UBS, BNP Warned of France’s Zero Tolerance on Tax Evasion

UBS AG (UBSN), BNP Paribas SA (BNP), Credit Suisse Group AG (CSGN) and other banks providing wealthy French people a home for their money in Switzerland are being told: No more tax evasion.

Ahead of French Finance Minister Michel Sapin’s visit today to the Swiss capital Bern, he briefed bankers on an updated set of guidelines for a tougher Franco-Swiss tax accord. Switzerland will intensify cooperation with France and release more names and bank accounts details to French tax authorities.

“It is not acceptable that a bank -- and this may have happened in the past -- instigates fiscal fraud,” Sapin said in an interview last night with Switzerland’s French-speaking television channel RTS. “I would say ‘continue to do what you are doing today: encourage your clients, without drama, quietly, to regularize their situation.’ They will sleep better.”

The push to tighten the rules comes a year after Socialist President Francois Hollande set up an office for French fiscal exiles to put their books in order. The state collected about 1 billion euros ($1.36 billion) in revenue from such tax evaders and expects more in 2014, with 80 percent coming from funds stashed away in Switzerland. Yesterday, Switzerland said it would comply with a French request for details of a UBS account of retired Senegalese-born French soccer player Patrick Vieira.

Photographer: Balint Porneczi/Bloomberg

French Finance Minister Michel Sapin. Close

French Finance Minister Michel Sapin.

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Photographer: Balint Porneczi/Bloomberg

French Finance Minister Michel Sapin.

Swiss Fortunes

The Swiss tax receipts are a much-needed bonanza for France, which is struggling to narrow its budget deficit in the face of anemic growth. France’s economy is lagging behind those of Germany and the U.K. The government predicts growth of 1 percent this year and a budget deficit at 3.8 percent of gross domestic product.

Taxes have increased by 70 billion euros in the past three years, and Hollande has promised to stop raising them further. Under a revised 2014 budget law voted by the French Parliament on June 23, the levies collected will be used to fund tax cuts for 3.7 million households.

On the other side of the Alps, the Swiss economy expanded 2 percent last year and is predicted to grow that much again this year and 2.6 percent in 2015. France’s unemployment rate, at 10.1 percent, is more than double Switzerland’s 4.8 percent. The Swiss had a budget surplus of 1.3 billion Swiss francs in 2013.

Still, Switzerland’s role as a secret and safe place to stash money is eroding. Bruised by battles with U.S. authorities, Swiss bankers are pressing French clients to “regularize” their accounts, or come clean on undeclared funds. Failure to do that will result in account closings, clients have been told.

Bankers Present

Adding weight to the threat, banks are combing through tens of thousands of accounts to identify potential tax cheats, a caseload that spans three or four generations of wealth deposited offshore by affluent French families.

“Switzerland will remain a strong, safe place,” Sapin said on RTS. “There’s a French family tradition of having an account in Switzerland. Those who want to keep an account in Switzerland can do so, with transparency.”

Sapin’s meeting last night with bankers had two goals: to explain the new rules and present guidelines on how banks can contribute.

Heads of the French units of HSBC Holdings Plc (HSBA), Swiss Life Holding AG (SLHN), Credit Suisse and UBS attended. Also present were representatives of Societe Generale SA (GLE) Chief Executive Officer Frederic Oudea and BNP Paribas CEO Jean-Laurent Bonnafe. Credit Agricole SA (ACA) CEO Jean-Paul Chifflet also attended.

More Revenue

In June last year, France offered to cut fines on unreported offshore wealth to encourage voluntary declarations. The office created for such cases has a full-time staff of about 50 people.

The program has yielded 946 million euros of taxes. A further 1.8 billion euros or more is expected this year from more than 25,000 other disclosures. Budget Minister Christian Eckert told senators on June 19 that he expects “a high level” of extra receipts also in 2015.

Eckert said such taxes will result in recurring revenue of 200 million euros annually for French coffers. The average amount tax payers bring back is 900,000 euros, he said. The French government hasn’t clarified the deadline for the disclosure program.

Sapin met today with the Swiss Finance Minister Eveline Widmer-Schlumpf. They signed an addendum to the Franco-Swiss fiscal agreement under which Switzerland will divulge names of the banks that host illegal accounts. The new rules also will allow France to make sweeping information requests about tax payers. The two countries will increase their cooperation on fighting tax fraud and tax evasion, the Swiss Finance Ministry said in a statement after the meeting.

French Investigations

France is investigating UBS after the country’s banking regulator fined the Swiss lender 10 million euros last year for deficient controls against tax fraud and illegal sales practices. Tax investigators searched the bank’s offices in Paris, Lyon and Strasbourg.

HSBC’s private bank is being investigated for allegedly helping 3,000 French customers avoid paying more than 4 billion euros in tax, Le Monde reported on June 10.

Investigating judges “clearly” want to bring charges, the daily said. The government built its case from a client list of leaked from the bank’s Geneva unit by a former software technician. HSBC has declined to comment on the report.

To contact the reporter on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net Vidya Root, Frank Connelly

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