Sunday, 12 August 2012

German opposition leader attacks Swiss banks

By Erik Kirschbaum / BERLIN | Sun Aug 12, 2012 6:14pm IST
Aug 12 (Reuters) - The leader of Germany's centre-left opposition, Sigmar Gabriel, criticised Swiss banks for helping Germans avoid taxes, giving a strongly worded radio interview on Sunday that could put new strains on ties between the two neighbours.

Gabriel, whose Social Democrats (SPD) have blocked a deal between the German and Swiss governments to levy taxes on German assets in Swiss bank accounts, told Deutschlandfunk that Swiss banking practices in Germany were comparable with organised crime.

"It's a serious crime," said Gabriel, the chairman of the SPD who may run against Chancellor Angela Merkel in the 2013 election. "We're talking about organised crime in Swiss banks (operating) in Germany."

Gabriel, who plans to make criticism of banks a centrepiece of the SPD's 2013 campaign, added the sentence for large-scale tax evasion in Germany could be as long as 10 years in prison.

The Swiss Banking Association completely rejected his accusation, spokesman Thomas Sutter said.

"It has no basis in fact," he added. "If certain Social Democrat politicians are prepared to make this kind of accusation, it should be backed up with facts."

Switzerland and Germany struck the tax deal in April, but the ratification is in doubt amid recent purchases by Germany of data leaked from Swiss banks.

The SPD has promised to veto the deal in its current form in the upper house of parliament, while a spokesman for the Swiss government said on Thursday it would not be renegotiated.

Gabriel said he was upset the German government had not set up a special prosecutor to fight this tax evasion and had not been as tough as the United States in negotiating with Switzerland.

"Why don't we have the courage for that ourselves?" Gabriel said. "Why don't we turn this over to the federal prosecutor to go after it? I'm certain it would put a quick end to all that."

On Saturday, another SPD leader, Andrea Nahles, said the deal to levy taxes on German assets wasn't worth the paper it was written on and should be scrapped.

Chancellor Angela Merkel's government says the deal would enable Berlin to net huge sums if and when it takes effect. Germans hold an estimated 150 billion euros ($184.7 billion) in Swiss accounts. But the government needs SPD backing for it in the upper house.

Banking secrecy is crucial to Switzerland's $2 trillion offshore wealth management industry, and the country has refused to agree to an automatic exchange of information.

The Swiss have reacted angrily to the purchases by German state prosecutors of data from presumed whistleblowers and even issued arrest warrants earlier this year for three German tax investigators they accused of buying secret tax data.

($1 = 0.8121 euros) (Reporting By Erik Kirschbaum, with reporting by Katharina Bart)

Friday, 10 August 2012

The Swiss Tax Agreements - A Template For The Future?

Switzerland has signed bi-lateral tax agreements with the UK, Germany and Austria, and started discussions with Italy and Greece.
It looks likely that this withholding tax model will be the way forward to collect taxes on assets hidden in Switzerland. It fulfils two seemingly paradoxical objectives: the foreign governments receive the tax due to them, while Switzerland gets to keep its prized banking secrecy.
The main components of the treaties are:

(1) A retrospective levy to cover past unpaid tax. For UK taxpayers this will be between 21% and 41% of the assets.

(2) A withholding tax to be applied on future income. For UK tax residents, interest will be taxed at 48%; dividends at 40% and capital gains at 27%.

(3) Inheritance tax.
(4) Information requests. A set number can be submitted to the Swiss authorities each year.

The agreements are seen as an attractive alternative by EU States with banking confidentiality. They are a way of "efficiently" collecting taxes and will greatly influence and the ongoing debate within the EU on the taxation of undeclared assets.

The Swiss government is keen to reach similar tax agreements with other countries. I expect more European countries will approach Switzerland as they realise it is an effective way of collecting unpaid taxes. Many people across Europe with undisclosed assets could be in for a shock.

There never was any legitimate tax planning benefit to holding assets in a Swiss bank account. For advice on arrangements which can legitimately save you tax in Portugal, speak to an established tax and estate planning advisory firm like Blevins Franks.

Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals must take personalised advice.

To keep in touch with the latest developments in the offshore world, check out the latest news on our website

By Bill Blevins,
Financial Correspondent,
Blevins Franks

German tax probe prosecutors act on new Swiss data leak

By Matthias Inverardi
DUESSELDORF, Germany | Thu Aug 9, 2012 7:09pm IST

Aug 9 (Reuters) - The German state of North Rhine-Westphalia is pursuing tax evaders who secretly stashed cash in Switzerland, prosecutors said on Thursday, after they obtained new bank data from a presumed whistleblower.

