Italian raids on Swiss bank branches, has hit back by halting talks on a new double taxation agreement, Swiss Finance Minster Hans-Rudolf Merz said in a newspaper interview published on Sunday.
"The (tax) agreement was ready to be ratified from our side," Merz told the weekly paper Sonntagsblick. "But now the negotiations will be stopped until further notice."
Rome launched a tax amnesty this month to recover billions of euros illegally held in foreign tax havens, and stepped up the pressure by ordering raids on Tuesday on 76 Swiss bank branches in Italy, sparking a diplomatic row.
Merz said the police raids had "criminalised" the Swiss legal system. "What is happening in Italy is clearly of discriminatory character."
Authorities in the Swiss frontier town of Chiasso retaliated by asking Swiss citizens to report any suspected Italian tax agents crossing the border.
Merz, who also holds the ceremonial role of Swiss president this year, told Sonntagsblick Switzerland would not negotiate a deal under pressure, and added that he had no plans for now to travel to Rome to talk to his Italian colleague Giulio Tremonti.
"I wait now to see how Mr. Tremonti reacts," Merz said. "We do not want to escalate the situation, but we are preparing potential measures," he said, without giving details.
Swiss banks — especially in the Southern Swiss canton of Ticino which borders Italy — are worried they may lose billions of euros in clients' money through the tax amnesty.
But some experts say Italy's tough stance may be counter-productive because some tax offenders may get cold feet for fear of retaliation once they move the money back to Italy.
In March, Switzerland gave in to international pressure to moderate its banking secrecy rules and pledged greater cooperation in the global fight against tax evasion.
It has since signed new tax agreements with a number of countries, including France and the United States, which include the OECD rules on cooperation in cases of suspected tax evasion.
