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Swiss braced for fresh attack on banking secrecy

The Council of Europe has banking secrecy in its sights AFP

Swiss banking secrecy faces renewed attack from members of the Council of Europe on Friday when they vote on a resolution demanding a clamp-down on tax havens.

The parliamentary assembly of the 47-member Council is to discuss a resolution prepared by one of its committees which wants to see the tax burden more fairly shared, and a change to judicial systems which allow banking secrecy to facilitate tax evasion.

One of the Swiss members of the committee, Urs Schwaller of the centre-right Christian Democrats, who sits in the Swiss Senate, tells that the resolution is “completely biased”.

It is based on a report which includes a “financial secrecy index” drawn up by the non-governmental organisation “Tax Justice Network” in which Switzerland is ranked at the top. Couldn’t you have prevented these attacks against Switzerland in the committee?

Urs Schwaller: The committee put banking secrecy on the same footing as tax fraud. That is nothing new: it’s the outcome of years of constant talk of tax havens and speaking as if Switzerland was the same as the Channel Islands.

What bothers me is that the report – or at least the preliminary version – has completely ignored everything Switzerland has done in the areas of information exchange, administrative assistance and double taxation agreements in the past few years.

It’s unacceptable to single out Switzerland from some 30 or 40 countries and even to come up with blacklists as well, without saying who has drawn up these lists – namely an organisation that has absolutely no basis as a state or any legitimate authority. If the Council of Europe approves the resolution it won’t be binding, but only a recommendation. But could it damage Switzerland even so?

U.S.: Yes. These are more pinpricks we have to defend ourselves against. The recommendation would go to the member states, perhaps to the European parliament. It all goes to fuel a certain attitude which is bad for Switzerland. You were rather alone in the committee in taking the position you did. How come that all other countries take a stand against Switzerland?

U.S.: It is in no-one’s particular interest to leap into the breach here when the finger is being pointed at only one country. We are not an EU member, we are not represented in various bodies, so these countries don’t feel any particular obligation to give us support. Are you expecting the assembly to adopt the resolution?

U.S.: We’ll see if there are other countries which, like us, reject the resolution. I think it would at least be in the interest of Luxembourg, and also of Austria and perhaps of Britain if everything that these countries have done in the past few years to deal with the issue was pointed out. The report underlying the resolution argues that tax havens and offshore financial centres which facilitate tax evasion are not only punishing ordinary taxpayers and damaging public finances, but are also undermining good governance. That makes sense, doesn’t it?

U.S.: No-one can deny that up to two years ago people were being helped – particularly by various banks – not to pay tax in their home country on all their money. But there has been a sea-change in policy here. Since 2009 we have applied the standards of the Organisation for Economic Co-operation and Development, we have concluded more than 40 double taxation agreements, given administrative assistance and have an independent financial market authority. What I don’t want to see is automatic exchange of information. The report criticises Switzerland for not being prepared – in contrast to most European countries – to give up some of its autonomy in favour of legal rules that do not facilitate tax evasion.

U.S.: Within this country we still differentiate between tax fraud and tax evasion. I would want to keep this. We don’t want to criminalise whole sections of the public because perhaps someone gave their grandchild SFr50 ($55) that wasn’t declared. The private sphere is protected in Switzerland. The Swiss tax authority isn’t some kind of wicked, arbitrary tax farmer. They have to keep to the law and can only demand the payments that are due. Why is the protection of the private sphere so important to you?

U.S.: I don’t want our citizens to be under constant scrutiny. People in Switzerland regard taxation very honestly. I think it important that citizens should have a private sphere where the state can’t intrude. That includes a degree of confidentiality about personal data. That is one of the basic values and one of the strengths of our country. For decades banking secrecy helped attract enormous sums in foreign assets to Swiss banks. Now Switzerland has had to make some concessions and ease this secrecy. Nevertheless, there has been no let-up in the pressure from abroad. Why is that?

U.S.: Many states are up to their necks in debt. I can understand that they want to see the assets of their compatriots in Swiss banks taxed.

I support this struggle as far as not protecting fraudulent tax avoidance is concerned. After all, we provide administrative assistance to foreign countries even for tax evasion. We are offering foreign tax authorities the chance to obtain certain data that a few years ago would have been protected. But that is now as far as we should go.

The draft resolution to be discussed on April 27 calls on the 47 member states of the Council of Europe to put more pressure on tax havens and off-shore financial centres.

It calls on the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) to monitor the tax regimes of their members better.

It describes the fight against tax havens as a moral duty, since they harm the interests of other countries.

It wants to see the automatic exchange of bank data introduced across Europe.

The text is based on a report by Dirk Van der Maelen, a Social Democrat member from Belgium, which says member countries of the European Council lose billions every year through tax fraud and evasion, favoured by offshore financial systems.

A Financial Secrecy Index for 2011 drawn up by the NGO Tax Justice Network  and appended to the report, puts Switzerland in first place.

It is followed by the Cayman Islands, Luxembourg, Hong Kong, USA, Singapore, Jersey, Japan, Germany and Bahrain.

(Translated from German by Julia Slater)

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