The move is likely to strain ties between Germany and Switzerland, which has sharply criticised previous purchases of leaked bank data by officials in the state.

In part to prevent such purchases, Berne struck a deal with Berlin in April to levy taxes on German assets in Swiss accounts, but the agreement could easily unravel.

The largest German opposition party has promised to veto the deal in its current form, while a spokesman for the Swiss government said on Thursday it would not be renegotiated.

A spokesman for the NRW prosecutor declined to say which bank or banks the latest information came from but the Financial Times Deutschland reported that the towns of Wuppertal and Aachen had purchased two CDs from a whistleblower, including data from UBS.

"Data from a CD has been made available to us. We are investigating .. in relation to tracking down tax evasion," said prosecutor Bernd Bieniossek.

The paper said the first disc carried data from Switzerland's biggest bank, including "big names", and that the second disc contained information on a smaller bank .

Despite ongoing talks on the Swiss-German tax deal, NRW is reported to have repeatedly bought such CDs over the past year.

Chancellor Angela Merkel's government says the deal will enable Berlin to net huge sums if and when it takes effect. Germans hold an estimated 150 billion euros in Swiss accounts.

But she will probably have to offer the opposition Social Democrats (SPD), who say the agreement in its current form lets the tax dodgers off too easily, more concessions to secure their support.

Merkel needs SPD backing to get the deal through the Bundesrat upper house of parliament, where a vote is tentatively planned this autumn.

Senior SPD member Joachim Poss said that buying the tax data was the best weapon to use to combat tax evasion.

"The purchase (of CDs) is far more effective than a lousily agreed tax deal with Switzerland which is full of loopholes," Poss told Reuters.

Asked if there was a chance the tax deal could succeed, he said: "I hope not. This agreement is not in the interests of the honest German taxpayer. There will be an amnesty on tax crime," he said.

In 2010 NRW, which is struggling to reduce high debt levels, and several other German states said they had bought data from whistleblowers. This prompted Germany and Switzerland to start their tortuous talks on the tax pact.

Banking secrecy is crucial to Switzerland's $2 trillion offshore wealth management industry, and the country has refused to agree to an automatic exchange of information.

Last month, German tax authorities raided Credit Suisse clients and French officials searched the homes of UBS employees, deepening the crackdown on foreigners hiding money in Swiss offshore accounts to dodge taxes.

The Swiss have reacted angrily to the CD purchases and even issued arrest warrants earlier this year for three German tax investigators they accused of buying secret tax data.

Urs Schwaller, a member of the centre-right Christian Democrats who sits in the Swiss upper house of parliament, said on Thursday that the German data purchases should stop.

"When we discussed the tax deal in parliament, we were clearly told that this would not be actively pursued anymore," he said.

Silvia Baer, spokeswoman for the right-wing People's Party (SVP), said: "If a market develops for stolen data and is even practically promoted by the government, then you will always have people who steal data."

(Additional reporting by Gernot Heller in Berlin, Katharina Bart, Albert Schmieder and Andrew Thompson in Zurich,; Writing by Madeline Chambers; Editing by John Stonestreet)

Game changes for foreign banks in Switzerland

Aug 8, 2012 - 11:00
 Foreign banks located in Switzerland are considered Swiss banks, according to the Association of Foreign Banks in Switzerland
Foreign banks located in Switzerland are considered Swiss banks, according to the Association of Foreign Banks in Switzerland (Keystone)
by Alexander Künzle,

When German tax authorities purchased yet another CD containing client details of Germans with Swiss bank accounts, the spotlight was unusually on a foreign bank, the Zurich branch of Coutts.

Up to now, foreign banks have generally been better able to steer clear of tax avoidance headlines than their Swiss counterparts.

The exception is when CDs full of confidential customer data crop up for sale in Germany, as happened with Coutts, a subsidiary of the Royal Bank of Scotland, and HSBC in Geneva.

But even though foreign banks in Switzerland have benefited from a generally lower profile, their numbers are dwindling.

According to the Association of Foreign Banks in Switzerland, foreign banks located in the country are considered Swiss banks.

A main difference is that their principal shareholders are foreign. These banks are either subsidies of foreign shareholders – often banks – or Swiss branches of foreign banks.

Traditionally, it was not only the famous Swiss discretion that attracted these 140-odd banks to set down stakes in the confederation. According to financial centre experts, Switzerland’s efficient regulatory climate and excellent provision of services offered further incentives.


While foreign banks do not make much of a splash in the Swiss media, in relative terms this inconspicuousness hardly seems justified.

