Swiss complicit in major offshore tax scams

Around 300 individuals and 70 companies from Switzerland are implicated in findings by an international investigative team of journalists into the stashing of trillions of dollars in offshore tax havens by wealthy people and companies around the world.

Swiss complicit in major offshore tax scams
British Virgin Islands, reputed to be the largest offshore tax haven in the world. Photo: Wikimedia Commons

The information stems from leaked information, containing more than two million documents on a computer disc, mailed anonymously to an address in Australia.

The data was subsequently analysed by the Washington-based International Consortium of Journalists, a group of media organizations from around the world, who assigned dozens of reporters to sift through emails and other documents.

They revealed more than 130,000 individuals from 140 countries evaded taxes through offshore havens in places such as the British Virgin Islands, as reported by The Guardian, The Washington Post and the BBC, among other media outlets contributing to the Offshore Leaks project.

Switzerland’s Le Matin and SonntagsZeitung newspapers, which also participated in the analysis of the leaks, found Swiss banks and financial intermediaries were heavily involved.

Le Matin reported online on Thursday that UBS created more than 2,900 companies in a dozen jurisdictions aimed at sheltering income from taxes.

Switzerland’s largest bank created the companies through Portcullis Trustnet, a Singapore-based firm active in the most “opaque” offshore tax haven in the world, such as the Cook Islands, the Cayman Islands and Samoa, Le Matin said.

Credit Suisse created more than 700 companies in the same way, the newspaper said.

“Internal emails show also how a subsidiary of Credit Suisse, Clariden Leu, put pressure on Portcullis Trustnet to create front companies so opaque that they would completely hide the identity of its clients,” Le Matin reported.

“According to this special agreement, only the name of the bank was known to (Portcullis) Trustnet, and not that of the client.”

Credit Suisse would not say whether it continues such practices today other than to say that “in a general manner, Credit Suisse and its subsidiaries respect all the laws currently in place in the countries where they operate,” Le Matin said.

An investigation conducted by the Swiss papers and German newspaper Süddeutsche Zeitung discovered how Gunther Sachs, the Swiss photographer who inherited the Opel car company fortune, avoided paying taxes through companies and trusts set up in the Cook Islands.

Sachs, who committed suicide in 2011, established other such companies in places such as Luxembourg and Panama, none of which were mentioned in his tax declarations, Le Matin said.

The newspaper said his fortune was managed in part by a Geneva company called Galaxar.

Sachs, who lived in Gstaad in the canton of Bern, declared his total assets to be worth 470 million francs in the last years of his life but former employees said his wealth was actually far greater, Le Matin said.

Among other revelations, documents show that front companies linked to Swiss entities were used, among others, by the son of Pakistan cabinet minister, the newspaper said.

They indicate that a Geneva financial adviser represented a company in the British Virgin Islands for a friend of Mother Teresa, the nun celebrated for establishing charity missionaries.

They point to the involvement of the director of an offshore company of an international commodity group who is a Swiss trustee under investigation for money laundering.

Le Matin also mentions Swiss “intermediaries” of a celebrated Hollywood actor with a secret account in Lausanne, without revealing names. 

Le Matin and SonntagsZeitung plan to publish more details about their findings in their editions of April 7th and 14th.

James Henry, a former chief economist at the McKinsey consultancy, last year estimated in a report that the world's super-rich had at least $21 trillion hidden ion secret tax havens by the end of 2010. 

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Switzerland’s banks remain among the world’s most secretive

Despite the progress made over the years, the Swiss financial sector continues to be one of the least transparent in the world. But there is good news too.

Switzerland’s banks remain among the world’s most secretive
Switzerland remains one of the world's least transparent nations. Photo AFP

Switzerland is in the third place in the 2020 Financial Secrecy Index released by the non-governmental organisation (NGO) Tax Justice Network (TJN), which rates 133 nations based on their financial transparency.

Two other European countries, Luxembourg and the Netherlands, are also ranked among the top 10 least transparent nations on the TJN’s list.

Despite being in the third place, Switzerland ranks better this year than it did in the previous edition of the Index, which is released every two years — it slipped from the first to third place. The Cayman Islands and the United States took the first and second spots, respectively.

Switzerland reduced its risk of being an offshore haven for tax cheats by 12 percent, “finally improving enough to move off the top of the index”, TJN said. 

READ MORE: Switzerland's strangest taxes – and what happens if you don't pay them

This improvement is mainly due to Switzerland extending its international network for the automatic exchange of customer information to more than 100 countries. 

Also, in a referendum held last year, Swiss voters accepted the Federal Act on Tax Reform and AVS Financing (TRAF). This legislation introduced major changes in the Swiss tax system by ending some preferential tax schemes and replacing them with new regulations which are in line with international standards.

This tax reform prompted the European Union to change Switzerland's status from ‘tax haven' to one which is EU-compliant, removing strict controls on transactions within the EU. 

So why, despite all the reforms, does Switzerland still rank among the world’s least transparent nations?

According to a Swiss NGO Alliance Sud, wealthy people from poor countries can still hide their money here from the tax authorities of their home nations.

Alliance Sud noted that despite the progress made in the past years by Swiss financial institutions, “the fight against tax evasion remains insufficient”.

Switzerland is the world’s biggest centre for managing offshore wealth, with a quarter of global assets invested here.

For years, it has been placed on various lists of tax havens where wealthy foreigners could park their money. Faced with widespread criticism for this practice, Switzerland passed an anti-money laundering law in 1997 and introduced strict regulations against tax evasion.