Switzerland » Tax Research UK

How to solve Switzerland’s problem in one short blog

Jan 302012

Switzerland must tackle the problem of untaxed money in secret accounts and also must ensure the central bank does not become a political pawn, the country’s economy minister was quoted as saying on Saturday.

“The problem of untaxed wealth in Switzerland is a serious problem that we need to resolve. Not only with the USA but also with the Europeans,” Economy Minister Johann Schneider-Amman, of the pro-business Free Democrats (FDP) party, told the German-language Tages-Anzeiger in an interview.

“Banking secrecy wasn’t invented to create an opportunity for doing business with untaxed money,” he also said. “We must find a way of dealing with legacy wealth.”

Well actually, that’s exactly why Swiss banking secrecy was created in 1934: it was all about and still is about facilitating tax evasion.

And there is an easy answer: sign up for the European Union Savings Tax Directive and for automatic information exchange.

What’s the problem?

I couldn’t help but smile

Banking, Switzerland, Tax evasion Comments Off

Jan 272012

I really couldn’t help but smile at this report in SwissInfo:

Switzerland’s oldest private bank, Wegelin & Co, will sell most of its business to the Raiffeisen Group amid a dispute with United States tax authorities.

Wegelin, which was founded in 1741, said on Friday most of its clients and staff would be transferred to a company called Notenstein Private Bank which will in turn become a 100 per cent subsidiary of the Raiffeisen banking group. The sale price has not been made public.

US authorities charged three Wegelin staff on January 3 with conspiring to hide more than $1.2 billion (SFr1.1 billion) in client assets from tax officials. Wegelin said at the time that it was prepared for the “expected quarrel” and the bank had not broken any Swiss laws.

Speaking to reporters on Friday, Wegelin senior managing partner Konrad Hummler said the sale had resulted from “the extraordinarily difficult situation and threat to the bank brought about by the legal dispute with the US”.

Even the suggestion of tax evasion does not pay now.

The Swiss might, at last, be beginning to realise the truth in that obviously true statement.

It looks like the UK Swiss tax deal is in trouble

Switzerland, Tax avoidance, Tax evasion, Uncategorized 13 Responses »

Jan 232012

For the second time this morning, I pick up a significant change in sentiment in a news story that suggests real change is afoot. First it was the NHS, now it is about the UK Swiss tax deal, and importantly, the change in mood music is coming from Swissinfo, which has reported:

The tax deals which Switzerland reached last year with Britain and Germany could yet fail in the face of opposition in Europe and in the countries concerned.

The agreements use the so-called “Rubik” model for dealing with the undeclared billions held by foreign customers in Swiss banks.

It is quick and easy: the countries whose taxpayers have tried to hide their assets get an inflow of money straight away, and Swiss banks remain relatively attractive to the super-rich who prefer to keep a low profile.

It works by levying a withholding tax on the assets held in the banks. In other words, a tax is automatically levied on the interest they earn, and then remitted to the country concerned. But no information about the identity of clients is provided.

And that is the sticking point: the European Union is insisting on “automatic exchange of information”, so that tax evaders can be tracked down.

Apologies to them for a lengthy quite but it’s necessary to get a sense of how Swiss sentiment is changing. And changing it is because this deal is beginning to look dead in the water.

It contravenes EU laws in the European Savings Tax Directive.

It undermines EU solidarity against tax evasion.

It helps preserve the concept of Swiss banking secrecy that was designed to assist tax evasion, and still does so.

And it’s very obviously a tawdry deal.

Osborne and Hartnett went for it. But it looks like the EU will kill it, as a very few of us suggested possible. And that will be good news for the EU as a whole.

Swiss bankers may not be honest?

Banking, Corruption, Switzerland, Tax evasion 3 Responses »

Jan 052012

The Guardian reports this morning that:

Switzerland’s central bank was embroiled in an insider trading scandal after bank chief Philipp Hildebrand was accused of speculating on currency transactions only weeks before he instituted dramatic policy changes that shifted prices in his favour.

The accusations, which have rocked the Swiss banking industry, were made by Swiss weekly newspaper Die Weltwoche.

