Struggling to pay off more than €300 billion (CHF313 billion) in debts, Greece is banking on Switzerland to help it recover a treasure trove of undeclared assets that tax cheats have stashed in alpine vaults.
But anti-tax haven campaigners are sceptical about “undemocratic” tax amnesties that are prone to loopholes, allowing many tax dodgers to wriggle out of their obligations.
“The devil is always in the detail with these deals. If Switzerland can claim it is helping to clear untaxed assets out of its banks, this could provide it with a public relations service,” Nicholas Shaxson of Tax Justice Network told swissinfo.ch.
“But amnesties generally favour wealthy people who can pay accountants to exploit loopholes, such as insurance wrappers and discretionary trusts.”
Such “slippery structures” render assets “technically declared”, allowing them to remain offshore under the radar of amnesties, Shaxson added.
“Tax amnesties only make a difference if the public believe that, once they have ended, the government will assertively go after people who did not disclose,” Heather Low of Global Financial Integrity (GFI) told swissinfo.ch.
“Tax cheats in the United States would be afraid of the authorities if they did not disclose during an amnesty. I’m not so sure this would be the case in Greece.”
In April, former Greek Finance Minister Yanis Varoufakis announced plans for a global tax amnesty to repatriate overseas funds to Greece. It is believed the government has settled for a one-off 21% levy on those who come clean, pending parliamentary approval of the proposal.
Negotiations between Greece and Switzerland on how best to recover black money hidden in Swiss banks have been ongoing since 2012. But the two sides are reported to be edging closer to a solution that would allow banks to cooperate.
While Switzerland would not be an official partner to a Greek tax amnesty, the approval and cooperation of the Swiss authorities would be integral to the scheme working.
To this end, two meetings were arranged between the countries in March and April to discuss the practical details of persuading Greek tax cheats to sign up to the amnesty. While not yet concluded, Varoufakis felt encouraged enough to announce Greece’s intended global tax amnesty following a meeting with Swiss officials in April.
The Swiss State Secretariat for International Financial Matters (SIF) confirmed in a statement that it was helping Greece to “develop a workable self-declaration programme” before Switzerland starts to automatically exchange tax information with the European Union.
“This includes more effective use of the existing DTA [double taxation agreement] between Switzerland and Greece and the Greek parliament adopting a self-declaration programme which is effective and sufficiently attractive.”
With Switzerland having agreed to apply automatic exchange of tax information by the start of 2018 at the latest, banks fear that some clients will move assets to other jurisdictions unless they first have a chance to clear their account with Athens.
In June, days before he resigned as finance minister, Varoufakis spoke of Greece’s frustration at tracking down black money in Switzerland during an interview with the Rundschau programme on Swiss public television, SRF.
Varoufakis knew that Greeks were illicitly stashing money in Swiss banks, but he could not penetrate Swiss banking secrecy to find out which banks or even in which cities the assets were held. “We know too little to be able to locate the black money,” he complained.
When asked about rumours of Greek tax cheats being charged around 20% on their hidden assets, Varoufakis refused to confirm or deny the figure. But he spoke of the difficulty of choosing a penalty that was both just and pragmatic. “It’s never easy finding a middle ground,” he said.
It is not known if Varoufakis’s resignation on July 6 will have any impact on negotiations between the two countries.
Due to banking secrecy and the fact that untaxed assets are hidden from sight, there is no definite information on how much cash Greeks have invested in Switzerland.
According to the Swiss National Bank, at the end of last year Swiss banks held CHF636 million ($674 million) of Greek assets in normal savings and deposits accounts. But this does not include a range of other investments, such as shares, bonds, real estate or cash held in trusts or foundations.
A further CHF6.1 billion sits in Swiss banks as undefined "other amounts due to customers" plus CHF724 million listed as fiduciary transactions, according to SNB calculations.
In a 2009 report, Helvea Bank calculated that 99% of the estimated CHF24.2 billion held in Switzerland by Greek citizens was undeclared to their tax authorities. A year later, former French Finance Minister Christine Lagarde handed the Greek authorities a list of more than 2,000 names of Greeks who had accounts at the Geneva private banking branch of HSBC.
The NZZ am Sonntag newspaper highlighted the uncertainty surrounding the exact number of clients and assets by saying estimates of Greek black money in Switzerland range from €2 billion to €200 billion.