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.