Switzerland Fighting Against Bank Secrecy
Switzerland has recently joined a number of nations in the fight against tax evasion by pledging to minimize bank secrecy. This pledge took the form of an accord, signed by 47 nations, under the supervision of the Organisation for Economic Cooperation and Development (OECD). Switzerland, along with countries such as India and Singapore, agreed upon the automatic exchange of banking information regarding tax matters, a step which has been hailed by Pascal Saint-Amans, the tax director of the Organisation for Economic Cooperation and Development, as the end of bank secrecy being abused for the purposes of tax evasion.
Switzerland’s acceptance of this accord was particularly important due to its prominent, bordering upon legendary, reputation for bank secrecy. In fact, Switzerland’s wealth management sector houses approximately $2.2 trillion in offshore assets, a perfect haven for tax evaders. The Swiss Bankers Association has said that it is perfectly willing to accept the recent accord so long as any information handed over by banks is used only for tax purposes. However, despite Switzerland’s willingness to impose transparency measures on the banking industry, many important financial centres, such as Panama and Dubai have resisted transparency initiatives. These holdouts threaten the efficacy of the accord as a whole, and certain G20 countries have already expressed their willingness to use sanctions in order to provide an incentive for these countries to adopt the accord, while it is expected that the OECD will come out with a list of these holdout nations later this year.
This important step taken by Switzerland in the fight against bank secrecy is inextricably linked to the recent economic crisis, as it has been accepted that tax evasion, a crime perpetuated by bank secrecy, is far from a victimless crime. In fact, Angel Gurria, the Secretary-General of the OECD, has stated that tax evasion not only deprives governments of the funds required to reinvigorate the economy, it also destroys the faith of citizens in the integrity of the tax system. A particularly significant example of how prominent the phenomenon of tax evasion has become can be seen in Britain’s decision to lower the penalties for all tax evaders who come forward, a move which has led to the collection of over 1 billion pounds in overdue tax revenues.
Switzerland, which signed a convention on mutual administrative assistance on tax matters last October, has been moving towards banking transparency from some time now, likely due to increasing pressure from countries such as the United States. However, despite the progress represented by this recent accord, the Tax Justice Network, a campaign group, has raised questions about the costly nature of the accord, which might prevent developing countries from taking part. Therefore, although this accord must be seen as a victory against tax evaders who use legal instruments such as shell companies and trusts to evade taxes,it is by no means a definitive solution to the problem of bank secrecy, and countries such as Switzerland must keep fighting if they hope to avoid the problems caused by tax evasion in countries such as Greece.