Bern puts conditions on easing banking secrecy

Switzerland is prepared to discuss the automatic exchange of banking information in the fight against tax evasion, but only once a global standard for doing so is created, the Swiss finance ministry said on Tuesday.

Bern puts conditions on easing banking secrecy
Photo: Swiss parliament

"If the automatic exchange of information becomes an international standard, Switzerland will be prepared to discuss" it, finance ministry spokeswoman Anne Cesard told AFP in an email.

In Switzerland, banking secrecy has for decades been seen as an immutable practice to protect privacy, in the same way as medical confidentiality.

Although the Alpine country has recently been cracking down on undeclared funds in a bid to clear its reputation as a tax haven, it has refused to consider allowing the automatic exchange of banking information.

Such a standard must "encompass all the large, American, European and Asian financial centres," Cesard said, stressing that secretive trusts and other legal vehicles everywhere would need to be identified.

Switzerland, she insisted, already lives up to its international obligations in terms of combatting money-laundering, "unlike the financial centres on the American continent and a number of offshore centres."

Her comments came after Swiss media concluded from a number of similar comments from politicians and bankers in recent days that Switzerland will be ready to shed its bank secrecy rules by 2015.

Swiss Interior Minister Alain Berset, for instance, told TV5 Tuesday that Switzerland "has always been prepared to conduct discussions with the actors, and our surrounding friends" on the subject.

The minister however stressed that one "should not be naive."

"If we are looking for a global solution, there are still a lot of other countries who must take steps, big steps," Berset said.

"There are a lot of countries that need to clear out their own cobwebs," he said.

"We have already taken important steps — we have already moved forward."

Switzerland's Christian Democratic Party, long one of the staunchest supporters of the country's bank secrecy system, meanwhile said on Monday that it no longer considered taboo discussions on changing the practice.

The party would be willing to support changes under certain conditions, including the guarantee that financial centres in the United States and in Britain would be required to do the same.

That stance echoed views voiced by the head of Swiss Bankers Association in an interview published Sunday.

If a global standard were instituted, Patrick Odier told the NZZ am Sonntag weekly, "we could also adapt," marking an about-face from his organisation's previous hard-nosed support of the bank secrecy regime.

Odier said in Sunday's interview that the best platform for creating global standards on the transfer of banking details was the Organisation for Economic Co-operation and Development (OECD).

Switzerland is one of 14 countries identified by the OECD for not doing enough to combat tax evasion.

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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.