Switzerland looks for tax understanding

Swiss Foreign Minister Micheline Calmy-Rey and her French counterpart Bernard Kouchner Keystone

Switzerland's recent easing of bank secrecy laws has prompted a flurry of efforts to ensure that the country is indeed kept off a blacklist of tax havens.

Swiss Foreign Minister Micheline Calmy-Rey visited Paris on Wednesday to present the new Swiss policy to her French counterpart, Bernard Kouchner, and Budget Minister Eric Woerth.

Calmy-Rey wanted to explain the Swiss position, a member of her delegation said, and was also anxious to find out what attitude other countries are taking towards it.

The Swiss delegation said Kouchner had welcomed the easing of bank secrecy as “a step in the right direction.” Woerth had “taken note” of the Swiss measures.

Only hours before his meeting with her, Woerth had told journalists that France would block the signature of a recently renegotiated tax convention with Switzerland until the Swiss authorities agreed to accept the criteria set by the Organisation of Economic Cooperation and Development (OECD) on the transfer of information between tax authorities.

Calmy-Rey told a media conference at the end of her talks that Switzerland had “noted” Woerth’s remarks, but that the agreement had already been signed. It now awaits ratification by both parliaments.

France is not Switzerland’s only target as it looks for understanding.

Finance Minister Hans-Rudolf Merz spoke to British Prime Minister George Brown on the issue in London last week-end, and Calmy-Rey is scheduled to visit Italy and Germany on the same mission in the run-up to the G20 meeting of the world’s largest economies on April 2. Tax havens are high on the agenda of the G20 session.

Reciprocity

There have been calls inside and outside the Swiss parliament to ensure that Switzerland should not be alone in making concessions.

Speaking in a lively debate in the House of Representatives on Wednesday, Gabi Huber of the Radical Party said the same OECD standards had to be applied in all the other financial centres, “notably the various US states and the British territories”.

Merz pledged to parliament that the government would set demands in negotiations on amended double taxation accords with other countries. He also said banking secrecy would remain intact and the privacy of Swiss residents would be protected.

Calmy-Rey had told French language radio on Tuesday that Switzerland was now in a better position to go on the diplomatic offensive. She pointed out that current agreements with EU countries had been made at a time when Switzerland did not give banking information to foreign tax authorities, and that the context had now changed.

Debate

In the debate in the House of Representatives – held just one day after a similar one in the Senate – many members mounted verbal attacks against the government policy.

The rightwing Swiss People’s Party accused the cabinet of caving in under pressure and called for retaliatory measures.

Parliamentarian Alfred Heer said the cabinet had “a backbone as weak as a toothpick”, while his colleague Hans Kaufmann demanded that Switzerland should suspend payment to European Union countries of the withholding tax (levied on the Swiss savings of EU nationals), which is due under a bilateral accord with Brussels.

The centre-left Social Democrats and Greens slammed the government for its perceived lack of interest in trying to reform banking secrecy rules in the past.

Daniel Vischer of the Green Party argued it would have been better to tackle the problem of illegal funds in Swiss bank accounts much earlier, and also to scrap the distinction between tax fraud and tax evasion.

But the centre-left was the target of scathing criticism by other parties which branded them as traitors.

Representatives of the centre-right Radicals and the Christian Democrats showed more understanding for Merz and his colleagues in the seven-member cabinet.

Georges Theiler said “the government had achieved the maximum in a difficult situation”.

The cabinet will hold an extraordinary meeting on Thursday to discuss the meetings they have had so far with foreign politicians, and the work carried out so far by the expert group on bank secrecy.

swissinfo

Banking Secrecy

Swiss banking secrecy was enshrined in law 75 years ago. It obliges banks to keep information about their clients confidential, except in cases of criminal investigation.

Banking secrecy has recently come under pressure from a number of countries trying to clamp down on tax evasion by their nationals.

Switzerland has hitherto not distinguished between tax evasion and tax fraud. Unlike most other countries, it has not regarded tax evasion, i.e. concealing the true extents of one’s assets from the tax authorities, as a criminal offence.

Swiss banks have only been obliged to hand over details of clients’ assets if they have lied on official documentation, which is regarded as tax fraud.

The Swiss government has now agreed to abolish the distinction, and to exchange information about individual cases if a legal request is made.

Not only Switzerland, but also Andorra, Austria, Luxembourg, Hong Kong and Singapore have announced measures to prevent themselves being placed on a blacklist of uncooperative tax havens by the G20 group of the world’s largest economies.