In 2009, foreign banks accounted for 11.5 per cent of total assets held by all Swiss banks and 20 per cent of added value. Before the 2008 crisis, foreign banks held managed funds worth about SFr940 billion ($960 billion). Today that figure is lower, but still SFr860 billion.

Marion Pester of DZ Privatbank Switzerland told that foreign banks were perceived differently because of the large “heterogeneity of this group of banks” and “different home domiciles, different business models, different sizes and different interests”, among other reasons.

She added that having foreign banks in the Swiss financial sector was a plus. “In dealings with individual countries, the Swiss are able to benefit from the judgment and experiences of foreign banks in their home countries.”

Future trends

According to the Association of Foreign Banks in Switzerland, no new foreign banking licences were applied for last year or this year. When a foreign bank decides to leave Switzerland, it simply hands its licence back.

The fact that only a few of these licences are being taken over is a sign that they are not particularly attractive at the moment. One possibility is that the Swiss financial centre is losing an edge due to changes in how undeclared tax money is handled.

Not everyone agrees. Stephan Fuchs, a banking expert at Ernst & Young who is partly responsible for the Ernst & Young’s Bank Barometer, said banking secrecy had been much less relevant for foreign than domestic banks.

The predominantly foreign clients of Swiss-based foreign banks are more interested in corporate financing than private asset management, he said.

“More than 30 Japanese banks alone have withdrawn from the Swiss market in recent years due to their investment banking business not developing in the way they expected.”


Fuchs said that in Switzerland the areas of individual and asset management were to a large extent saturated.

“For this reason, I expect more banks to disappear in the coming decade. I’ll leave it open as to whether they will be predominantly foreign banks or also possibly Swiss domestic banks.”

Regardless, the fiscal and banking crisis and the tax changes concerning international asset management have changed the game for the Swiss financial centre.

“In other countries, Switzerland is still seen as an offshore banking centre,” said Fuchs. “To a large extent this is attributed to Swiss domestic banks.”

This is because an individual German seeking to evade taxes has up to now opted to put assets directly into a Swiss domestic bank rather than a German-dominated foreign bank.

“On the other hand, a German businessman with customers in many different countries would likely prefer to do business with a Swiss branch of his home bank in Germany.”

IT and back office services

That so many foreign banks choose to stay put in Switzerland no longer has much to do with tax exemptions, according to a foreign banker who preferred not to be named. The outstanding software and back office services available are the real draw, the banker said.

Even rival foreign banks will sometimes combine their IT and back office services, spinning them off from the banks themselves.

Another plus is that multiple employees abroad can be replaced by a single employee in Switzerland who provides back office services. In this case high Swiss salaries are not a deterrent to “insourcing”.

Fuchs confirms this trend. “The Swiss experience in universal banking is quite old. Back office employees in Switzerland have a wide-ranging education, because Swiss banks offer an extremely diverse palette of services. The bank apprenticeship system adds to further precision in services.”

As to Swiss banks following their foreign counterparts in outsourcing of IT and back office services, Fuchs observed that “the pressure on domestic banks is not large enough. Today most of the banks have enough money for their own, separate individual solutions and centres.”

Even though such activities do not bring competitive advantages, they are cost effective. Therefore, Fuchs believes they “are bound to come”.

Add together the Swiss work ethic, the precision of its services and vaunted Swiss reliability, and it is not inconceivable that Switzerland might become a hub for banks seeking to outsource their IT and back office services.

Alexander Künzle,
(Translated by Kathleen Aeschlimann)

US may target Swiss bankers travelling in Europe

Aug 7, 2012 - 13:56
Swiss bankers travelling to European countries could risk arrest
Swiss bankers travelling to European countries could risk arrest (Keystone)

Swiss bankers whose names were delivered to the United States in April as part of the crackdown on US tax evaders face the risk of arrest while travelling in some European countries, not just on US soil.

Extradition treaties between the US and countries including France, Germany, Italy, Austria and Britain make it possible for the US to take legal steps via Interpol against bankers suspected of helping US citizens evade taxes, Denise Chervet, central secretary of the Swiss Bank Employees Association told the Swiss News Agency.

“If the US issues an arrest warrant via Interpol, the employee targeted could be arrested in any country with which Washington has an extradition treaty, and where the alleged offences are also punishable,” Chervet said.

Around 10,000 employees of 11 banks under investigation by US authorities could be affected by potential travel restrictions.

Chervet said that employees visiting the US who had had direct contact with American clients “run the risk of being arrested for violating American tax laws for having assisted with tax evasion”. Other bank employees who may not have had direct contact with clients could be called as witnesses, she said.

Bankers’ families could also be implicated: a report in La Tribune de Genève newspaper this week said two teenagers who arrived in the US to visit their grandparents were interrogated by officials for six hours about the whereabouts and working habits of their father, a Geneva banker.

