Switzerland, which continues to attract money from poorer countries, was ranked No. 1 even after succumbing to pressure from the U.S. to cooperate with a probe of the Swiss financial industry and after signing more than 40 bilateral agreements on tax information administrative assistance, the London-based Tax Justice Network said in a report today.
Luxembourg, Hong Kong, the Cayman Islands and Singapore trailed Switzerland in the benchmark, which is published every two years. The U.S., which topped the index in 2009, placed sixth in the study of 82 jurisdictions.
“In line with a shrinking international tolerance for financial secrecy, Switzerland has made a few not insignificant concessions on secrecy, agreeing to exchange information on a limited basis with selected other jurisdictions, while largely rebuffing efforts for greater transparency toward other countries, particularly weaker and more vulnerable developing countries,” the report said.
An estimated $21 trillion to $32 trillion of private financial wealth is located in untaxed or lightly taxed secrecy jurisdictions, according to the Tax Justice Network, a group of academics, policy analysts and journalists that campaigns for greater transparency in offshore finance and lobbies governments to crack down on havens that attract undeclared assets.
The index ranks those jurisdictions based on bank secrecy rules and the share of the global market for offshore financial services, using reports by governments and the Organization for Economic Cooperation and Development and surveys of finance ministries. Switzerland agreed in 2009 to implement the Paris-based OECD’s standards on tax information exchange.
Switzerland increased private cross-border financial assets to $2.2 trillion last year and is the largest cross-border private-wealth center, Boston Consulting Group said in a report in May. Total assets under management at Swiss banks increased by 320 billion francs ($347 billion) to 5.6 trillion francs, with the proportion of foreign assets unchanged at just over 50 percent in 2012, according to a separate study published in September by the Basel-based Swiss Bankers Association.
Switzerland signed a mutual assistance accord with the European Union on tax matters in October and said it’s adopting a negotiating mandate to revise EU rules on the taxation of cross-border savings. The government also agreed this year to discuss a new system of automatic exchange of information with other authorities and supported U.S. demands for a voluntary disclosure initiative for Swiss banks to give up information on undeclared American clients.
The U.S. Department of Justice is investigating 14 banks, including Credit Suisse Group AG (CSGN), Julius Baer Group Ltd. and HSBC Holdings Plc (HSBA)’s Swiss unit, for allegedly helping Americans hide money from the Internal Revenue Service.
Hundreds of other banks may be covered by a U.S.-Swiss accord over how to punish firms that used accounts to help American clients evade the IRS. Swiss banks that seek to avoid prosecution for fostering tax evasion through secret accounts held by U.S. clients face penalties of as much as 50 percent of the value of those assets under the plan announced by the U.S. government on Aug. 29 and accepted by the Swiss.
Switzerland is unlikely to move from the top spot in the secrecy ranking unless the financial industry shifts its focus from gathering assets to implementing more transparent, spontaneous cooperation with other countries to counter tax evasion, according to Markus Meinzer, a researcher at the Tax Justice Network based in Marburg, Germany.
“Swiss bankers are having a hard time because on the one hand they are being told they have to get clean, and on the other hand they still have performance targets to achieve,” Meinzer said in a phone interview. “To fully show its integrity, Switzerland has to sign up for automatic exchange of information.”
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