The new rules could be in place next year

The agreement will see Switzerland charge a flat tax on accounts held by EU taxpayers.

In return, Swiss citizens - and their goods - will gain passport-free access to most of the EU.

The deal follows two years of wrangling, as Switzerland fought to defend banking secrecy and the EU tried to stop citizens evading taxes at home.

The EU wants the new rules to come into force at the beginning of next year.

But Switzerland says that may not be possible, since the deal needs to be ratified in a referendum.

Lengthy negotiations

Within the EU, the argument over tax evasion has gone on for a long time.

For 15 years, member states have been trying to come up with ways of preventing their citizens from putting money in foreign bank accounts to avoid paying tax on the interest.

Originally, a Europe-wide "withholding tax" was suggested, only to be blocked by the UK, which feared its effects on the City of London.

Now most of the EU has agreed to share information about accounts held by other member states' citizens, to allow their governments to level taxes accordingly.

The countries holding out are Austria, Belgium and Luxembourg, all of whom - like Switzerland - are sticking with the withholding tax system to protect their own banking confidentiality rules.

Four tiny offshore jurisdictions - Andorra, Monaco, Liechtenstein and San Marino - are also to abide by the same deal.

Tax avoidance, tax evasion

In the case of Switzerland, the crux of the problem has been the fact that tax evasion - deliberate action to dodge taxes - is dealt with by civil fines, rather than criminal prosecutions.

That means that, unlike in the EU and elsewhere, agreements for cross-border co-operation between law enforcement agencies do not apply.

That has posed problems for the passport side of the deal, since Schengen - the set of pacts which allow people and goods unfettered transit within the EU - includes rules governing mutual assistance on financial crime.

Now, though, the EU has agreed an opt-out for Switzerland should Schengen ever be extended to cover direct taxation issues.