Staying put

Following pressure from the US government, in April the Swiss government authorised the eleven banks to deliver the names of their employees to the US authorities. The data, however, had to be encoded.

Since then, some 10,000 files have been relayed to the US Department of Justice containing written correspondence and notes of telephone calls made between bank staff and US clients. Some of this data has been used to identify specific bank staff.

Swiss bank employees, fearful of how the decision to hand over data could affect them, have begun legal proceedings against banks and the government in an effort to find out what personal data was transferred to the US.

“You don’t know what the US is planning to do with the data of bank employees. As a precaution I’m advising my clients not to leave Switzerland,” said Geneva lawyer Douglas Hornung, who represents 40 current and former bank employees.

The dispute between the two countries over Switzerland’s bank secrecy laws and US citizens’ use of Swiss accounts to shield  untaxed income has overshadowed relations since 2009, when Swiss bank UBS was fined $780 million (SFr.755 million) for helping US citizens dodge taxes.

A double-taxation accord signed by the Swiss and US governments in September 2009 was revised and ratified by the Swiss parliament in March, but still requires ratification by the US Senate.

Swiss Finance Minister Eveline Widmer-Schlumpf said at a press conference on Tuesday that the government had authorised banks to hand over data to US authorities for the purpose of self-defence. The finance minister said she plans to meet with bank employees who may be affected by the delivery of data.

The government had unable to ascertain whether the banks acted in accordance with data privacy acts and labour laws, Widmer-Schlumpf said. However she stressed that the responsibility lies with the banks involved and with Swiss financial market regulator Finma. and agencies

US demands drawing out tax dispute

Aug 4, 2012 - 13:50
Switzerland hopes to reach a global settlement with the US, but "not at any price"
Switzerland hopes to reach a global settlement with the US, but "not at any price" (Keystone)

The United States authorities are holding up resolution of a tax dispute with Switzerland by making new demands, according to Swiss Finance Minister Eveline Widmer-Schlumpf.

The minister told Saturday’s Zürcher Regionalzeitungen newspaper, that since the two countries had agreed on an overall approach to a global settlement “new demands are constantly being made that we cannot accept”.

She could not say how long she expected the negotiations to continue. “If Switzerland did as the United States’ wanted, a global solution would be decided tomorrow.” But Bern is holding firm on certain points, and any compromises had to be compatible with Swiss law, she stressed.

The minister said Switzerland was looking for a solution that addressed the situation of the 11 Swiss banks under investigation by the US authorities for allegedly aiding tax evasion, as well as other Swiss banks. As such, “a line needed to be drawn under the past”.

The Swiss government wants to get US tax investigations against the 11 banks - including Credit Suisse and Julius Bär - dropped in exchange for the payment of fines and the transfer of client names. It is also seeking to shield the remainder of its 300 or so banks from US prosecution.

Widmer-Schlumpf did not go into more specifics on which points in particular were holding up the process.

The US wants Swiss banks to provide information on undeclared funds belonging to American citizens in Swiss banks. A global settlement between the two countries would end ad hoc requests by the US.

"Not at any price"

It comprises a double-taxation accord signed by the Swiss and US governments in September 2009. It was revised and ratified by the Swiss parliament in March 2012. It was cleared by the US Senate’s Foreign Relations Committee in July 2011 but still requires ratification by the US Senate.

The lead Swiss negotiator Michael Ambühl, secretary of state for international financial matters, said in an interview published Friday that Switzerland wanted a US settlement to be concluded by the end of the year, “but not at any price”.

Switzerland and the US have been hashing out a new deal on double taxation ever since 2009 when Swiss bank UBS paid $780 million (SFr757 million) to settle criminal charges. Switzerland also agreed to deliver UBS client data to the US without demanding documentation of suspected tax fraud, thus undermining banking secrecy.

Other Swiss banks have since been in the US tax authorities’ sights.

The current US-Swiss tax deal dates back to 1996 and in line with Swiss banking secrecy laws differentiates between tax fraud and tax evasion. Swiss can provide administrative assistance to the US in cases of tax fraud only, but under the new double taxation accord that could also be given in cases of tax evasion (forgetting to declare assets).

As a result of international pressure, Switzerland has signed around 30 double taxation agreements in recent years, in which administrative assistance can also be given in tax evasion cases, according to Organisation for Economic Co-operation and Development standards. and agencies

Analysis: Tax haven clampdown yields cash but secrecy still thrives

Published: Thursday, 26 Jul 2012 | 4:56 AM ET

LONDON (Reuters) - A global campaign to tax trillions of dollars hidden in offshore tax havens has made revolutionary progress, an official leading the drive said, rejecting suggestions that the super rich are running rings around Western authorities.

