The FT reports:
The friction between Switzerland and Germany over bank secrecy reached government level on Monday, as the Swiss defence minister confirmed he had traded in his official Mercedes limousine for a French car.
It may sound petty, but the symbolism is important. Germany has quite appropriately named Switzerland as a state engaging economic warfare upon it.
Switzerland is fighting back, not least through the pages of the Financial Times which yesterday reported that:
Evading tax is, of course, just one reason why people deposit money offshore. The Swiss note that their secrecy laws date back to 1934, when they were enacted partly to protect German Jews and trade unionists from the Nazis. More recently, rampant inflation, political corruption and runaway crime have been among other reasons for wealthy people to deposit assets outside their own country.
This is wholly untrue. Swiss banking secrecy was not created to protect the Jews and trade unionists from the Nazis. There was no such international concern on their behalf in 1934. It was created to prevent the French repeating an exercise they undertook in the early 1930s to secure the names of at least 2000 prominent citizens tax evading in Swiss bank accounts. Numbered bank accounts were the Swiss response.
The claim that banking secrecy protects human rights is a myth. It was created to protect those evading their responsibility to pay tax in other states and that remains its primary purpose today. Its secondary use is to hide the proceeds of political corruption and runaway crime. It is not a safe harbour from such abuse, it is the mechanism that makes such abuse possible.
It is notable that in the same Financial Times article the following is said:
“Of course there is concern. You’re talking about competitive advantages that are being put in jeopardy,” says Michel D?©robert, director of the Geneva private bankers’ association. Ivan Pictet, managing partner of the bank created by his family 204 years ago, warned last month that the Swiss banking sector could shrink by half if secrecy were abandoned.
Let me be clear: the competitive advantage that the banker is talking about is the right to handle stolen goods with out fear of prosecution. What is apparent is that the second banker thinks that half of all Swiss banking business does involve that process of handling stolen property.
And later in the article there is the following quote:
Many Swiss bankers see the international pressure in a much wider context. “This is not about bank secrecy or hiding taxes. We’re fighting a commercial war. The next step will be to go after Swiss industry,” says Eric Syz, founder and owner of Syz & Co, a medium-sized Geneva private bank.
He is wrong: this is not a commercial war, it is economic warfare between nation states.
Switzerland is a secrecy jurisdiction. Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain that is designed to undermine the legislation or regulation of another jurisdiction and that, in addition, create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.
When Germany is challenging Switzerland for acting in this way it is acting in self defence. Switzerland is unambiguously the aggressor state here. They can dress up their actions in a cloak of human rights. The reality is that they are simply helping people steal tax revenues from other countries. And I hate to say it, but wars have been fought over such issues.
As someone who was a Quaker for several years and who remains very much in sympathy with the Quaker approach to living I abhor the idea of war. It is why I place my hope in negotiation. But let me be unambiguous: that negotiation has to achieve real results. Places like Switzerland, Jersey, Cayman, Luxembourg, and the other tax havens (plus those lawyers, bankers and accountants who work within them) are seeking to undermine the democratic way of life that has in turn underpinned our well-being by destroying the income streams that governments need to provide services that electorates demand and have indicated their willingness to pay for.
That is why this issue is not petty. This issue is about preserving democratic society. It is about the right of society to make choices on behalf of whole populations in the best interest of all.
And if we lose the tax haven argument we have no hope on green issues: those who have and abuse wealth will continue to abuse the planet through their use of tax havens to preserve their short-term wealth at a detriment to life itself if the secrecy that tax havens permit is allowed to continue.
I do not expect miracles from the G 20. I do expect it to begin an irrevocable process of change. The world needs that.
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Richard
I would be interested to learn why you ceased practicing as a Quaker. But perhaps thats for another forum.
Colman
Richard
Bank secrecy in Switzerland has a long history. But one thing is sure, the first group of clients to benefit from the formalisation of bank secrecy into Swiss law in 1934, was the Central European Jewish community ‘living’ under the Nazi rule or, later, occupation, and who, before being brutally expropriated and persecuted by the Nazis, had assets deposited into Swiss banks.
These banks and the Swiss authorities deserve praise, not your easy sarcasm, for having refused to provide to the ruling Nazis sensitive information related to the banking situation of their German customers.
Thankfully, conditions are not as dramatic nowadays (although a majority of the world’s population lives in non-free countries, for which you seem to show a surprising degree of tolerance), but they remind us that if individuals deposit part of their earnings into safe havens, their decision may owe partly to the often hostile fiscal system imposed disproportionately and unilaterally upon them by their home government.
