Switzerland’s Bank Secrecy To Come Tumbling Down Like Berlin Wall When Automatic Exchange of Information Treaty Goes Into Effect

Author Samuel Jaberg sat down to interview Jacques de Watteville, Switzerland’s State Secretary for International Financial Matters. Mr. de Watteville is the man in charge of implementing Switzerland’s new treaty on automatic exchange of information between tax authorities. Before we dive into the interview, some background information about how the automatic exchange of information works is useful.

According to the article,

“… banks will collect data on their clients and transfer it to their national taxation authorities, which then forward it in encrypted form to the authorities in the respective countries. The name, address, account number and balance will be divulged, as well as interest payments, dividends and the purchase and sale of securities.”

“The rules apply to private citizens as well as businesses, including the beneficiaries of trusts or foundations. The automatic exchange of information concerns banks, but also negotiators, investment funds and assurers. It applies only to financial data. Elements of fortunes such as works of art or real estate are not covered.”

The interview, which appeared on swissinfo.ch, is available here. Excerpts can be found below:

swissinfo.ch: Switzerland has always been protective of its banking secrecy and only reluctantly changed its stance at the last moment. In the context of the automatic exchange of information, the country is now actively collaborating in framing these rules. What has it obtained in exchange?

Jacques de Watteville: All the criteria Switzerland fought for were accepted and included in the new rules which around 100 countries have agreed to adopt. The automatic exchange of information should apply to everyone in the same manner on the basis of reciprocity. Information can only be exchanged for clearly defined purposes and will be subject to data protection. Finally, transparency will apply equally to trusts and other legal entities.

Another important element is that all the main financial centres have agreed to put the automatic exchange of information into practice. So, we can now fight on equal terms with Luxembourg, Austria, Singapore, Hong Kong or Jersey. The list of “non-cooperative” countries is being considerably reduced. There are still a few shady areas, but they will not be able to resist the current developments.

swissinfo.ch: The automatic exchange of information seemed unthinkable two years ago. Have you been surprised by these developments?

J.d-W.: Everybody has been surprised by the speed of these changes. Two years ago nobody thought we would be here today, including those in the OECD (Organisation for Economic Co-operation and Development). There has been very strong momentum in favour of this major development.

The crisis of 2009 reinforced international cooperation in fighting tax evasion and marked a real turning point.

That year, Switzerland first decided to provide administrative assistance – not only in cases of fraud but also for tax evasion – and then we developed a strategy designed to ensure Swiss banks only held declared funds. Following that, rejection by the German parliament of the ‘Rubik’ accord on taxation between Switzerland and Germany coincided with the international push for the automatic exchange of information.

To avoid being marginalised and subjected to increased pressure, and to maintain our competitiveness, we had to take on these measures at the same time as the others. But the attitude of the Swiss banks was also decisive. Whereas previously they had done everything to stop it, they subsequently came out in favour of the automatic exchange of information and invested a lot of resources in lobbying for it.

swissinfo.ch: The government seems set on the path of automatic exchange, but in the event of a referendum are the parliament and the people ready to completely abandon banking secrecy for foreign clients of Swiss banks?

J.d-W.: The debate will be intense but most of the political players have accepted the issues and the international developments underway. Within the population, a concerted effort at communication is needed. The automatic exchange of information allows for more transparency and equality in taxation matters. It reduces the possibilities of fraud, something which is in the interests of all honest taxpayers in this country.

swissinfo.ch: The automatic exchange of information is a model for the future but it does not resolve the problems of the past, such as the legalisation of undeclared funds parked in Swiss banks. There are still a lot of unanswered questions.

J.d-W.: There is a mutual interest in resolving this problem. For example, we have reached an agreement with Italy, which wants to avoid a massive exodus of taxable capital. It has offered citizens with undeclared funds in Switzerland an attractive solution to regularise their affairs before the automatic exchange of information comes into force.

Our banks also have an interest in finding a solution which will allow them to continue to manage these funds. Significant progress has been achieved with regard to other neighbouring countries. Most of the German funds in Switzerland have already been regularised, as has a good portion of French funds.

swissinfo.ch: Several countries have attacked Swiss banks, forcing them to pay huge fines, in addition to legal and administrative fees. Is Switzerland not paying a heavy price for its staunch defence of banking secrecy and its belated commitment to international norms?

J.d-W.: It’s not only Switzerland’s slow pace in adapting to international norms that is to blame, but also the attitude of certain banks which continued to help American clients avoid their fiscal obligations even when they knew it was illegal. These banks bear a heavy responsibility for what happened next.

swissinfo.ch: In February, the OECD Global Forum will assess Switzerland’s readiness to move on to the second phase of evaluation. Do you think it will meet with a favourable response?

J.d-W.: We have put a lot of effort into making sure the results of this evaluation will be positive. In our view, the efforts we have made justify our promotion from phase one to phase two. But the decades of Swiss banking secrecy have left their mark. Some countries question whether Switzerland is really sincere. It’s up to us to vanquish these doubts and demonstrate that our actions are serious.

Original Post By:  Michael DeBlis

As a former public defender, Michael has defended the poor, the forgotten, and the damned against a gov. that has seemingly unlimited resources to investigate and prosecute crimes. He has spent the last six years cutting his teeth on some of the most serious felony cases, obtaining favorable results for his clients. He knows what it’s like to go toe to toe with the government. In an adversarial environment that is akin to trench warfare, Michael has developed a reputation as a fearless litigator.

Michael graduated from the Thomas M. Cooley Law School. He then earned his LLM in International Tax. Michael’s unique background in tax law puts him into an elite category of criminal defense attorneys who specialize in criminal tax defense. His extensive trial experience and solid grounding in all major areas of taxation make him uniquely qualified to handle any white-collar case.


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