Switzerland under EU pressure to abandon banking secrecy

The European Union agreement on capital gains tax leaves Switzerland exposed and vulnerable, according to local commentators. They say banking secrecy laws will have to be scrapped, if the country is to join the EU.

Under the EU deal, clinched at its summit in Portugal, member states agreed to provide information on non-residents’ savings accounts, a measure that would help governments crack down on tax evasion.

But pressure from Luxembourg and Austria means the agreement is dependent on persuading third countries, including Switzerland, the United States and other offshore tax havens, to adopt similar measures.

Swiss analysts said that although the EU compromise was fragile, Berne’s secret hope that the union would fail to harmonise its tax legislation had been dashed. The German-language Neue Zürcher Zeitung (NZZ) newspaper went even further, saying that Luxembourg and Austria had successfully passed the hot potato on to Switzerland.

“The strategy of these two countries is to offer to sacrifice their banking secrecy only if Switzerland, among others, follows suit,” it said in an editorial. “That places Switzerland in a uncomfortable position.”

Switzerland is already under pressure within the Organisation for Economic Co-operation and Development (OECD) to soften its strict banking secrecy regulations, and the NZZ says Switzerland is unlikely to be able to resist the pressure for long.

The close economic ties between Switzerland and the EU give Brussels considerable leverage, not least because Berne is seeking further concessions from the union to ease the impact of being outside the 15-state body. The newspaper says Switzerland must, therefore, waste no time in developing a coherent strategy.

“A steamrolling of Switzerland, such as the United States managed on the issue of dormant Holocaust-era accounts, can not be allowed to happen again. There is too much at stake,” it commented.

Swiss officials and banks were adamant in the wake of the EU deal that they would not change their position. The finance ministry reiterated that Switzerland was not prepared to accept any system involving an exchange of information, while a spokesman for the Bankers’ Association stated categorically that “banking secrecy is not up for discussion”.

But the Berne-based daily, Der Bund, agreed with the NZZ that such a position is untenable in the long term. It also recalled the controversy over Nazi gold and dormant accounts, concluding: “The lesson is: it is no use deluding oneself for decades when the rest of the world has lost faith.”

The largest French-language daily, Le Temps, also feels the writing is on the wall. It says that if the government is serious about wanting to revive Switzerland’s application to join the EU, then banking secrecy will almost certainly have to go.

“The government’s only hope now is that the tax accord is never put into place, given that there are so many conditions attached,” writes editorialist, Roland Krumm. “But it would be best advised not to count on it.”

by Malcolm Shearmur