Pascal Saint-Amans, director of a unit at the Organisation for Economic Cooperation and Development, also cast doubt on estimates that the havens are illicitly sheltering wealth equivalent to several hundred times the fortune of Bill Gates.

Leaders of the G20 group of leading Western and developing nations launched the campaign three years ago, aiming to claw back billions in lost tax revenue at a time when many governments are trying to cut huge budget deficits.

Saint-Amans said his gut feeling was that before the G20's initiative at its 2009 London summit, people could hide their wealth in offshore havens without any risk of legal reprisals.

"Now you are at risk and that's a major change. That's a revolution," Paris-based Saint-Amans told Reuters in a telephone interview. Even if money is transferred abroad, rules improving transparency have made it easier for the taxman to find it, said Saint-Amans, whose unit is tasked with leading the Western efforts to fight tax evasion.

The Tax Justice Network, a campaign group, estimated last weekend that as much as $21 to $32 trillion of financial assets are sheltered in offshore tax havens, representing up to $280 billion in lost income tax.

That total wealth would dwarf the fortune of Microsoft Corp cofounder and philanthropist Bill Gates. In March Forbes magazine ranked Gates second on its global rich list with total wealth of a mere $61 billion.
Saint-Amans suggested the TJN estimates might be overstated. "I was wondering where the equivalent of 450 Bill Gates are hiding from everyone. It looks like the equivalent 20,000 unknown billionaires in the world or 200,000 people with net worth of 100 million," he said.

The Scorpio Partnership, a consultancy that analyses the global private wealth management industry, estimates the amount of money held offshore by people worth at least $1 million at a more modest $8-$9 trillion.


Saint-Amans, who heads the OECD's Centre for Tax Policy and Administration, acknowledged his organisation makes no equivalent estimate. "I would rather spend the resource improving the legal framework and putting an end to loopholes than trying to find the magic number," he said.

In a statement accompanying its research, TJN criticized the OECD and other international bodies for not doing enough to track offshore wealth, saying it was scandalous that institutions devoted so little research to the issue.

G20 leaders agreed at their London summit to crack down on tax evasion and banking secrecy, and asked the OECD to publish lists of tax havens according to how cooperative authorities there are on releasing information about offshore wealth holdings.

There are now 89 countries on the OECD's "white list" of jurisdictions that have implemented internationally agreed tax standards. These jurisdictions have between them signed more than 800 agreements on exchanging information with authorities other countries, Saint-Amans said.

"Until 2009, countries said being secretive is justified and fair. The change in the world is nobody says that any more, so that is a big change," he said.

Western tax authorities have individually stepped up efforts to net more money hidden abroad by their own citizens through a series of amnesties targeting people with accounts in jurisdictions such as Switzerland and Liechtenstein.

At the same time they have turned up the heat on citizens suspected of tax evasion. This has included using details of Swiss accounts originally stolen from HSBC by a former IT employee that found their way into the hands of tax authorities around Europe.

Britain's HMRC tax office expects an amnesty offering leniency to people with accounts in Liechtenstein if they come clean to raise about 3 billion pounds, while a similar deal on Swiss accounts will bring in up to 7 billion pounds.

Campaigners argue that such initiatives will achieve only limited success because a financial industry designed to ensure confidentiality across multiple jurisdictions makes it impossible to shut down tax fraud or money laundering.

"Anybody who's serious about holding money offshore ... will hold it through a trust," said Richard Murphy, a chartered accountant and director of Tax Research, a think-tank.

"You'd have the trust in one territory, the company in another territory, its directors in another territory and its bank account in a fourth territory. So making an application for information is not very simple."

Murphy dismissed the OECD's progress in cracking down on tax havens, arguing that implementation of information exchange between territories is limited in practice and the process too complex to be workable.

"They've set up a system where it's virtually impossible to apply for information ... The OECD claiming they are making progress is like checking the stable door has been shut way after the horse bolted. Not just the horse, the entire stable has bolted," he said.

The TJN research on offshore wealth - authored by James Henry, a former chief economist at consultant McKinsey & Co - highlights the "often unsavory role" played by banks in catering to rich individuals who want to hide money offshore.

Large private banks with offshore businesses reject the idea they aid tax evasion.
"Our Code of Conduct explicitly says not to assist clients in activities intended to breach their tax obligations," said a spokesman for Swiss bank Credit Suisse <CSGN.VX> who declined to comment specifically on the contents of the TJN report

But recent crackdowns by tax authorities in countries such as Britain, the United States and Germany have proved embarrassing for Swiss banks.

