FT.com / Comment / Editorial - Secrets and tax.
The FT has an editorial under the above title today. As they say:
The ability to keep secrets is an essential part of private banking. But sadly for the bankers of Switzerland and other tax havens, it is an ability they are losing. Stung perhaps by pressure on public budgets, governments are using ever cruder methods to pierce the veil of customer confidentiality. In recent years, the British have leaned on the Channel Islands, while the US has forced open the ledgers of Switzerland’s UBS by threatening it with commercial retaliation. But the Germans have come up with the most direct approach: purchasing stolen bank recordsfrom employees.
As the n ote:
The Swiss are outraged, and have accused the Germans of fencing stolen goods.
It is easy to see why the Swiss are alarmed. Germany is in effect establishing a market in bank data. Berlin may not be commissioning acts of larceny, but the “Merkel put” is a standing inducement for bank staff to breach their contracts. This is a potent threat to the private banking model. Even the possibility of leaks is damaging. If you were a German tax evader, you would not want to wait around to test the loyalty of the staff at your offshore bank.
So what's the FT's opinion on this:
It is surely legitimate to offer inducements for informers to testify. And it is in the public interest for tax cheats to be identified and forced to pay their dues.
Merkel’s put is a highly effective mechanism for achieving this. The Germans have raked in about €200m so far from LGT’s clients for their €4.6m, some of which they recouped by onward sales of data to other states. The Swiss are right to be worried.
The FT has this completely right: Switzerland is, by offering bank secrecy knowing that it will be sued to facilitate tax evasion, promoting crime. There is no other explanation for its actions. It is the Swiss and the Swiss alone who are wrong in the German - Swiss dispute on this issue. Germany is tackling crime, Switzerland actively facilitating it to the point that its actions might reasonably be considered criminal. Of course it is legitimate in that case to buy data to stop crime.
In the broader context it's also about stopping economic warfare by Switzerland, and we've always paid informers to do that.
There's just one issue I'll argue with the FT on. They says:
Tax evasion is seen as morally ambiguous partly because it does not cause a big harm to a single individual but a small harm to many. Non-compliance is sufficiently widespread that people feel “it is all right because everybody does it”
I disagree. Undermining the rule of law is a big harm to all - especially when tax evasion does in the process deny the essential resources society needs to ensure a decent standard of living for all, as will increasingly be the case over the combing years. This is an enormous issue, and we should treat it as such.
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Richard:
You may be right, it may be a war.
Here is an easy strategy for the Swiss to fight it, and win it.
– Feign concern
– Flood the “market” with bogus CD’s, etc. (one of them saying that a R. Murphy has stashed away a solid $1 billion in Lugano)
– Make sure the Germans, French, Italians, British etc. fall over each other and pay top Dollar for the data
– Once these governments are up to their ears in the junk CD’s, offer assistance to solve the cases and pursue the “evaders”
– Feign suprise when one after the other all the prosecutions collapse (R. Murphy has not stashed away anything)
I give it 6-12 months before the thing is burried and out of the way. Of course, it is bad for business in the short term, but hey, there is money to be made selling that junk to the Euros.
Seriously, should you (and more importantly the FT) not think about the obvious shortcomings of stablishing a market in stolen data?
Ted
You’re really so inane you’ll be blocked from now on
Do you really think money changes hands without due diligence?
Live in the real world – not the one you fantasists create
Richard
As a lawyer, I have never understood why the manner in which circumstantial evidence is obtained should prevent it being used at trial. That applies to wire taps against terrorists as much as it does to tax evaders.
The whole Proceeds of Crime legislation that we have in the crown dependencies is precisely aimed at assisting that flow of information for “suspicious” clients.
If Switzerland won’t improve their regulation (and, more importantly, the implementation of the regulation) to meet globally accepted standards, then it is surely both ironic and satisfactory that the “market” develops a solution to that shortcoming.
@Ted B.
Although early, Ted is my nomination for moron-of-the-year. What amazes me is that someone of his intellect has managed to scrape enough resources to access the web.
“Undermining the rule of law is a big harm to all”
Oh, I agree Richard. And tax evasion is not illegal in Switzerland and breach of bank secrecy is illegal.
So, umm, who is undermining the rule of law? Note please, the “rule of law” does not mean the rule of the law as we would like it to be, nor even the rule of the law as it should be. It means the rule of the law as it actually is.
@Tim Worstall
Apartheid was legal in South Africa
Anti Semitism in the most violent form was legal in Nazi Germany
And tax evasion is legal in Switzerland
Now which of these crimes do you think acceptable Tim? After all – by your definition all are
Richard
I’ve already made the distinction you seek above: “Note please, the “rule of law” does not mean the rule of the law as we would like it to be, nor even the rule of the law as it should be. It means the rule of the law as it actually is.”
I’ve not said anything at all about “acceptable”, I’ve already pointed out that the rule of law isn’t about what we think desirable. It’s about what the rule of law *is*.
Now, you can go on and say that you think that violent anti-semitism is undesirable (abhorrent is the word I would use personally) and thus we desire to undermine the rule of law in Nazi Germany. Ditto with apartheid S Africa. But we cannot claim that while we’re doing so we are trying to uphold the rule of law. For we’re not, we’re deliberately attempting to undermine it.
Equally so with the legality of tax evasion in Switzerland. We can say (as you do) that we wish to undermine this. That we wish it were not so and that we support actions illegal under Swiss law which undermine this part of Swiss law. But while you’re doing that you cannot be claiming to be upholding the rule of law. You’re not, you’re deliberately and specifically seeking to undermine the rule of law.
@Tim Worstall
As ever, weasel words from you
No we weren’t undermining the rule of law by opposing the Nazis or South Africa
We were upholding it
There are universal human rights recognised in law
And there is international law regulating the relationship between states
Switzerland is abusing these laws
Germany is upholding the law by challenging Switzerland’s right to break the law itself and facilitate others in doing so
It is you who seek to abuse the law because you wish to destroy the rule of law that supports society as it now is – including those human rights that should be dear to nay real libertarian
Germany and I are upholding the right of humans and states that wish to act within the law
You seem to be supporting those who want to break those laws
There is no other explanation Tim.
As for your libertarianism – it’s just an excuse for law breaking – isn’t it? What sort of philosophy is that?
Don’t bother replying
Richard
Richard:
do you really want your site to be associated with ths type of attacks?
TGB
Ted
I could say no
But I let Worstall on here
And I note what he allows
So i understand Mark’s frustration
Richard