Switzerland, along with around 100 other countries, will put an end to its treasured practice of banking secrecy when the treaty on automatic exchange of information between tax authorities comes into force in 2018.
The country is hoping that being proactive in the implementation of the new rules will both shield it from new attacks and enable it to help shape the laws into something it finds palatable.
But decades of shady banking practices and the country’s initial reluctance to end banking secrecy after the 2009 financial crisis have left their mark on the country’s reputation. It is not always easy to convince others of Switzerland’s good intentions, says Jacques de Watteville, State Secretary for International Financial Matters, and the man in charge of Swiss efforts in the area.
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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.
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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.And so forth. See the article for the rest of the interview.
At the bottom of the article, the following explanation of exchange of information is given:
Automatic exchange of information, how does it work?
According to the system designed by the OECD, 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.