German tax authorities are investigating roughly 5,000 German clients of Credit Suisse while French officials have searched the homes of UBS <UBSN.VX> employees.

At least 11 Swiss banks suspected of helping wealthy American clients dodge taxes are currently subject to a U.S. investigation.

Saint-Amans said the OECD's efforts have focused on engaging with governments rather than imposing more supervision on financial institutions. The complexity of the industry, he said, meant that greater information exchange was the best way to tackle people using banking secrecy to break the law.

"I'm not sure that nationalizing the banking industry throughout the world is the solution. The fact you have private practitioners being involved in a sophisticated environment is why you need to favor transparency and exchange of information," he said.

Efforts to increase disclosure and combat both tax evasion and money laundering by international bodies such as the OECD and the Financial Action Task Force (FATF), a Paris-based inter-governmental body, have focused on self regulation.

"We've tried to ensure that what we're talking about is not to create some draconian system where we put a policeman in every financial institution which would be impossible to do," said a senior source at the FATF, which was set up to combat money laundering and terrorist financing.

Nick Matthews, anti-money laundering and offshore financial industry specialist at Kinetic Partners, said purging the world's financial system is "incredibly difficult".

"Clearly tax evasion leads to money laundering and is a crime but you would have money laundering even if there was no tax, because you still have proceeds from crime or corruption polluting the financial system," he said.

"That is why I say that no bank would ever stand up and claim that they are not being used to launder money. They appreciate that they are only as strong as their weakest link."

(Additional reporting by Katharina Bart and Martin de Sa'Pinto in Zurich; editing by David Stamp)
(c) Copyright Thomson Reuters 2012. Check for restrictions at:

Attacks on Romney’s account have Swiss worried

Stashing money in the vaults of Swiss banks has become part of Hollywood folklore
Stashing money in the vaults of Swiss banks has become part of Hollywood folklore (RDB)
by Sophie Douez and Marie-Christine Bonzom,

As the United States presidential campaign heats up, Switzerland is finding itself the centre of attention in what is an increasingly bitter fight between the two candidates’ claims to the seat of power.

The revelation that presumptive Republican candidate Mitt Romney had $3 million (SFr2.94 million) in a Swiss bank account has led to unrelenting attacks from President Barack Obama’s re-election team that he hides his money overseas to avoid paying tax.

In recent days, the Obama campaign has ramped up its attacks on Romney, accusing him of lacking transparency in having several foreign bank accounts and refusing to release more than one year of tax returns. A recent attack ad from the campaign contrasts Romney singing “America the Beautiful” while flashing up a headline saying: “He had millions in a Swiss bank account”.

But although Romney closed his Swiss account in 2010 and revelations have also come to light that he has money in other foreign accounts, including in the Cayman Islands, it is the Swiss account that has been bandied about by his opponents like a dirty word.

“The Cayman account came out later than the disclosure of Mitt Romney’s Swiss account,” Greg Wierzynski, a Republican former advisor to the Financial Services Committee of the US House of Representatives and former reporter for Time magazine, told

“The fact is that, in the minds of people here, Switzerland is the country most easily associated with bank secrecy, tax evasion and rich people who want to hide their money.”

" The problem of Swiss and other foreign accounts is that it leads to questions such as: did the candidate put his money there so he doesn’t have to pay taxes? "
George Edwards, political scientist

Hollywood cliché

Head of the government’s communication agency Presence Switzerland, Nicolas Bideau, described the attention on Romney’s Swiss account as “confirmation of a Hollywood cliché which already exists”. Namely that if you want to hide your money from the taxman, send it to Switzerland.

His assessment was supported by George Edwards, a political scientist at Texas A&M University who said that Switzerland’s long term success had led to the country being a “fabled place to land your money”.

“That image is part of popular culture, here,” Edwards told “You see it in the movies. Every time there’s a need to hide money, the idea of a Swiss bank account comes up. To hide money, the standard is the Swiss account. It just evokes notions of avoidance of scrutiny.”

Wierzynski said US media attention on UBS’ admission in 2009 that it helped US clients hide money from the taxman and on American pressure on Switzerland to disclose details of accounts held here by rich Americans, reinforced the association of secrecy and tax evasion tied to Swiss bank accounts in the minds of Americans.

“And in the minds of the American media might also be the old story about the Holocaust assets that still lingers on,” he said. “I don’t think that many Americans have a bad image of Switzerland as a whole. The elites, certainly, know better. But you do have a lot of people here who see Swiss banks as a haven for the super wealthy and tax dodgers.”

Image problem?

