Should swiss banking laws be overhauled?Featured December 09 Words by Ian Wylie And Rosie Carr
SAYS IAN WYLIE
I love Zurich. It's one of my favourite European cities. But there's an odious stench that lingers around the banking quarters of Zürich and Geneva, and it isn't the Swiss cheese. Pecunia non olet - money has no smell - goes the Latin saying. But what really stinks is the willingness of Swiss bankers to turn a blind eye to the origins of the cash stashed in their vaults. Is Switzerland happy with its reputation as a place to put your money if you want to dodge taxes or hide criminal dealings?
Swiss financial institutions manage around €1.3 trillion - more than a quarter of all private foreign assets worldwide. Much of it has been put there because of the protection afforded by Swiss financial confidentiality laws, first passed in 1934.
Today, the cloak of secrecy still makes Swiss banks hugely attractive. Banking regulations have been the perfect vehicle for international tax evasion, which Swiss law does not consider a criminal offence. But why should the Swiss profit from aiding foreign tax evaders? German tax dodgers alone have around €300bn stashed away in Swiss accounts, according to the German Tax Union.
The US and European governments have had to pay a lot of money to whistle blowers so they would reveal the details of citizens who keep their money in Swiss banks instead of allowing it to be taxed locally. But tax authorities' investigations should no longer end at the border. Account details from Switzerland should be made available via official channels.
Tiny tears in the veil of secrecy are beginning to appear. Earlier this year the Swiss government agreed to negotiate taxation agreements with a dozen countries to avoid being blacklisted as a tax haven by the Organisation for Economic Cooperation and Development. Countries such as Austria, Norway, Denmark and the US have hammered out deals already.
But the small print of each treaty signed has been very different. In some, the Swiss have indicated they will hand over information only if a request complies with their own procedures. In others there is a "grandfather clause" that allows them to conceal all information about accounts or investments made with them in the past.
If Switzerland thinks it can persist with a legal system that criminalises tax fraud but not tax evasion, it must be persuaded to change its laws.
Swiss bankers say dirty money will only flow to other havens like the Caribbean and they worry that Switzerland's financial industry will no longer have a competitive advantage once secrecy is relaxed. "We will need to work harder for our money in the years to come," said Boris Collardi, chief executive of Swiss bank Julius Bär, at a recent conference in Zürich. Two words, Mr Collardi. Hard cheese.
Ian Wylie writes for The Financial Times and the Guardian
SAYS ROSIE CARR
Let's get one thing straight: not everyone who has a Swiss bank account is a drug-dealing money launderer or a dictator. But it's always easier to build support for a crackdown on certain groups when you depict them as unsavoury. And so Swiss banks are routinely portrayed as hiding money for criminals and cheats, rather than hard-working business people fed up with handing over their money for someone else to spend.
I don't doubt there are some dubious people among the clients of Swiss banks. But that's not the reason why governments are furious over laws that prevent them from discovering who's been diverting money away from their control. Their determination to tear down the protection that Swiss banks offer is not driven by anger over moral issues. It's not even driven by the lost tax.
What it is about is control. Governments can't bear the idea that their tax inspectors might hit a brick wall that stops them knowing exactly how much money we have and how much we earn from our savings and investments. What governments want is for us to meekly hand our money to the politicians who think they know best how to spend it. You see, governments have an insatiable appetite for tax. They need money to fund their long lists of grand schemes and lavish promises to loyal voters.
But why wouldn't high earners be indignant about the demands made on them? They already pay more tax than anyone else and in the wake of the economic crisis many countries have introduced special higher rates of tax for the highest earners. Clearly we all need to pay tax. Without that revenue, the state we live in could not afford to educate our children, look after the sick and the poor, pay the police and armed forces, supply clean water and waste services, or build roads. But we must also be allowed to retain most of our income to spend how we choose. We are not the slaves of the state and we should not be treated as such.
These so-called tax evaders and cheats already pay large amounts of tax, but the greed of the state knows no bounds. Look at Britain - under a high-spending, tax-loving Labour government, new laws force almost everyone to spill the beans on everyone else where income is concerned. Britain has also changed its tax laws so that its high earners will have to pay tax on every penny they earn - their tax-free allowance has been withdrawn entirely. No wonder governments are keen to end secret bank accounts when they give taxpayers incentives to hide their money!
We should all pay tax, but no government has the right to trample over our right to privacy or to mug us at gunpoint in its unseemly haste to get its hands on our money.
Rosie Carr is deputy editor of Investors Chronicle magazine