Swiss keep their heads down as tax row rumbles

Keystone

Some Swiss bankers and trade promotion agencies are steering clear of Germany for fear of becoming embroiled in the ongoing tax evasion row between the neighbours.

Appenzell Outer Rhodes last week cancelled an exhibition in Cologne promoting the canton’s tax saving qualities to German firms, while some banks have reportedly banned foreign travel for executives.

Switzerland’s tradition of banking secrecy has come under fire in the last year as a succession of countries accuse it of helping their citizens evade taxes.

The United States authorities are still pursuing an investigation against Switzerland’s largest bank, UBS, for allegedly helping tax dodgers, while the world’s 20 most influential countries meet this week to decide on whether to blacklist the Swiss as a tax haven.

Germany has been particularly vocal in its criticism of the Swiss banking regime, with Finance Minister Peer Steinbrück repeatedly using provocative language in the ongoing row.

Appenzell Outer Rhodes, which offers low rates of corporate tax to entice foreign to relocate, said last week its planned exhibition in Cologne would only “pour oil onto the flames”.

“Business as usual”

Cantonal spokesman Georg Amstutz told the Tages-Anzeiger newspaper: “Because the financial debate is currently dominated by the topic tax evasion, it is not appropriate for us to communicate our message.”

Not all cantons are adopting the same approach however, and the association of cantonal finance directors told swissinfo that it has issued no specific guidelines on foreign promotional activities.

The Greater Zurich Area organisation, that promotes trade for the canton of Zurich and neighbouring areas such as Schaffhausen and Zug, said it was business as usual despite the row.

“We have not changed our activities in Germany as we do not run any specific promotional events in that country,” chief executive Willi Meier told swissinfo.

“Tax is an important element in attracting companies, but we have never used it at the forefront of our campaigns.”

“We assume that once the discussions currently taking place between Switzerland and Germany are concluded then things will return back to normal again,” he added.

Bankers “stay at home”

Some Swiss private banks have reportedly stopped executives from travelling abroad for fear of them being hounded by the authorities of other countries. The US authorities detained two UBS executives in recent months during their tax investigation.

Unnamed sources told the Financial Times newspaper last week that some senior executives were afraid of leaving Geneva, home to many Swiss private banks.

“If today I go to Germany to visit two banks I deal with…German customs can take me in and question me,” one senior industry figure told the FT.

However, the Swiss Bankers Association (SBA) said there was no blanket ban on travel and that it had made no specific recommendations to its members.

“It may be individual banks. They are free to do whatever they want,” said SBA President Pierre Mirabaud. “I travel all the time even in America. I have no fear of travelling.”

Switzerland has signalled its intent to make concessions to other countries by renegotiating tax treaties in an effort to stave off a sustained international attack.

But it has also reacted fiercely to some comments, particularly from Steinbrück who earlier this month likened the Swiss to “Indians” running scared from the US “cavalry”. The German ambassador to Bern was summoned by the Swiss foreign ministry for a dressing down after this remark.

swissinfo, Matthew Allen in Zurich

International tax row

Many countries have long suspected tax cheats of hiding their assets from the tax authorities behind the cloak of Swiss banking secrecy. But a series of events in the last year has brought the issue to boiling point.

In May last year, a US tax evasion investigation turned the heat on UBS after a former employee admitted helping clients to evade taxes.

The bank was forced in February to hand over confidential details of some clients and pay a $780 million ($676 million) fine to stave off the threat of criminal action. The US tax authorities, however, have not dropped the probe and are demanding more client data.

The financial crisis and subsequent global recession have sharpened the resolve of many countries to tackle tax evasion as they seek to fill up empty state coffers.

Last October, German Finance Minister Peer Steinbrück and French Budget Minister Eric Woerth called for Switzerland to be blacklisted as an uncooperative tax haven by the Organisation for Economic Cooperation and Development (OECD).

The British government waded into the row in February, with Prime Minister Gordon Brown starting a global crusade to clamp down on tax havens worldwide.

The G20 meeting of the world’s most influential powers will meet on Thursday to decide whether to blacklist Switzerland and other states.