Fiscal solidarity is of course fine and necessary, but many governements seem willing to function according to a famous 1940 (sorry for misquoting) speech by Churchill : “Never in the field of human taxation was so much paid by so few to so many”.
Bernard
Colman
a) No Meeting that met my need up here – a purely pragmatic one
b) I do like Church music as part of worship – and singing. Neither are Quake strong points!
I now worship with a liberal CoE parish – with great music
Richard
Bernard
Those hostile fiscal systems were chosen by an electorate through the ballot box
Opting out is anti-democratic
Those who provide the means to do so seek to undermine democracy.
Is that what you seek to do?
Richard
Bernard.
The survivors from the subsequent ground war came back and demanded (no forced) real change and a fairer society.
Never have so few paid themselves so much from a position of economic power taken from the collective earning efforts of the real producers.
Balance balance its all about balance…greed against perhaps very real need in some cases.
I do abhor waste & sleaze though.
Shaun
Well said
And I to deplore and waste – but this is a problem of big organisations – and has to be tackled in part by trusting in devolved power
Richard
Good evening Richard,
The ballot is indeed a wonderful concept. One man (or woman) equals one vote, everyone has the same rights and the same obligations, this is fine and obviously democratic.
In fiscal matters however, democracy is relative, as one taxpayer may be asked to contribute as much as thousands of other taxpayers.
Sure, some earn more than others, or even a lot more, and therefore it is right that they pay disproportionately more taxes (unless you believe in pure flat tax).
The dilemma for tax authorities is to assess the limit up to which they can pressure those high earners (or even middle-class folks), without them starting to ask whether their contribution is not excessive.
Jean-Baptiste Colbert, the famous 17th century French finance minister, superbly summarised the challenge for fiscal authorities : “The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing”.
Even democratic countries like Britain can expose their high earners to punitive taxes; you recall George Bernard Shaw declaring his occupation as “tax collector on 2¬? per cent commission”. I am sure you would consider this level of taxation normal and ‘balanced’ from your arithmetic view of democracy.
Thanks to tax competition and maybe because of the existence of tax havens, some countries have developed a more respectful attitude towards their citizens, without jeopardising their spending capacity (maybe even increasing it). Sure, in most countries, any political party that would promise a tax reduction to 95% of the people, and a tax increase on the remaining 5%, is likely to be elected. But one may make the case a democracy is more than just the majority imposing its will on the minority.
I know a small country in the Alps, whose philosophy is based on a reverse Big Brother system : the people actively control the public officials and ministries, minorities are respected, tax issues are openly discussed and regularly voted upon, tax competition is strong between cantons, a high withholding tax is levied, the size of the shadow economy is among the lowest in the world, money laundering regulation and monitoring is of the highest standard, tax evasion is sanctioned administratively and tax fraud brings you to jail, but fiscal authorities understand their power derives from the people, and hence have a respectful attitude towards the taxpayers.
Like the concept of equality, it seems there are countries more democratic than others ; I can understand this irritates some governments and finance ministries, as well as some NGOs.
Kind regards
Bernard
[…] forgotten that UBS is an admitted i nternational tax fraudster? Or that a SWiss private banker has admitted half the money will leave the country if secrecy […]
Swiss Banks.
& other offshore banking countries.
Secrecy.—–. Secret numbered accounts.
The benefits to the bank are far greater than the benefits to the client .
The funds are easy to deposit but very difficult to withdraw.
You can/might be paid the interest accrued but don’t ask for the capital.
This type of banking facilitates crime. ( a place to hide criminally obtained monies.)
Category.
A. Drug Trafficking , Arms Dealing. International Fraud.
B. Organized Crime. Serious Fraud .
C. Tax Evasion . ( Income Tax — V.A.T—Corporation tax. Etc.
60% of the funds held in these banks fall into Categories A & B.
20% of the funds held in these banks fall into Category. C.
_______________________
If you have monies in one of these banks. ( either legal or illegal monies.)
Remember. ( do not die.)
Even if you have told your wife about your “secret account.” or your children , or solicitor ,or left documents with your Will , it is impossible for them to claim the monies from that account. ( clever these banks.)
Do you recall. ( Don Johnson— in TV Show . Miami Vice.)
In 2003 he and three associates were sent by American Business Organisations to withdraw £,6.000,000,000. ( six billions.) from the accounts they had in Swiss Banks. (in bonds- securities etc.)
I wonder how the police on the Swiss border knew to stop their particular car that day after they had been to the Swiss banks . They were searched and arrested. Don and his friends made a mistake . They should not have asked for their monies back from the Swiss Banks.( clever these banks.)