No constitutional safeguard for banking secrecy

Parliament thinks banking secrecy is secure enough swissinfo.ch

A proposal to enshrine Swiss banking secrecy in the constitution has been thrown out by the House of Representatives, which approved just such a plan two years ago.

Most parliamentarians took the view that such protection for banking secrecy was no longer necessary since the signing of a relevant treaty with the European Union.

The proposal, put forward by the rightwing Swiss People’s Party, gained a good deal of currency in parliament in December 2003 when Switzerland was under heavy EU pressure to relax banking secrecy.

But a bilateral treaty agreed in the interim now guarantees that the EU will respect Swiss rules on confidentiality. In exchange EU countries receive a share of the tax take from interest earned by their residents’ assets in Switzerland.

“The context has changed, especially following the negotiation of a second set of bilateral accords with the EU,” explained Charles Favre, who was part of a parliamentary commission charged with examining the proposal.

Under the relevant treaty, EU residents must either disclose their assets in Switzerland to the tax authorities in their country of residence, or agree to hand over 15 per cent of their interest in exchange for privacy. The tax take will increase to 35 per cent by 2011.

Protected

“Banking secrecy is more protected than ever before and it is no longer necessary to enshrine it in the Swiss constitution,” added Favre.

He said attempts to include it would send a pointless, aggressive political message to Switzerland’s neighbours.

Another commission member, centre-left parliamentarian Remo Gysin, said the proposal would logically have required the inclusion of other confidentiality protections in the constitution.

“To write banking secrecy into the constitution would also mean having to add something on other professional secrecies, such as medical and legal.”

Despite the conclusive vote – 112 votes against and 43 in favour – supporters of the proposal continue to claim that Swiss banking secrecy remains “under threat”.

Tax

“The EU continues to interfere with Swiss affairs, as seen by their moves to oppose Swiss cantons imposing their own tax rates. Swiss banks are under the spotlight right now, unlike their British or French competitors,” said People’s Party parliamentarian Hans Kaufmann.

He was referring to a current dispute in which the EU argues that so-called low-tax cantons are in effect subsidising business in violation of a 1972 free trade agreement.

The Swiss retort that the treaty in question has nothing to do with tax competition, and governs only the trade in certain goods and services.

The Swiss Bankers Association, for its part, stated that, despite helping strengthen Switzerland’s negotiating hand with Brussels, enshrining the concept of banking secrecy in the Swiss constitution would offer no additional protection.

Experts say banking secrecy is likely to come under pressure again in the longer term. The EU has made clear that it wants banking secrecy phased out in the Union, and will need Swiss cooperation if it is to persuade its own members – notably Belgium, Austria and Luxembourg – to scrap their confidentiality rules.

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In brief

The proposal to enshrine banking secrecy in the constitution came about when Switzerland was facing European Union pressure to disclose the identities of EU residents’ with assets in Swiss banks.

Since then, the EU and non-member Switzerland have signed a bilateral treaty which allows tax to be deducted from savings’ interest without violating customer confidentiality rules.

Taxation continues to be a bone of contention between Bern and Brussels – the latest dispute concerns low levels of corporation tax in certain Swiss cantons.