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TAX EVASION

Bern reveals ‘solution’ to settle US tax dispute

The federal government revealed plans in Bern on Wednesday to settle a bitter dispute with Washington after lawmakers rejected a deal that would have halted US legal action against Swiss banks suspected of stashing cash for American tax dodgers.

Bern reveals 'solution' to settle US tax dispute
Photo: OFCL

Rather than a blanket accord, Swiss banks will now have to apply on a case-by-case basis for government permission to cooperate with US investigators, Finance Minister Eveline Widmer-Schlumpf said.

The moves comes two weeks after Swiss parliament shot down the controversial "Lex USA" accord, which would have temporarily lifted Switzerland's long-sacrosanct banking secrecy and allowed banks to settle with US authorities and draw a line under past wrongdoing.

Parliamentary backing was needed for a one-year blanket waiver of secrecy rules for American clients.

Currently, US investigators have to make formal requests for legal assistance concerning specific tax-dodgers, a procedure Washington sees as cumbersome.

The Swiss government had approved Washington's take-it-or-leave-it settlement at the end of May, with a view to having it in force this month.

But parliament had the final say, and there was an uproar from lawmakers over the fact that they were asked to vote on the deal without the details being disclosed, as well as concerns that it breached Swiss sovereignty.

SEE ALSO: AMERICANS FALL OUT OF FAVOUR WITH SWISS BANKS

Without the blanket secrecy waiver, the individual banks need government permission to cooperate with probes in the United States of their alleged abetting of tax evasion by Americans.

Legal cooperation is expected to include the banks paying massive fines in exchange for an end to US lawsuits.

Swiss banks are believed in the past to have accepted billions of dollars belonging to American citizens who have not declared these assets to US tax authorities, though they now refuse such money.

Under the government plan — which will need US approval, but not that of parliament — the banks will be able to hand over the names of employees and third parties who dealt with American clients.

In addition, they will have the right to provide "Leavers Lists" with details of sums transferred by former US clients, but not their names.

Widmer-Schlumpf said the clients' names could only be handed over if US lawmakers ratify a long-awaited tax treaty which has already been passed by the Swiss.

The battle began in 2009 after Swiss banking giant UBS was fined $780 million in the US for complicity in tax evasion — an issue in sharp focus amid the financial crisis.

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TAX EVASION

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.
 

 

 
 

 

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