Source: http://www.privacyworld.com/
Privacy World - The WORLD'S SHREWDEST PRIVACY NEWSLETTER
The Demise of Swiss Banking Secrecy
Is Swiss banking secrecy headed for the history books? And are
(German) Steinbreck and other finance ministers fighting a paper tiger?
Almost, but not entirely. According to Waldburger, "the automatic
exchange of information," in other words, the disclosure of account
details, "would spell the real demise of Swiss banking secrecy." But
the treaty on the taxation of interest between Switzerland and the EU
still prevents this from happening.
After years of negotiations, the EU member states agreed that the
Swiss could levy a source tax, a sort of withholding tax, which would
increase over time, on the interest earnings of foreign customers, and
turn over this source tax to the EU states without including customer
data. However, the tax is easily circumvented with special financial
products and letterbox companies, because it does not apply to legal
persons.
But this is precisely what EU member states Austria, Luxembourg and
Belgium are also doing. For this reason, a uniform EU directive to
strengthen the interest taxation directive is not in sight. When
finance ministers met in Brussels last Wednesday, Steinbreck
encountered strong resistance to his demands. Austrian Finance
Minister Wilhelm Molterer has said that banking secrecy is "not up for
discussion."
In the United States, on the other hand, the Swiss banking industry
could run into difficulties sooner. For years, the US Senate has been
conducting its own detailed inquiries into the issue of tax evasion.
Senators have summoned key representatives of the industry, including
tax advisors, accountants, lawyers and bankers, to the Capitol in
Washington for lengthy hearings.
These hearings have produced reports, some of them hundreds of pages
long, on the "tax shelter industry" and "its tools, methods of
obfuscation and those pulling the strings." UBS was mentioned early
in the Senate documents as an offender. With relish, the senators
cited a letter written by an insider to UBS management. According to
the letter, the bank offers "US taxpayers illegal tax evasion models,"
part of a system that costs American tax authorities "several hundred
million dollars a year."
Of course, others -- the auditors at KPMG -- invented the system on
which this is based. After admitting to charges of criminal tax fraud
conspiracy, they only managed to avoid further criminal prosecution in
the United States in 2005 by paying $456 million (E294 million) in
fines and penalties.
By this point, the UBS executives should have known that they were
likely to face significant problems in the United States. Many of the
"tax optimizers" advised by KPMG had maintained accounts with the
Swiss bank. The trail had been set. All the American officials had
to do was to follow it.
Three US authorities are now conducting investigations against the
Swiss portfolio managers: tax investigators from the US Justice
Department, the Securities and Exchange Commission (SEC), headed by
Christopher Cox, and New York Attorney General Michael Garcia. All
are now hunting down the Swiss.
Political conflict is also on the horizon. An aggressive bill to
combat tax evasion, the "Stop Tax Haven Abuse Act," was introduced in
the US Congress last year. The legislation provides for tough
measures against 34 tax havens, including Liechtenstein, Luxembourg
and Switzerland.
The bill has stood little chance of becoming law until now. But that
could quickly change after the presidential election in November.
Once of the bill's three sponsors is Senator Barack Obama, who is
currently favored to win the White House.
The above article courtesy of Frank Hornig. |
