A group of academics and government officials appointed by the finance ministry recommended in a report today that Switzerland start to work immediately on developing global standards for exchanging data within the framework of the Organization for Economic Cooperation and Development.
Switzerland is trying to shake off its reputation as a tax haven after amassing $2.2 trillion of assets from wealthy clients living outside the country. It has faced pressure from the European Union to join a system of automatic exchange of bank-account data.
“If this standard is recognized and introduced by other financial centers, we’re prepared to launch the political dialogue,” Finance Minister Eveline Widmer-Schlumpf said during a press conference in Bern. “The government has decided that we want to be part of the discussion -- it’s going to happen whether we join it or not.”
Adopting the automatic exchange would end the Swiss tradition of banking secrecy as the government also tries to resolve a U.S. probe of at least 14 financial firms, including Credit Suisse Group AG and Julius Baer Group Ltd. (BAER), which allegedly helped Americans dodge taxes.
The Swiss government will hold “detailed discussions” on the recommendations in coming months, said Widmer-Schlumpf, who earlier this year said there should be a level playing field among the world’s financial centers. A change of Swiss law could face a national referendum.
Martin Naville, Chief Executive Officer of the Swiss-American Chamber of Commerce, said adopting the proposal would not mean the end of the Swiss banking sector, while it would have some economic impact. Switzerland’s political stability and rule of law, among other factors, would keep its banks attractive for international clients, he said.
“There are a lot of things that still make Switzerland a great place,” he said in a phone interview.
Switzerland is the world’s biggest offshore wealth management center, according to Boston Consulting Group Inc.’s Global Wealth 2012 report.
The OECD framework should include trusts, the group led by Professor Aymo Brunetti said in the report. Other members of the panel include Jean-Pierre Danthine, vice-chairman of the Swiss National Bank, and Urs Zulauf, deputy director of Switzerland’s financial markets supervisor known as Finma.
The Swiss Bankers Association welcomed the report, saying it envisages a strategy similar to its own of “tax compliance for the future coupled with a fair and reasonable settlement for the past,” according to an e-mailed statement.
Dividends, capital gains and other forms of financial income should be subject to automatic exchange of information among tax authorities beginning in 2015, the European Commission said June 12. The Brussels-based commission aims to combine the new proposals with an existing effort to update tax-data sharing on interest from savings accounts.
If approved by member nations, the combination would rewrite bank secrecy laws across the 27-nation bloc to make it harder to dodge cross-border taxes, said European Union Tax Commissioner Algirdas Semeta, who will meet Widmer-Schlumpf in Bern on Monday.
Switzerland still can enter into individual withholding tax agreements as it has done with the U.K. and Austria, according to the Brunetti report. Those accords have retained an element of bank secrecy by not disclosing client names.
Switzerland is revising anti-money laundering regulations to include serious tax crimes and tightening client due diligence requirements to meet international standards recommended by the international Financial Action Task Force. The government has separately proposed a “clean-money” strategy after a global crackdown on tax evasion using offshore bank accounts in Switzerland.
That strategy has worthy aims but it poses considerable “practical problems” and may make the Swiss financial industry less competitive versus other countries with weaker rules, Nicolas Pictet, chairman of the Swiss Private Bankers Association, said at an annual members’ meeting on June 7.
Swiss banks lobbied against a government proposal last year that would have required them to reject deposits from clients who don’t disclose the origin of their funds and attest to their tax compliance. The banks said that would have scared off millionaire customers and threatened jobs.
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