Switzerland cautioned over taxation transparency

Pascal Saint-Amans says Switzerland should be more transparent AFP

Switzerland has been cautioned that it should not treat international pressure for increased transparency in taxation matters lightly.

In an interview with swissinfo.ch, Pascal Saint-Amans, head of the Global Forum on Transparency and Exchange of Information of Tax Purposes, praised Finance Minister Eveline Widmer-Schlumpf for her recent moves to relax conditions for the release of data on foreign bank account holders.

“The Swiss should not make a minor point of serious questions of principle,” said Saint-Amans, adding it was “regrettable” that the issue had provoked such heated debate in Switzerland.

The so-called “concessions” offered by Widmer-Schlumpf were prompted by initial feedback from the forum’s peer review examining banking secrecy in Switzerland and are designed to adapt the country to OECD rules.

swissinfo.ch: What stage is the examination process of Switzerland at?

Pascal Saint-Amans: I cannot comment on details of timing, that is an internal matter of a confidential nature. But let’s summarise the process of the peer examination. The forum sends a questionnaire to the country concerned which then has four weeks to respond. Next, two representatives of member countries, in this case Denmark and Argentina, and an OECD delegate, have a month to write a report which will then be sent to the Peer Review Group (PRG) which comprises 30 member countries, including Switzerland.

What we observe is that countries quickly change their legislation, especially when they are under “pressure” by the forum.

swissinfo.ch: In Switzerland, some are questioning why the convention of taxation cooperation, laboriously negotiated in 2009 and 2010, doesn’t better fulfil the criteria of the OECD…

P.S-A. : The terms of reference have not changed. They are in the OECD model agreement for exchanges of information which dates back to 2002, and also in the model of the convention on taxation (2004). Two years ago, the secretary general of the OECD placed Switzerland on the white list – the latter having renegotiated more than 12 conventions – without making a detailed analysis. Today we are in a different situation. It concerns a much more detailed study conducted by the peers.

swissinfo.ch: Should the double taxation agreements (DTAs) Switzerland has with other countries be reviewed entirely?

P.S-A. : No. If the agreements prove to be clearly against the standards, they should be renegotiated, as was the case for Panama. For Switzerland, it seems to be less the agreements which are the problem, than the interpretation by the government. In this case and following the corrections which seem to have been made by Switzerland, it is sufficient to proceed with an exchange of diplomatic notes with its partners.

swissinfo.ch: The conciliatory proposals made by Swiss Finance Minister Eveline Widmer-Schlumpf have provoked a small political crisis in Switzerland. What do you think about that?

P.S-A. : It is not for me to comment on an internal political issue. All I can say is that this controversy is all the more regrettable because the minister has responded in a very prudent manner, quickly and without being rash. By responding so quickly, she avoided having a negative report.

swissinfo.ch: In Switzerland, some people think the minister overreacted to the wishes of the OECD…

P.S-A. : Switzerland went 95 per cent of the way but not the final five per cent, unlike certain other countries. If you look at Singapore’s legislation, for example, you see that it respects perfectly Article 26 of the OECD Model Tax Convention. Its law anticipates providing information to a country that asks if that country provides the name and address of the taxpayer. But also, in certain circumstances, when only an account number is provided.

Following conversations with the World Forum’s assessment team, Switzerland decided it was taking a big risk for an issue that is in the end, secondary.

swissinfo.ch: What sanctions does Switzerland risk if the report is negative?

P.S-A. : The forum doesn’t impose sanctions. But the famous OECD white, grey and black lists are still in vigour. Certainly the G20 keeps a close watch on these processes. In its conclusions, the recent G20 meeting which took place in Paris called on the Global Forum to keep these reports up to date.

swissinfo.ch: The next meeting of the Global Forum will take place in May in Bermuda. Why Bermuda?

P.S-A. : This country is vice president of the forum…. During the course of the meeting in Bermuda, the reports concerning Switzerland, and also Singapore, Liechtenstein, the United States and France will be examined. We will look closely at the delicate issues of the US state of Delaware and of trusts in Britain. You see, the forum does not have anything against Switzerland!

Recent Reports

In response to a request from the G20 and with a view to increasing taxation transparency, the Global Forum published ten new reports in February.

Four countries – Barbados, the Seychelles, San Marino and Trinidad and Tobago –  are far from applying the international standards. They should implement the report recommendations relating to them before passing to the next phase of evaluation.

The report concerning Guernsey indicates that a satisfactory judicial framework has been put in place but that there are still several minor issues which Guernsey has been asked to rectify.

The four examinations “combined” indicate that the systems put in place in Australia, Denmark, Ireland and Norway have allowed for an effective exchange of information.

However, there are minor issues concerning the information on bearer shares and  fronts that need to be addressed. These examinations bring the number of adopted reports to 18. It is an indication that the Global Forum continues to work toward achieving the G20’s programme goals.

Swiss DTAs

In force

Denmark 

Finland 

Norway 

France  

Britain 

Qatar  

Luxembourg  

Mexico  

Austria (from March 1, 2011) 

Spain 

Canada 

United States (accepted by Swiss parliament, US approval pending) 

Awaiting parliamentary approval 

The Netherlands 

Turkey 

Japan 

Poland 

India 

Germany 

Kazakhstan 

Uruguay 

Greece 

Signed

Hong Kong 

South Korea

Slovakia  

Outlined 

Ireland

Malta 

Oman 

Romania 

Sweden 

Singapore 

United Arab Emirates

(Adapted from French by Sophie Douez)