Article on Erosion of Swiss Secrecy
Michael Birnbaum, Threatened by isolation, Switzerland lifting veil on secret bank accounts. The article is very good summary of the current situation. Here are some excerpts I thought might be of interest to readers of this blog:
[W]ith the euro crisis forcing Switzerland’s revenue-starved neighbors to search out new sources of money, the Alpine country’s bank vaults are suddenly looking irresistible. In recent months, the nation’s strict banking secrecy has been under assault from countries such as Germany and Britain as never before. Experts say that the last veils may soon be dropped altogether, bringing the hush-hush tradition to a final end.
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Many in Switzerland’s banking capitals have resigned themselves to handing over their ledger books to international tax authorities sooner or later. In the hushed, marble-lined hallways of grand banks in Zurich and Geneva, the whispers are of a future when the country no longer serves as a hub for tax evasion.
You can hardly understate what is happening,” said Luc Thevenoz, director of the Center for Banking and Financial Law at the University of Geneva. “Switzerland has created this image that the big value that Swiss bankers brought their clients was secrecy. It was an attractive proposition, especially with regard to tax issues.”
No one is sure quite how much Switzerland’s private wealth management sector depends on tax evasion. Bankers’ estimates of deposits from private individuals range from 30 percent on the low end to 60 percent or more. Many say that a significant portion of those funds will drain away from Swiss coffers.
Even the measures already taken could put pressure on the Swiss economy, which is heavily dependent on profits from the financial sector. Some economists forecast a loss of 10,000 jobs and a full percentage point off the country’s gross domestic product. In recent weeks, banking giants like UBS and Credit Suisse have cited the impending changes as one source of their lackluster third-quarter profits.
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The current CEO of UBS, Sergio Ermotti, recently broke a longstanding taboo in Switzerland when he told a local newspaper that the country ought to do away with banking secrecy altogether. He estimated that his bank held between $13 billion and $32 billion in untaxed deposits.
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The United States has imposed far-reaching restrictions on banks that do business with U.S. clients abroad, inspired in part by revelations of wide-ranging efforts from Swiss banks to help Americans evade taxes. With penalties of up to 30 percent on foreign banks’ U.S.-based profits if the banks fail to hand over the foreign data of even a single U.S. account-holder, many Swiss banks are giving up on Americans altogether. They reason that there is not enough demand to justify the risks.
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Switzerland has been trying to reach agreements with individual countries rather than be forced into full-scale transparency. The treaties with Britain and Austria would hand over a chunk of investment income to tax authorities in those countries while preserving depositors’ anonymity.