First it has to be said these are allegations, and from a source with an axe to grind. But what really amused me is not the substance of the issue, but the fact that a Swiss banker may be dishonest has “rocked the Swiss banking industry”. The whole Swiss banking sector is built on the basis of dishonesty. Indeed, much of the Swiss economy is built on dishonesty. As I noted in 2009:

Tax havens handle stolen property. This is not by accident, this is by design. The tale of the creation of Swiss banking secrecy says it all. As noted in a letter in the Financial Times today, Swiss secrecy laws date back to 1934. They were not created to protect German Jews and trade unionists from the Nazis as the Swiss like to claim.This is a big myth.

The reason bank secrecy was strengthened in 1934 was a scandal two years earlier, when the Basler Handelsbank was caught in flagrante by the French tax authorities facilitating tax evasion by members of French high society, among them two bishops, several generals, and the owners of Le Figaro and Le Matin newspapers.

Rather than risk their clients being found to be breaking the law again the Swiss introduced banking secrecy and the notorious numbered bank account system to ensure that customers of Swiss banks could evade their tax at will.

Tax evaded funds are money claimed by fraudulent means. they are stolen property. tax havens have, following in the wake of Switzerland, set out to handle that stolen property.

In March 2009 a Swiss banker quoted in the Financial Times said he believed that half of all funds deposited in that country would leave if bank secrecy was abolished – implying they must be tainted by tax evasion – and that the bankers know it.

This is what Swiss banking is all about. So why be surprised that a Swiss banker might be dishonest?

There’s more on Swiss banking secrecy and its creation here.

UK tax deal with Switzerland is already being renegotiated – another Hartnett debacle

Switzerland, Tax evasion 58 Responses »

Dec 282011

I have commented often on the UK – Swiss tax deal that Dave Hartnett negotiated and which was initialled by both parties in October. My objections to the deal are numerous, some being summarised here and others here.

Now Bloomberg has noted:

Switzerland is discussing “technical adjustments” to tax agreements with the U.K. and Germany, SonntagsZeitung reported, citing Andre Simonazzi, a spokesman for the Swiss Federal Council.

The changes aim to counter criticisms of the accords from the European Union, the Zurich-based newspaper reported. The talks are on revisions to distinguish between the EU-Swiss tax on interest and a separate withholding tax, Simonazzi was cited as saying.

Similar stories have appeared in the Swiss press.

I think three observations follow. The first s that those who said the opinion of the EU on this issue did not matter are clearly wrong: it does, very much.

Second, this renegotiation seems to confirm that others will not go down this route and the hopes of Luxembourg that they might use the deal as a mechanisms to shatter the upgrade to the European Union Savings Tax Directive – a hope, I suspect shared by George Osborne in support of UK tax havens – look like they may be shattered.

Last, yet again we see the gross incompetence of Dave Hartnett at work - seemingly doing deals irrespective of their legality to keep his political masters happy, whatever the cost. I just wish I had the confidence he was being replaced by someone better.

The OBR say the UK – Swiss tax deal is full of holes

HMRC, Switzerland 1 Response »

Nov 302011

Fascinating commentary in the Office for Budget Responsibility Autumn Statement report on the UK- Switzerland tax deal. They say (page 118):

The UK-Switzerland tax deal announced on 24 August … is not included in the central projection as it is subject to ratification by the Swiss Parliament and a possible referendum. HMRC and Ministers have stated that the yield from this policy is in the range of £4 to £7 billion. We have not certified this costing. Our initial discussions with HMRC suggest there are significant uncertainties (in particular over the amount of UK funds in Switzerland that would be subject to the deal and the assumed level of compliance) and we currently judge that the yield is likely to be towards the lower end of the range. We will consider the available evidence further for the final costing.

This deal is, of course, one of ‘Hartnett’s specials’ - referred to on this blog often. It’s a deal that the European Commission says breaks EU law and which is both highly avoidable and quite deliberately designed by the UK to undermine the attempts to end tax havens, no doubt in an attempt the preserve tax abuse from the UK’s own tax havens on behalf of the City of London.

