Peter Wuffli feels that pressure on Switzerland from the European Union to water down banking secrecy is neither fair nor appropriate.This content was published on November 7, 2002 - 14:08
The EU earlier this month mooted a set of possible sanctions against Switzerland in a lingering dispute over the taxation of EU citizen's savings.
Brussels wants to finalise plans to prevent tax evasion by EU citizens from both within and outside its borders. For the plans to succeed, it has asked non-EU members to provide an exchange of information.
Switzerland has consistently rejected this, arguing that any information exchange would run counter to its stringent laws governing bank customer confidentiality. Tax evasion is not a criminal offence in Switzerland.
However, Bern has offered to introduce a withholding tax. Banks would be asked to deduct tax liabilities directly from foreign investors' income and repatriate the proceeds to the tax authority of the country of residence.
swissinfo: Banking secrecy and Switzerland's relationship with the EU don't seem to be out of the headlines these days. Isn't there a problem that banking secrecy protects tax dodgers?
Well, we feel that right now the tide rather goes in our favour because I think there is more and more recognition of the justification to preserve the privacy of private individuals. We have given clear proof that we have no interest whatsoever in protecting criminal or fraudulent monies. We have been and are at the forefront of global banks that have very rigorous processes to identify and sanction - and also help the authorities to sanction - fraudulent and criminal behaviour. We firmly believe that the automatic exchange of information on behalf of foreign countries' tax authorities is not the right way to go. Our experience within Switzerland is that a withholding tax system with a trust-based tax environment is a much more effective but also ethical way.
You say "ethical", but some people might say that tax evasion should be a crime? It seems to be everywhere else in Europe.
Switzerland has a very effective system based on trust between the citizens and the authorities, and based on competition, which we feel is very healthy between different tax authorities. We still have a world where countries are sovereign and can have their own laws. We cannot accept as a matter of principle that something considered a crime in another country has to be considered the same in Switzerland. I think that goes against the very basics of international law and it's not negotiable.
What would you do though, as head of UBS, if banking secrecy were to be lifted?
Well, we have no contingency plan because we firmly believe in that principle. We do not see any reason for Switzerland to concede. We do have a sense that this viewpoint is more and more not only heard but also understood and accepted. There are increasingly reactions from clients but also from other countries, which feel that the way that Switzerland is put under pressure by the European Union right now is not fair and not appropriate.
After it was disclosed that the former Nigerian head Sani Abacha had stashed millions in Switzerland, the banks created even more stringent controls to try to prevent money laundering. Do "dubious" people still knock on the door?
The Abacha case was obviously unfortunate but we were more stringent with controls long before it. We have not changed procedures. I think obviously the increased awareness on cases of money laundering in general and politically eminent persons in particular have created a much higher degree of sensitivity. We have been at the forefront here with the whole Swiss banking system. This is effectively something that is being monitored regularly in a systematic management process.
But of course every time that a name turns up there's a problem, with people asking "Why didn't you spot that? Doesn't that harm the image of Switzerland as a banking centre?
Well, we know that as much as corporate leaders can fall from grace, the same can happen for political leaders and it is obviously a very challenging and delicate judgement call on where to draw the line. I guess the same is true in politics as it is in business. Nothing succeeds like success, nothing fails like failure, and so politically eminent persons can change from heroes to foes in a short space of time. But we do our best to be very diligent and to my knowledge we are clearly advanced against any other banks in the world with the regulations that we have from our Federal Banking Commission to systematically track this and make these judgement calls.
Peter Wuffli believes European Union has no authority to pressure Switzerland to scrap banking secrecy.
He believes a withholding tax system - where banks deduct tax directly from foreign investors' income and repatriate the proceeds to the appropriate tax authority - is more ethical as the privacy of individuals is preserved.
Switzerland, he says, has a very effective system that is based on competition between tax authorities, which is healthy.
UBS has no contingency plan if banking secrecy were to be lifted because he sees no reason why Switzerland should bow to foreign pressure.
Wuffli says that Switzerland has some of the world's tightest control regimes to prevent money laundering.
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