Swiss banks pay out millions to Austria, Britain

The first tranche of payments has been made Keystone

Switzerland has transferred nearly CHF900 million ($962 million) to Britain and Austria as part of a withholding tax agreement to settle untaxed assets held in Swiss banks.

The Finance Ministry said on Thursday that Britain had received CHF372 million (as opposed to the CHF500 million anticipated when the deal was signed) and Austria, CHF515 million.

“Switzerland thereby fulfilled an obligation which is set out in the bilateral withholding tax agreements with the two countries,” a ministry statement said.

More clients had opted to reveal their secret accounts to the British and Austrian tax authorities than expected, according to the Swiss Bankers Association (SBA). Voluntary disclosures accounted for around CHF12 billion, relieving Swiss banks from the responsibility of collecting backdated taxes on these assets.

Earlier this month, the SBA also said that many Swiss bank clients that Britain had hoped to target with the tax treaty had slipped through the net thanks to their non-domiciled status in Britain.

The financial crisis has put Switzerland under mounting pressure to lift its trademark banking secrecy. In order to defend this principle, it has agreed to withholding tax deals with certain countries.

Under the deals with Britain and Austria, Switzerland gave people who failed to declare money placed in Swiss banks to their home countries two options.

They could either declare themselves to their country’s tax authorities, or have their accounts taxed by the Swiss, who would then transfer the funds without naming the clients.

The monies and declarations announced on Thursday are the first in a serious of tranches to be transferred in the coming months.

“These measures enable the assets in Switzerland of bank clients residing in Austria and United Kingdom to be regularized from a tax viewpoint,” stated the ministry.

Withholding tax on capital income generated on bank accounts or securities deposits after the agreements came into force will be forwarded from 2014, added the statement.

“Effective solution”

The ministry also hailed the withholding tax agreements as “an effective solution”, which can help attain a goal of an “untarnished financial centre in terms of taxation”.

No major problems had arisen from the implementation of the agreements and negotiations on similar deals are currently under way with Greece and Italy, it added.

However, not everyone agrees that the so-called Rubik tax treaties are the best well to deal with the longstanding tax evasion issues. Last year the German parliament rejected a similar deal negotiated by its government with Switzerland.

The European Union also demanded that the original Rubik deals, first concluded in 2011, should be amended to avoid clashing with an existing, and similar, EU-Swiss tax treaty known as the Savings Directive.

The EU has now embarked on negotiations with Switzerland to update the Savings Directive and is pressing for an automatic exchange of tax information – measures that many observers believe could render the Rubik treaties null and void.