A proposal by the British finance minister, Gordon Brown (pictured), could have major implications for banking secrecy laws in EU states and Switzerland. He said EU members should exchange information on investor income as a way of fighting tax evasion.
A proposal at the weekend by the British finance minister, Gordon Brown, could have wide-ranging implications for banking secrecy laws in European Union states as well as Switzerland. Brown ruffled feathers with a proposal for EU member states to exchange information on investor income as a way of combatting tax evasion.
Brown's proposal is meant to head off an alternative plan to introduce a minimum 20 per cent withholding tax on non-resident savings. Britain is worried that would have an adverse effect on London's $3,000 billion international bond market.
The proposal for an information exchange, which came at a meeting of EU finance ministers in Lisbon, angered Luxembourg which threatened to use its national veto to protect its banking secrecy laws. Switzerland is watching the debate closely.
"Switzerland has a very large asset management base which attracts a lot of wealthy people from around the world," said Swiss banking expert, Marc Faber, "But to what extent these assets are in Switzerland because of the reliability of Swiss banks and their good portfolio management or because of banking secrecy is debatable, probably a bit of both."
"A lot of money flows into Switzerland from people who may not have an entirely clean record," continued Faber. "On the other hand, a lot of money is here because Swiss banks have a good reputation."
The British proposals will be discussed in May by a group of EU junior ministers and the issue is bound to be high on the agenda when EU leaders meet for their summit in June.
And even though Switzerland is not a member of the EU, experts say Brussels' adoption of an information exchange policy would have implications for Swiss financial institutions.
"They have already come under scrutiny in the United States and there could be a lot of pressure brought to bear on Switzerland to disclose account holders' names," said Faber. "Bank assets could in theory be frozen if there was a dispute."
The heightened debate over the issue of banking secrecy within the EU comes just weeks before the Swiss vote on the bilateral accords between Berne and Brussels and may be used by opponents as further ammunition against them.
By Michael Hollingdale