Sunday, November 4, 2012

Article on Erosion of Swiss Secrecy (11/4/12)

Michael Birnbaum, Threatened by isolation, Switzerland lifting veil on secret bank accounts (Washington Post 11/4/12), here.  The article is very good summary of the current situation.  Here are some excerpts I thought might be of interest to readers of this blog:
[W]ith the euro crisis forcing Switzerland’s revenue-starved neighbors to search out new sources of money, the Alpine country’s bank vaults are suddenly looking irresistible. In recent months, the nation’s strict banking secrecy has been under assault from countries such as Germany and Britain as never before. Experts say that the last veils may soon be dropped altogether, bringing the hush-hush tradition to a final end. 
* * * * 
Many in Switzerland’s banking capitals have resigned themselves to handing over their ledger books to international tax authorities sooner or later. In the hushed, marble-lined hallways of grand banks in Zurich and Geneva, the whispers are of a future when the country no longer serves as a hub for tax evasion. 
You can hardly understate what is happening,” said Luc Thevenoz, director of the Center for Banking and Financial Law at the University of Geneva. “Switzerland has created this image that the big value that Swiss bankers brought their clients was secrecy. It was an attractive proposition, especially with regard to tax issues.” 
No one is sure quite how much Switzerland’s private wealth management sector depends on tax evasion. Bankers’ estimates of deposits from private individuals range from 30 percent on the low end to 60 percent or more. Many say that a significant portion of those funds will drain away from Swiss coffers.
Even the measures already taken could put pressure on the Swiss economy, which is heavily dependent on profits from the financial sector. Some economists forecast a loss of 10,000 jobs and a full percentage point off the country’s gross domestic product. In recent weeks, banking giants like UBS and Credit Suisse have cited the impending changes as one source of their lackluster third-quarter profits. 
* * * * 
The current CEO of UBS, Sergio Ermotti, recently broke a longstanding taboo in Switzerland when he told a local newspaper that the country ought to do away with banking secrecy altogether. He estimated that his bank held between $13 billion and $32 billion in untaxed deposits. 
* * * * 
The United States has imposed far-reaching restrictions on banks that do business with U.S. clients abroad, inspired in part by revelations of wide-ranging efforts from Swiss banks to help Americans evade taxes. With penalties of up to 30 percent on foreign banks’ U.S.-based profits if the banks fail to hand over the foreign data of even a single U.S. account-holder, many Swiss banks are giving up on Americans altogether. They reason that there is not enough demand to justify the risks. 
* * * * 
Switzerland has been trying to reach agreements with individual countries rather than be forced into full-scale transparency. The treaties with Britain and Austria would hand over a chunk of investment income to tax authorities in those countries while preserving depositors’ anonymity.


  1. Mr. Ermotti's comment is surprising and gives rise to additional questions.

    "He estimated that his bank held between $13 billion and $32 billion in untaxed deposits." "Held" is in the past tense. $13-32 billion before UBS' settlement with DOJ and subsequent closure of accounts owned by Americans? What is the amount today? Is this a total amount, inclusive of deposits from non-Americans? How much is still held at other Swiss banks?

  2. This article is hardly news, and has a lot of fluff, including the reference to "hushed, marble-lined hallways of grand banks" as well as complete misinformation, such as:

    "penalties of up to 30 percent on foreign banks’ U.S.-based profits"

    Wrong. FATCA would provide 30% (not "up to") withholding of ALL payments including interest on US obligations, principal repayment of US obligations sent to non-FATCA banks

    "treaties with Britain and Austria would hand over a chunk of investment income"

    Wrong, around 40% of principal balance in such accounts. The European Savings Tax Directive already provides for 35% withholding of interest payments to EU residents who do not allow their data to be shared

    " euro crisis forcing Switzerland’s revenue-starved neighbors"

    Not the euro crisis; Germany is in fine shape yet still going after money abroad

    "hush-hush tradition"

    Not merely a "tradition" but bank secrecy law. Many other countries both tax havens and not have similar laws, including Germany. USA too; non-US persons fill out a W8 (instead of W9) and thus NO info is shared with the US government. Since the US government has no info, it has nothing to share with foreign countries.

    "wide-ranging efforts from Swiss banks to help Americans evade taxes"

    UBS, yes. Other banks? So far, no real indicators of active conduct like UBS.

    Not much new or correct info in the article. Maybe that's why this newspaper is referred to by a certain radio commentator as the Washington Compost.

  3. I won't pick apart your comments, but I do perceive an agenda that you have not stated. Could you state openly what exactly your agenda is?

  4. Maybe we could add this article to the discussion.

    US election unlikely to ease strained relations

    Regardless of the outcome of the United States presidential election, Swiss politicians are not expecting an immediate improvement in bilateral relations, which have been strained by on-going banking and tax disputes.

    “Some argue that [Republican candidate Mitt] Romney may have a different attitude to Obama, but I don’t think things will change as the IRS [Internal Revenue Service] and Department of Justice have a clear policy,” said centre-right Radical Party senator Felix Gutzwiller, who is vice president of the Senate foreign affairs commission.

    Luzi Stamm, a parliamentarian from the rightwing Swiss People’s Party and member of the House of Representative’s foreign affairs committee, was more categorical.

    “I think relations have clearly got worse,” he said. “The US has a sick legal system that keeps taking pot shots at Switzerland. Putting a friendly state under pressure to push through your own views is unacceptable.”

    Carlo Sommaruga of the centre-left Social Democrats is concerned about possible long-term damage: “In the US collective imagination, what is being generated is a rejection of Switzerland.”

    Low priority

    According to the Swiss ambassador to the US, Manuel Sager, it is understandable that finding a solution to the banking and tax issues has not been a priority for Washington in a presidential election year.

    Booming business

    Martin Naville, chief executive of the Swiss-American Chamber of Commerce, is also upbeat about relations despite the rows.

    “Underlying business relations are going very well. If you look at 2012 trade figures, exports to the US are up 12 per cent on the previous year and imports to Switzerland are up 20 per cent. In 2011, Switzerland was the second-biggest direct investor in the US … and the US is the biggest foreign direct investor in Switzerland with firms like Google and Kraft,” he said.

    “Constructive path”

    One outward sign of progress was an agreement by Switzerland in June to cooperate with the US Treasury to implement a light version of the US Foreign Account Tax Compliance Act (Fatca), a 2010 anti-tax evasion law.

    And in September the Swiss government approved two security accords with the US relating to sharing fingerprint, DNA and terrorist-related data, which in return will allow Swiss nationals to continue to benefit from visa-free entry to the United States for stays of up to 90 days.

    Regardless of the obvious “asymmetrical relationship” between the US and Switzerland, Markwalder said it was important to look after the historically close relations.

    “I now think we need to come back onto a more constructive path and look for solutions as blaming each other in this difficult situation will not lead to results,” she said.

  5. This is the original anonymous. No agenda, simply to point out that the article has a lot of inaccuracies and does not appear to have been written by someone who knows the facts.


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