Now the OBR has spoken and in about the politest terms possible they have said they have no confidence at all in the projections for tax to be collected. Why? Because it is not yet proven to be legal and because, as they all too obviously realise, it can be avoided as easily as the average lamp post is missed every day by people on the pavements of the UK.

More than that – they know the funds in Switzerland are currently leaving by the suitcase by the hour for Singapore whilst they’re also saying they have no confidence in Swiss banks’ role as honorary tax collectors for H M Revenue & Customs.

If you’d want a louder message saying Hartnett was either gullible, and that the Swiss saw him coming, or alternatively he’s done a deliberately bad deal it would be harder to find.

Hat tip: Faisal Islam

EU threatens to sue UK over rogue tax deal negotiated by Dave Hartnett

HMRC, Switzerland, Tax evasion 14 Responses »

Nov 282011

As the FT reports:

Brussels is threatening to sue Britain unless ministers significantly alter a landmark tax deal with Switzerland, in a dispute that will cast doubt over the £4bn to £7bn of expected proceeds for the Treasury.

European Commission lawyers concluded that the bilateral deal, which recovers billions of unpaid taxes in return for protecting the prized secrecy of the Swiss banking system, is in breach of European Union laws that are tougher on tax evasion.

What can I say except I and the Tax Justice Network told you so, often?

It really is time people like the Treasury listened to us more often. We’ve invariably been right.

Take the UK – Swiss tax deal and then avoid it

Switzerland, Tax avoidance, Tax evasion 1 Response »

Nov 232011

I was intrigued by the commentary on the Q Wealth Report web site about the UK – Swiss tax deal. They said:

The tax justice crowd are already claiming that the treaties signed by the UK and Germany are a sell out. It seems to me, however, a very pragmatic and ultimately sensible decision on both parts. The Swiss get to keep their secrecy, including a new treaty provision that limits requests for information to a maximum of 500 individuals per year – a clause specifically inserted to avoid fishing trips. The UK gets good publicity about cracking down on tax cheats, and some people will likely be scared enough to pay the tax.

Crucially, they add:

On the other hand, it’s quite an easy tax to legally avoid.

And then the say how – which is all too easy.

Which is exactly what we in the tax justice crowd have been saying.

And which is exactly why this is an appalling deal for the UK.

Which proves just how inverted their logic really is.

Especially when you remember this deal is aimed at evaders, not avoiders.

Now why would they want to help them?

Hartnett doesn’t just not apply the law, he breaks it too

HMRC, Switzerland, Tax Havens 20 Responses »

Nov 172011

Europolitics has noted:

Manoeuvring over Rubik is in full swing. The European Commission is pressuring Germany and the United Kingdom to change the bilateral fiscal agreements they have worked out with Switzerland. If they refuse to do so, it will open infringement proceedings against Berlin and London by the end of the year. The texts have already been drafted.

The UK – Swiss deal to which this refers was, of course, Dave Hartnett’s work, and gives up UK tax sovereignty to the Swiss in significant areas for good. As the report continues:

The Rubik agreements make provision for the introduction in Switzerland of a withholding tax in full discharge of all tax obligations on the assets placed by German and British residents in this country and on the income they continue to collect on these assets in the future in a variety of forms (interest, dividends, capital gains, etc).

The Commission’s Legal Service considers that Berlin and London have overstepped their competences by signing these agreements, which protect the anonymity of fraudsters and whose scope partly interferes with EU rules on the taxation of savings income – and the agreement between Berne and the EU in this area. There are also certain “technical problems” inherent to the Rubik system. The rate of withholding on income from these assets paid to Germans, for example, is set at 26.375%, compared with 35% under the savings taxation agreement. The tax will also constitute full discharge of tax liability. Germany and Britain have also agreed to give Swiss financial service providers easier access to their market.

The Commission’s legal experts therefore recommend the opening of proceedings against Berlin and London before the EU Court of Justice for failure to fulfil obligations.

Negotiations are, of course, going on, but that this outcome was likely was predictable from the moment these hideous and rather sordid deals that trade a little cash for exonerating criminal activity in the past without penalty whilst permitting it in the future were pout on the table.

So why did Hartnett do the deal? Is he really on the side of tax evaders? It looks like it. And now we know he’s even willing to break EU law to help them. Amazing.