Swiss banks getting tougher with clients they suspect of tax evasion, it is claimed

News - Tax

Written by Ray Clancy

Thursday, 06 May 2010 12:00

Swiss banks are getting tougher with European clients they suspect of dodging home country taxes, a move that could mark the beginning of the end of its tax secrecy image.

Many Swiss banks got rid of American clients last year after US authorities discovered employees at UBS were helping them avoid the tax man but until now have not been as strict with others who represent a much larger part of their business, industry experts say.

European governments are piling on the pressure and its resulting in Swiss quizzing clients more.

‘We are in the midst of a transformational period both culturally and operationally,’ said Ray Soudah, head of Millenium Associates, an adviser to private banks. He believes that tax compliant wealth management will become the product in Switzerland, not bank secrecy and a tax haven.

German authorities are sifting through records in search of tax dodgers, after they acquired stolen data on offshore accounts in Switzerland. Last year, the French government seized a stolen disc with details of 24,000 Swiss bank account holders at HSBC and authorities there also are looking through the data for tax dodgers. Meanwhile, Italy and the UK have launched tax amnesty programmes.

It is estimated that Switzerland is home to more than a quarter, or $1.8 trillion, of the world’s offshore money. As much as 80% of Europeans’ offshore money via Switzerland is undeclared.

UBS is at the forefront in terms of pushing ahead on foreign tax compliance. It has revamped compliance policies in the wake of the US scandal and is now tightening the rules applied to Europe as well.

The bank says it has seen clients withdraw hundreds of billions of Swiss francs over the last two years but it is prepared to lose clients in order to be more transparent. The company said that if a banker suspects an offshore client isn’t paying taxes on the money at home he suggests clients should to take up tax amnesties in order to regularize any undeclared money. The bank has tightened up procedures for its relocation department to make sure clients who take up residence in Switzerland in fact live there. If clients don’t come clean, UBS could close the account.

Another Swiss bank, Julius Baer, said each of its offshore German clients will get an account tax statement, whether the client asks for it or not. The bank may expand the practice to other offshore account holders as well.

At Sarasin & Cie AG, clients suspected of avoiding taxes, for example, by asking that account statements not be mailed to their home country, will no longer be allowed to invest in the bank’s full range of investment products and face limits on how actively their accounts can be traded.

Tax lawyers say banks are making other unprecedented demands. When a wealthy individual wants to move a trust to a new bank, many banks are demanding that a third party, for example a lawyer, an accountant or a family member named in the trust, certify that the structure is tax compliant in his home jurisdiction before taking it on. In a few cases, banks are demanding to see signed tax returns.