Switzerland backs down on US tax row
It appears that Switzerland’s two year battle with the US on the issue of information sharing could be reaching its climax as Bern has seemingly caved in to American demands.Swiss officials confirmed on Wednesday that they have presented a parliamentary bill to establish a new legal procedure that will allow banks to cooperate with American authorities which, in light of the country’s economic problems, are trying to track down US citizens’ offshore accounts.
Since the 1930s it has been illegal for Swiss banks to reveal a client’s identity. This secrecy law was responsible for creating the world’s biggest and, many would argue, the most secure and stable, banking haven.
So has this ‘ultimate haven’ status come to an end for good? It’s a hard one to call.
On the one hand, Julius Baer, amongst other major financial institutions in Switzerland, is predicting client withdrawals, suggesting that this proposed legislation could seriously damage the country’s reputation for being a credible offshore hub.
But on the other, the plans do not appear to be too far-reaching. The bill proposes to permit Swiss banks to share only limited information (only enough to protect the banks’ interests) with US authorities for 12 months in order to get their working relationship back on track. And in exchange, the US will reconcile its differences with Switzerland, effectively letting ‘bygones be bygones’ – although it remains to be seen if it will happen.
Looking at today’s developments, what I find galling is the imperialistic audacity of the US. It is cajoling, perhaps using its economic and political might to bully, Switzerland into changing its long-established laws to suit its own agenda. It also smacks of hypocrisy because America, many would argue, is a tax haven in its own right with huge sums of money from South America housed in banks in Florida, and with it being incredibly easy to establish a tax-efficient ‘shell’ firm in states such as Delaware and Nevada.
The most concerning part is that Switzerland has, it would seem, succumbed to the tactics of the US when it has stood firm against the interference of larger, stronger nations than itself on this issue for decades. A sign of the times perhaps.
Nigel Green deVere Group
Blog written 29 th May