With EU finance ministers due to debate the issue tomorrow, the eve of an EU summit in Helsinki, last minute proposals were being drafted by the European Commission and the Finnish presidency of the EU to break the deadlock.
A Treasury spokesman welcomed the Finnish move. "We will be very happy to look at any proposal in a constructive way," he said. Any compromise would have to protect the City's interests, however.
The UK has been isolated and is threatening to veto the savings directive - which aims to stop EU nationals avoiding tax on their interest earned abroad - arguing that it would drive the City's eurobond market abroad. But under the latest draft plans, companies may simply have to submit the names and addresses of non-resident Europeans receiving interest payments.
Last night the Finnish Finance Minister Sauli Niinisto said he plans to table the compromise tomorrow, adding: "If it is too costly to provide information, why not look for something less costly."
This comment addressed the UK's concern that although a proposal to exchange information could be acceptable, if it were too onerous investment banks would simply go ahead and switch their Eurobond transactions to centres such as Switzerland anyway.