Bideau said that analysis of the media attention on Romney’s Swiss account revealed that the attacks are less an attack on Switzerland itself and more about calling into question the candidate’s patriotism given his penchant for having his assets in foreign bank accounts. Additionally, insisting on his Swiss bank account is aimed at underscoring the supposedly out-of-touch wealth of the Republican candidate, he said.

“Nevertheless it’s true that it is an official position and that our embassy in Washington has pointed out to Mr Obama’s people that it is not very flattering to Switzerland,” Bideau told

Bideau said the issue is particularly sensitive given that Switzerland and the US are in discussions to find a solution to the current impasse on banking and taxation matters between the two countries.

“In a general sense, the relations between Switzerland and the US on financial questions are sensitive,” Bideau said.


Despite the protestations of the Swiss, attacks on Romney for having held a Swiss bank account are likely to continue right up to election day in November, Edwards said.

“The problem of Swiss and other foreign accounts is that it leads to questions such as: did the candidate put his money there so he doesn’t have to pay taxes? In the case of Mitt Romney, his lack of transparency gives the story legs. He has made one year of his personal finances available, but no others, while everyone knows he’s very wealthy,” Edwards said.

“In battleground states, surveys show that this line of attack resonates with some voters. From the Obama campaign perspective, this is very favourable feedback and it encourages them to continue doing it.”

Wierzynski said the line of attack on Romney’s foreign accounts was important for the Democrats as a means of mobilising the left of their own party and diverting attention from Obama’s record as president.

“We can expect more of this because it’s a fundamental base of attack against Romney,” he said. “I’m not sure that Switzerland will figure prominently in the [autumn], but it is and will be a piece of a caricature of Mitt Romney. In the context of the election campaign, it’s just a way to stir up controversy.”

Sophie Douez and Marie-Christine Bonzom,

German Tax Treaty with Switzerland Could Crumble

German Finance Minister Wolfgang Schäuble (right) and his Swiss counterpart Eveline Widmer-Schlumpf:

German Finance Minister Wolfgang Schäuble is battling domestic opposition to rescue a planned tax treaty with Switzerland that could mean billions in additional revenues for Germany. Meanwhile, many tax evaders are moving their money from Switzerland to Singapore and Shanghai.
Time is running out for both tax evaders and investigators, with just 162 days left before a new tax agreement between Switzerland and Germany is scheduled to come into effect on Jan. 1, 2013. That leaves just a little more time for German tax dodgers to squirrel away their undeclared income somewhere else, and just a little more time in which the country's tax investigators can purchase CDs of bank customer data, and make any tax cheats they find pay up.
Both sides, in fact, would rather the new tax treaty never came into effect at all. Then everyone could simply go on as they did before, both the persistent investigators and their slippery prey.
In fact, precisely that scenario might come to pass. A debate has arisen in Germany over the past two years concerning fairness in taxes in this age of digital data records that can be copied in an instant and turned into commodities. Whether the bilateral agreement will indeed come into effect is more uncertain now than ever.

The most recent purchase of such data records was conducted by tax investigators in Wuppertal, in the western German state of North Rhine-Westphalia. They bought a data CD containing information on German clients at the Zurich-based office of the British private bank Coutts.
Finance Minister Switches into Battle Mode

The first to react to that purchase was Federal Finance Minister Wolfgang Schäuble of Germany's ruling conservative Christian Democratic Union (CDU) party, who announced he would no longer provide funds for acquiring such data. Ultimately, his message was that the state of North Rhine-Westphalia will have to find the means to pay for such expensive purchases on its own from now on. "Since we weren't informed about the CD, we won't share in the costs," is the word from the Finance Ministry in Berlin.

That leaves the minister's state-level colleagues in North Rhine-Westphalia shaking their heads, since they say the purchase of the data CD was approved by the Federal Central Tax Office, in Bonn, which is part of the Federal Finance Ministry.

Schäuble has switched into battle mode in his attempts to save the treaty with Switzerland. It would mean an enormous loss of face for him, and for Germany as a whole, if this became the first bilateral treaty to fail in the Bundesrat, Germany's upper legislative chamber that represents the interests of the country's federal states.

To keep that from happening, Schäuble needs to win state governors from the center-left Social Democratic Party (SPD) and the Green Party over to his side, breaking their majority in the Bundesrat. That body will vote in November, and the finance minister may be able to use the cash-strapped budget situation in many states as leverage for his position. Especially those states that stand to gain little by exposing tax cheats should be willing to hear out Berlin's proposals.

At stake are up to €10 billion ($12 billion), distributed between the federal and state level, that the treaty with Switzerland is expected to bring in. For example, Wolfgang Voss, finance minister for the state of Thuringia and a member of the CDU, stands to gain at least €100 million for his state budget by 2020.

