BRUSSELS, April 30, 2008 (AFP) - The European Commission is to recommend tightening EU rules against tax dodgers who stash their cash in offshore accounts, a senior official told AFP.

With Berlin and Liechtenstein mired in a standoff over tax evasion, the bloc's finance ministers asked the commission in March to step up a review of 2005 savings tax directive.

An interim report, which is to be presented to ministers on May 14, 'very clearly points in the direction of a revision,' the director general for taxation at the commission, Robert Verrue, told AFP on Tuesday.

He said that the report aimed 'to alert ministers to the current directive's weak points' in the wake of recent revelations of alleged tax fraud by rich Germans hiding their cash away in Liechtenstein.

In its present form, the savings tax directive requires EU members to share tax information with one other on interest income kept by account holders from other EU countries.

However, there are special arrangements for Austria, Belgium and Luxembourg to protect their jealously guarded banking secrecy.

The EU has similar bilateral agreements with a clutch of countries and territories known for their banking secrecy laws, including Switzerland and Liechtenstein.

However, the savings directive allows considerable scope for people to set up foundations in order to get around the rules, which also do not cover such revenues as dividend income or capital gains.

The directive also does not cover fast-growing Asian offshore banking centres such as Hong Kong, Macau and Singapore, with which the EU is struggling to negotiate similar information-sharing accords.

Although EU members are deeply divided on the taboo of banking secrecy, the commission 'will try to find out on what points there are nevertheless a majority' in agreement, before making proposals in the autumn, Verrue said.