Swiss offer concessions on tax evasion
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PARIS: Switzerland agreed Friday to exchange information with other countries in suspected cases of tax evasion, a major victory for its European neighbors and the United States in their effort to crack down on tax havens and claw back revenue.
Austria and Luxembourg also announced similar steps to fend off a growing push to stem fiscal evasion before a meeting of leaders from the Group of 20 developed and emerging nations in London at the start of next month.
The Swiss government said the agreement related to individual tax cases where there are "specific and justified" requests for information. It maintained that the principle of banking secrecy, established under Swiss law in 1934, was maintained for all clients not under suspicion.
Swiss citizens and foreign residents who pay Swiss taxes will not be affected, Bern said.
Prime Minister Gordon Brown of Britain, who will lead the G-20 meeting April 2, said in a statement that the Swiss announcement was "the beginning of the end of tax havens."
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France, Germany and the United States had been leading the campaign against tax evasion, eager to replenish coffers emptied by the financial crisis, the huge bailouts of financial firms, the slump in corporate and individual tax receipts and higher welfare payments as unemployment rises.
"The pendulum is swinging rather fast towards tighter regulation of tax affairs as the G-20 economies need money," said Stephan Kuhn, tax chief at the accounting firm Ernst & Young for Europe, the Middle East, India and Africa. "How far will it go? It remains to be seen."
Politicians have also sought to respond to public anger that some of the wealthiest businessmen, who are regarded as having caused the financial problems, have walked away from the mess, often with hefty payouts.
The moves by Switzerland, Austria and Luxembourg leave only a handful of places, like Gibraltar and Panama, that could be considered genuine tax havens because they are not considered to be cooperative with foreign governments in tax cases.
"There are still a large number of perceived tax havens," Kuhn said, but their lack of regulatory infrastructure make them risky territories in which to invest. "In the Turks and Caicos, you don't have the same infrastructure, the same expertise to replace those other financial centers," he said.
To that could be added the risk of having your money swallowed by the collapse of loosely regulated companies, as was the case in Antigua recently when the finances of the U.S. businessman Robert Allen Stanford collapsed.
Kuhn also noted that some secrecy remains even in places like Switzerland or Singapore, because information sharing will be restricted to specific requests. "No information will be obtained on mere 'fishing expeditions,"' or when countries actively go looking for evaders without evidence, he said.
But what G-20 governments are probably hoping is that a large number of evaders will start to feel uncomfortable and declare their revenue of their own accord, perhaps even with the help of amnesties as have been enacted previously in German and Italy.
The moves Friday followed announcements this week by a number of other countries committing to relax their strict bank secrecy rules.
This week, it emerged that the Organization for Economic Cooperation and Development had added Switzerland, Luxembourg, Austria, Singapore and Hong Kong to a list of uncooperative tax havens for the G-20 summit meeting. The list already included Andorra, Liechtenstein and Monaco.
Being surrounded by members of the European Union, Switzerland could have been especially vulnerable to retaliation for noncooperation.
"Once the G-20 nations threatened to blacklist Switzerland as a tax haven, it had to consider the potential risks to its entire economy and the government obviously decided to proceed with this forward strategy," said James Nason, a spokesman for the Swiss Bankers Association.
The association said it expected Switzerland would no longer be included on the "blacklist" of noncooperative nations. The OECD declined to comment.
During an interview, Albert Pintat, the prime minister of Andorra, confirmed that his country had made similar moves toward cooperation for fear of the effect that the OECD list would have on Andorran commercial interests. "It would be impossible for the development of our economy" to continue as it had, Pintat said.
Andorra initially plans to negotiate a tax treaty with France, then Spain, Portugal and other countries. Pintat said that Andorran service businesses were being harmed by taxes imposed by the French. Now, he hopes that the country's banks can expand abroad in coming years.
But Switzerland is, of course, the biggest prize. According to numbers from the Swiss Bankers Association and Boston Consulting Group, Switzerland manages of 27 percent of all private offshore assets, making it the biggest player in the field.
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