Hartmut Möllring, Voss' counterpart in the state of Lower Saxony and likewise of the CDU, can expect even more, €900 million.

"Continuous sources of income are especially important for those states that need to pursue a clear course of consolidation by 2020," Voss argues, referring to the fact that, under Germany's balanced budget act passed in 2009, all German states will be required to balance their budgets by 2020. He adds that these sources shouldn't be ignored just in the hope that there might be even more to be had by pursuing the other path, without the treaty. The challenge for Schäuble in the coming weeks will be to convince state governments that are led by the SPD, Green Party or "grand coalitions" of CDU and SPD to give their blessing to the agreement, which the finance minister and his Swiss counterpart Eveline Widmer-Schlumpf signed last September.
'Loopholes as Big as a Barn Door'

Many in the CDU saw a potential ally within the Bundesrat in the southwestern state of Baden-Württemberg, which for years has been lax in pursuing tax evaders, but so far the state's finance minister, Nils Schmid of the SPD, has stuck to his party line, also represented by SPD head Sigmar Gabriel and by Joachim Poss, the party's expert on financial issues in the federal parliament, the Bundestag. Schmid criticizes the treaty as still containing "loopholes as big as a barn door" despite all the negotiations that have gone into revising it.

Schmid sees the greatest flaw in the fact that under the treaty, undeclared income transferred from a Swiss bank account to an account in another country by Jan. 1, 2013, would not be subject to back taxes. "That loophole remains the most serious point of criticism," he says, explaining that this allows tax evaders time to shift their money to other tax havens. He also considers the initial tax rate of 21 percent on unreported income in Switzerland too low. "It shouldn't be any less than 25 percent," Schmid believes.

Norbert Walter-Borjans, North Rhine-Westphalia's finance minister and a member of the SPD, has been one of the main buyers of tax data CDs. He's also at the forefront of the opposition to the treaty, which he believes rewards the worst tax evaders at the expense of honest taxpayers. Like many in the SPD, he also finds Switzerland's obligations to disclose information to German authorities insufficient.
A Treaty Backed By Swiss Banks

The general consensus is that there's no chance of the Swiss government making further concessions. Swiss Finance Minister Widmer-Schlumpf already faced harsh criticism from those within her country who say she negotiated poorly with Germany, and the whole process hasn't gone smoothly in Switzerland either.

Yet Switzerland's banks need this treaty urgently. The vast majority of the country's financial institutions want to operate aboveboard, and would rather not be viewed as a haven for undeclared income and illegal wealth anymore. These banks support the decision of their government in Bern, which wants to put an end to the practice of harboring such money.

Still, the restructuring has already claimed its first victims, with dozens of small private banks going up for sale. The Swiss newspaper Aargauer Zeitung even ran an article titled, "Swiss private banks heading toward clearance sale." The country's oldest financial institute, high-end private bank Wegelin, took the hit already, closing down in the wake of tax offense charges filed against it in the United States. Consulting firm Booz & Company calculates that revenue earned by Switzerland's private banks may drop by 46 percent by 2014.
Will Singapore and Shanghai Become New Tax Havens?

It comes as no great surprise that not all banks follow purely legal strategies. Individuals determined not to declare their unreported income, and instead to keep their wealth out of the government's hands, will always find willing helpers. One banker who wished to remain anonymous says that in the past two years, as both Germany and Switzerland have debated the potential tax treaty, he has made millions for German clients who previously kept their money in Switzerland. "We work with a clientele that prefers not to pay taxes," is how the banker puts it. The preferred destination for this wealth is now Singapore, the banker says, with experts advising against investments in the United Arab Emirates: "Too much drug money, too many Russians, and in general the unrest in the Arab region has shown that these are not reliable states."
The banker believes he can also help those who feel their money is not secure enough even in Singapore. 
"Banks in Shanghai are largely owned by the Chinese government," he explains. "That at the very latest is the end of the line for German tax investigators."
In other words, the risky destination for investors these days is not Shanghai, but Zurich. "Anyone putting money into supposedly secure destinations in Switzerland these days must reckon with the possibility of exposure for the next 10 years," explains Karsten Randt, a tax lawyer at the Bonn-based firm of Flick, Gocke, Schaumburg. That's the length of time for which Swiss banks are required to store their clients' data.

And Randt anticipates a further loosening of Swiss bank secrecy. Sooner or later, he says, Switzerland too will fall in line with the OECD's strict criteria. "The dam has broken and there's no turning back," he concludes.

Translated from the German by Ella Ornstein