Twelve EU countries, including Ireland, will take part in a new system of automatic information exchange between banking authorities to throw the spotlight on savings squirreled away across borders.
The other three member states - Austria, Belgian and Luxembourg - have baulked at swapping such sensitive financial details about their overseas clients but have agreed instead to levy a flat-rate 35 per cent tax on the interest on savings which they will pass to the relevant authorities.
EU Commissioner Mr Frits Bolkestein welcomed the accord in Brussels tonight, saying: "This system ensures that EU citizens do pay their taxes on interest derived from savings held in other countries."
Crucially, Switzerland has agreed to levy a 35 per cent tax on foreign investments too, closing one loophole for EU residents looking for somewhere to lodge savings undetected.
Mr Bolkestein said there were still technical details to be settled with Switzerland but tonight's political agreement between the 15 EU finance ministers, means the system should be launched from the start of next year.
The European Commission set out plans in December 1997 to catch the cross-border tax dodgers, giving member states the choice between an information exchange system between banks and the "withholding tax" which three countries tonight opted for.
AFP