Swiss End to Bank Secrecy One Step Closer as Law Revamp ProposedCatherine Bosley
Switzerland today proposed two draft laws that would effectively get rid of bank secrecy for offshore accounts and allow the automatic exchange of an account-holder’s information with foreign tax authorities.
With banks including UBS Group AG and Credit Suisse Group AG handing over information to the U.S. and paying fines for helping tax evaders, the Swiss government in 2013 said it would adopt the automatic exchange of information, provided it becomes the global standard.
“The global standard creates a level playing field for all financial centers around the world,” the government said in a statement today. “For Switzerland, this means that tax-related banking secrecy will no longer apply for clients from abroad. Furthermore, Switzerland will be less vulnerable internationally.”
The laws implement the Organization for Economic Cooperation and Development’s convention on assistance in tax matters and separate act on procedure on exchanging data.
Interested parties will have until April 21 to comment on the bill, according to the statement. The laws will then go to parliament to be voted upon in the autumn and winter sessions, where they could face opposition, including from members of the European Union-skeptic Swiss People’s Party. The measure could also be subject to a national referendum, with a deadline to submit signatures to demand one expected for spring 2016, the government said.
“Even with a possible referendum,” which would be held in September 2016, the laws could come into force at the beginning of 2017 and “first automatic exchange of information would then take place in 2018,” it said, adding that it would “at a later stage” submit proposals on what countries to enter into data exchange with.
Banking secrecy has been enshrined in Swiss law since 1934, helping the country to become one of the world’s foremost offshore financial hubs. Pressure to give it up mounted on Switzerland after UBS, the country’s biggest bank, in 2009 paid a fine of $780 million and disclosed the names of American clients.
Several other Swiss banks, including Julius Baer Group Ltd. face U.S. criminal investigations. About 100 more -- roughly a third of all Swiss banks -- are cooperating with the U.S. Justice Department. They want to avoid the fate of Wegelin & Co., at the time the country’s oldest bank, which was forced to close in 2013 after a guilty plea.
Other governments have also trained their sights on untaxed assets at Swiss banks. Switzerland signed withholding tax agreements with Austria and the U.K., allowing the two countries to recoup unpaid tax revenue while preserving client anonymity. A similar agreement with Germany failed after the parliament in Berlin declined to ratify it. German authorities also bought CDs containing stolen bank data.
The Swiss government also plans to make declarations that it will “generally inform affected persons about the forthcoming exchange of information” and “not allow foreign authorities’ requests to conduct tax audits in Switzerland.”
The government’s decision to urge adoption of automatic data exchange, a practice favored by the OECD, constitutes a policy reversal. In 2008, then Finance Minister Hans-Rudolf Merz said secrecy was there to stay, with its opponents at risk of losing “their teeth” in trying to get rid of it.
More than 40 countries have agreed to adopt the OECD data sharing in 2017. Others, including Brazil, Canada, China, Hong Kong and Monaco, have committed to start in 2018, the OECD has said.