An article in the Sunday edition of the Washington Post details the continued erosion of Switzerland’s banking secrecy laws. As many of Europe’s economies continue to experience stagnant economic conditions, many countries have taken aim at Switzerland’s vaults in the search for much needed tax revenue. If the Swiss fail to address the nation’s strict banking secrecy laws they are threatened with isolation by Europe’s most powerful nations.
Last week, the council that serves as Switzerland’s executive branch met to discuss new steps toward banking transparency after having been threatened with painful isolation if it did not agree to changes. This month, the upper house of Germany’s Parliament is set to vote on a treaty with Switzerland that would require the banking stronghold to withhold taxes from the accounts of German residents. Similar deals have been signed recently with Austria and Britain, and the possibility is being discussed with others.
In addition to Europe, the United States has imposed tight restrictions on financial institutions that do business with U.S. clients abroad, as a result of the recent revelations of extensive efforts by Swiss banks to help American taxpayers avoid paying U.S. taxes.
You can hardly understate what is happening,” said Luc Thevenoz, director of the Center for Banking and Financial Law at the University of Geneva. “Switzerland has created this image that the big value that Swiss bankers brought their clients was secrecy. It was an attractive proposition, especially with regard to tax issues.”
No one is sure quite how much Switzerland’s private wealth management sector depends on tax evasion. Bankers’ estimates of deposits from private individuals range from 30 percent on the low end to 60 percent or more. Many say that a significant portion of those funds will drain away from Swiss coffers.
Indeed, it may only be a matter of time until the sharing of depositor information becomes the norm among the international community of nations.
Many experts say it is only a matter of time before international standards are in place that would automatically hand over full information about depositors to other countries’ tax authorities. That would be the death knell for secrecy in Switzerland, an old tradition that was codified in 1934, making it a criminal offense for any bank employee to divulge information about a client’s accounts except in the case of the gravest crimes – a category that did not include tax evasion.
While Swiss neutrality may remain intact, Swiss vaults may no longer be the place where money “goes to hide.”
To read the Washington Post article, click here.