Swiss to outlaw untaxed money but wants to cling on to bank secrecy

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Written by Ray Clancy

Monday, 01 March 2010 09:40

Switzerland will no longer accept untaxed money into its banks as it tries to ease pressure on its offshore banking industry but it still believes in bank secrecy.

Financial minister Hans Rudolf Mertz said it is committed to find a solution to the estimated $600 billion of undeclared assets that are still hidden in its system. But it will not try to agree a global deal, but rather focus on agreements with individual countries.

‘We are not interested in untaxed money,’ Merz declared and reiterated a general commitment to embracing international standards for cooperation in tax matters that have been drafted by the Organisation for Economic Cooperation and Development.

But he fell short of offering full transparency to its European Union partners as he said Switzerland would not accept the practice of automatic exchange of information relevant for tax purposes in use in all EU states but Luxembourg and Austria.

‘Automatic exchange of information would be the end of bank secrecy and I believe it would greatly damage the Swiss financial market,’ Merz explained.

Switzerland, the world’s largest offshore financial centre and home to UBS, Credit Suisse and Julius Baer, fears opening up too much would force money out into rising financial centres in Asia.

Even though Switzerland says it will help foreign authorities fight tax evasion, countries cannot directly access bank data on assets hidden in secret Swiss accounts, known as Schwarzgeld or black money.

But the US, France, Germany and Italy are also keeping up the pressure in the form of a combination of tax amnesties and threats to acquire Swiss bank data from informants.

There are signs however, of divisions within the Swiss government over the issues. While Mertz declared he was still in favour of some kind of secrecy, the Swiss justice minister suggested tax evasion should be treated as a crime.

At present, tax evasion is a misdemeanour, not a crime, in contrast to the practice of countries such as the US, UK or Germany. Tax fraud, that is deliberately misleading the tax authorities, is a crime in Switzerland.

Swiss tax authorities should be treated in the same way as foreign ones, according to Justice Minister Eveline Widmer-Schlumpf. ‘The question arises whether in the long term we should abolish the distinction between tax fraud and serious cases of tax evasion domestically as well,’ she said.

She confirmed that the Swiss authorities would not help foreign tax authorities with investigations into tax cases that were based on stolen bank data.