15 de marzo de 2009

"Switzerland: the Beginning of the End of Tax Havens"


Switzerland agreed Friday to exchange information with other countries in suspected cases of tax evasion, a major victory for its European neighbors and the United States in their effort to crack down on tax havens and claw back revenue. Austria and Luxembourg also announced similar steps to fend off a growing push to stem fiscal evasion before a meeting of leaders from the Group of 20 developed and emerging nations in London at the start of next month.



The Swiss government said the agreement related to individual tax cases where there are "specific and justified" requests for information. It maintained that the principle of banking secrecy, established under Swiss law in 1934, was maintained for all clients not under suspicion. Swiss citizens and foreign residents who pay Swiss taxes will not be affected, Bern said. Prime Minister Gordon Brown of Britain, who will lead the G-20 meeting April 2, said in a statement that the Swiss announcement was "the beginning of the end of tax havens."



France, Germany and the United States had been leading the campaign against tax evasion, eager to replenish coffers emptied by the financial crisis, the huge bailouts of financial firms, the slump in corporate and individual tax receipts and higher welfare payments as unemployment rises. "The pendulum is swinging rather fast towards tighter regulation of tax affairs as the G-20 economies need money," said Stephan Kuhn, tax chief at the accounting firm Ernst & Young for Europe, the Middle East, India and Africa. "How far will it go? It remains to be seen."



Politicians have also sought to respond to public anger that some of the wealthiest businessmen, who are regarded as having caused the financial problems, have walked away from the mess, often with hefty payouts. The moves by Switzerland, Austria and Luxembourg leave only a handful of places, like Gibraltar and Panama, that could be considered genuine tax havens because they are not considered to be cooperative with foreign governments in tax cases.



"There are still a large number of perceived tax havens," Kuhn said, but their lack of regulatory infrastructure make them risky territories in which to invest. "In the Turks and Caicos, you don't have the same infrastructure, the same expertise to replace those other financial centers," he said.



To that could be added the risk of having your money swallowed by the collapse of loosely regulated companies, as was the case in Antigua recently when the finances of the U.S. businessman Robert Allen Stanford collapsed. Kuhn also noted that some secrecy remains even in places like Switzerland or Singapore, because information sharing will be restricted to specific requests. "No information will be obtained on mere 'fishing expeditions,"' or when countries actively go looking for evaders without evidence, he said.



But what G-20 governments are probably hoping is that a large number of evaders will start to feel uncomfortable and declare their revenue of their own accord, perhaps even with the help of amnesties as have been enacted previously in German and Italy. The moves Friday followed announcements this week by a number of other countries committing to relax their strict bank secrecy rules. This week, it emerged that the Organization for Economic Cooperation and Development had added Switzerland, Luxembourg, Austria, Singapore and Hong Kong to a list of uncooperative tax havens for the G-20 summit meeting. The list already included Andorra, Liechtenstein and Monaco.



Being surrounded by members of the European Union, Switzerland could have been especially vulnerable to retaliation for noncooperation. "Once the G-20 nations threatened to blacklist Switzerland as a tax haven, it had to consider the potential risks to its entire economy and the government obviously decided to proceed with this forward strategy," said James Nason, a spokesman for the Swiss Bankers Association. The association said it expected Switzerland would no longer be included on the "blacklist" of noncooperative nations. The OECD declined to comment.



During an interview, Albert Pintat, the prime minister of Andorra, confirmed that his country had made similar moves toward cooperation for fear of the effect that the OECD list would have on Andorran commercial interests. "It would be impossible for the development of our economy" to continue as it had, Pintat said. Andorra initially plans to negotiate a tax treaty with France, then Spain, Portugal and other countries. Pintat said that Andorran service businesses were being harmed by taxes imposed by the French. Now, he hopes that the country's banks can expand abroad in coming years.



But Switzerland is, of course, the biggest prize. According to numbers from the Swiss Bankers Association and Boston Consulting Group, Switzerland manages of 27 percent of all private offshore assets, making it the biggest player in the field. According to Swiss National Bank data, managed assets held in custody by Swiss banks at the end of last year totaled 3.82 trillion Swiss francs, or $3.22 trillion. Of that total, about 17 percent was managed for international private clients and 36 percent was for international institutions.



The Swiss agreement will be enacted through a series of bilateral agreements to prevent double taxation. Bern has agreed that these accords will henceforth be governed by the OECD's Model Tax Convention, a worldwide standard for double taxation agreements. It remains to be seen whether the authorities have the appetite to pursue individuals like the weathered rocker Johnny Hallyday, who lives in Switzerland to avoid the so-called wealth tax in France, or the British retailer Philip Green, who lives in Monaco and pays himself in tax-friendly dividends from his private companies Arcadia and Bhs.



Some are wondering whether the spotlight will now turn to companies that use a myriad of complex offshore plans and trusts to minimize their tax payments in the countries in which they do the most business. Analysts say such a move is unlikely immediately because of the complex national rules that govern that conduct and because of the implications it might have on companies moving their offices and staff. The Austrian government also said Friday that it would do more to share information with other countries on suspected tax offenders.



"I can say today that the Austrian bank secrecy law can stay as it is," Austria's finance minister, Josef Pröll, was quoted by Reuters as saying. "However, we will start in bilateral tax agreements to ensure information is shared if there is the suspicion of tax offenses." The Luxembourg government made a similar commitment to "exchange information on request in specific cases and on the basis of concrete proof."



The Liechtenstein government said Thursday that it "accepts the OECD standards on transparency and information exchange in tax matters and supports the international measures against non-compliance with tax laws."



Pressure had been building on tiny Liechtenstein since more than a year ago, when Germany used bank data purchased from a former employee of LGT, the bank of the ruling family of the country, to begin investigating some 900 people suspected of tax evasion. In January, Klaus Zumwinkel, the former Deutsche Post chief executive, received a two-year suspended sentence and a fine in a related case. The U.S. Justice Department last month won an agreement with UBS, the giant Swiss bank, to turn over the names of about 250 customers suspected of avoiding American taxes. UBS also agreed to pay a fine of $780 million.



But on Feb. 19, U.S. tax officials in a civil case demanded details on the accounts of 52,000 more UBS customers. The Swiss bank has said that it has "substantial defenses against the enforcement and intends to vigorously contest it in the civil proceeding." The Swiss government said Friday that it would instruct a U.S. law firm to draft a brief "explaining Switzerland's legal position with a view to giving added emphasis to Switzerland's sovereign interests."



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