The Swiss agree to negotiate OECD style double tax treaties

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New just in is that the Swiss Government has decided to comply with the standards of article 26 of the OECD in future double tax treaties it might now negotiate. This means that the difference between tax fraud and simple tax evasion will be abolished in relationship between Switzerland and foreign countries.

This decision is an important step forward to breaking down Swiss resistance to information exchange. It is a step in the right direction. That has to be warmly welcomed. A few months ago it was unimaginable.

But, I stress, this leaves many issues to address:

  • This does not mean there will automatic information exchange.
  • Nothing will change until new double tax treaties are negotiated between Switzerland and the other countries. Switzerland is going to have to move very quickly to start work on these.
  • Problems between Switzerland and the EU remain unresolved and full EU STD compliance is not on offer, yet.
  • It is likely that Switzerland will try to protect old clients with a kind of grandfather clause. This could be a kind of tax amnesty. This will depend on negotiation with other countries. I would urge countries to resist this move — and there are welcome hints from Dave Hartnett from The Treasury today that it will resist such demands.
  • There is no indication as yet that the Swiss will enter into information exchange agreements with developing countries who might as a result get less favourable treatment.

If anyone wants to know whether the threat of sanctions works, here is the evidence. Switzerland wants to avoid any form of sanction if at all possible. I do not think they will.

My message to them is that they have taken an enormous step in the right direction. I do not underestimate that. I welcome it. But we do need more than words. We need evidence of change. They cannot avoid a black listing until we see that change happening. Then we will know that this process is real.

Only then can they begin to be reintegrated into the mainstream. It will take a while.