Swiss to sign last rites for banking secrecy

(Globalpost/GlobalPost)

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Switzerland will break the seal on its banking secrecy, until now considered virtually ironclad, by signing an international agreement on fighting tax evasion on Tuesday, the OECD said.

This marks "the end of banking secrecy" in Switzerland, the head of tax issues at the Organisation for Economic Cooperation and Development, Pascal Saint-Amans, told AFP.

The inclusion of Switzerland in the agreement to exchange information among more than 60 countries will be "highly significant" in the fight against tax evasion, he said.

At the instigation of many advanced countries, the Paris-based OECD has spearheaded a clampdown on tax evasion and the concealment of illicit funds.

Swiss banking secrecy in its current form took shape before World War II, and provided the victims of Nazi persecution with a way to protect their assets.

The movement to scrap the policy in Switzerland and other well-known "tax havens" arose after the financial crisis of 2008 and subsequent eurozone debt crisis.

Ordinary people with money woes, often facing higher taxes to cover the costs of the crises, were outraged by revelations of tax evasion and avoidance by corporations and wealthy individuals.
US tax authorities in particular took tough action against some Swiss banks.

At the same time, high-profile controversies arose when lists of bank accounts stashed in Switzerland were leaked to tax authorities elsewhere.

The multilateral agreement on the exchange of information on tax matters is to be signed at the OECD headquarters at 1200 GMT by Switzerland's permanent representative to the organisation, Stefan Flueckiger.

The convention's signatories so far include all 20 members of the Group of Twenty (G20) of the world's leading economies, as well as more than 40 other countries.

In addition to exchanging information, signatories agree to organise simultaneous controls to track tax fraud.

The main objective is to ramp up the effort to catch tax cheats who hide their assets and transactions behind the protective laws of offshore tax havens.

Until now, many tax authorities, and their governments, have complained that cross-border tax investigations have been hampered or completely stymied by the complex routes used to hide funds, coupled with obstructionism on the part of some national authorities.

These difficulties have been exacerbated by the increased openness of frontiers to capital flows as well as the use of new technologies for transferring money.

Saint-Amans said the convention "prepares the way for the automatic exchange of tax information".
The OECD wants to make this the normal practice internationally, but it continues to be an extremely sensitive issue for the Swiss, as well as for some other countries.

Under the convention as it stands, however, the automatic exchange of information is optional.
The OECD noted that among the countries that have signed the convention or are preparing to are a number of jurisdictions often described as tax havens, some under the British crown, notably in the Caribbean.

Saint-Amans said the noose would continue to tighten on tax evasion and that countries that do not sign up to the agreement "would begin to be sidelined".

He said: "I can't see how going back could be possible."

Switzerland, which has been under strong pressure since the financial crisis to open up its banking
secrecy and to tax foreign assets, announced its intention to sign the agreement last week.
At the same time, it expressed its concern to preserve the integrity and reputation of its financial institutions.

The next hurdle -- which could prove a formidable one -- is ratification of the convention by the Swiss parliament