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Switzerland: Tax Haven No More?

By: EW News Desk Team Date: 23 February 2012

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23 February 2012

Switzerland is set to introduce more tax obligation requirements for foreign clients of its banking industry in the future, said the country’s Finance Ministry on Wednesday, in an attempt to clean up its image as a haven for overseas tax evasion.

According to the Wall Street Journal, the plans will be finalised by the Finance Ministry in September this year, and will come just as the Swiss government proceeds with negotiation over a double-tax agreement with the US, Germany and the UK.

"We are trying to formulate a set of credible, concrete proposals to improve our financial-centre efficiency, and achieve a better balance between private bank privacy and tax compliance," said Swiss Finance Minister Eveline Widmer-Schlumpf.

"The focus is on enhanced due diligence requirements for banks when accepting assets, as well as a requirement for foreign clients to make a declaration on the fulfilment of their tax obligations," added a cabinet statement as cited by Reuters.

The country’s finance and banking industry had come under international scrutiny in recent years, as several governments attempted to pursue alleged tax dodgers from their own nations who had stored much of their money in Switzerland.

These governments though, often faced a roadblock in their investigations: Switzerland’s much-cherished tradition of banking secrecy. But with growing international pressure mounting on Switzerland to reveal more information of their banks’ clients, who have helped build up a $2 trillion offshore wealth management industry in the country, the Swiss government appear to have little option but to accede to international demands.

"The government's aim is to create favourable conditions for the Swiss financial centre that boost its competitiveness, and are globally acceptable," claimed a statement by the Swiss government.

Last week, the Swiss embassy in India had to dismiss allegations made by Indian Minister of State for personnel V. Narayanasamy that their government was not doing enough to cooperate with India in getting vast amounts of black money hidden in Swiss banks. Indian Central Bureau of Investigations’ chief A.P. Singh also alleged that Indians had already stashed $500 billion of black money abroad for tax evasion.

"The Swiss government has been forthcoming in its cooperation with all foreign governments in cases of tax evasion as well as cases of tax fraud, that have been presented within the framework of bilateral treaties," said a statement by the Swiss Embassy, as quoted by the Economic Times.

"The Swiss government has conceded to administrative assistance also in cases of tax evasion. This is completely in line with the current international standard," it added.