Swiss Secrecy Has No Place in Globalized World
By the Editors Oct 25, 2011
Switzerland’s bank secrecy laws and anonymous numbered accounts have a long and shameful history: They have been used to help criminals conceal illicit gains, to deny Holocaust survivors their stolen inheritances and to help the world’s wealthy hide taxable income.
So it’s a welcome sign that 11 firms may be on the verge of agreeing to pay billions of dollars in penalties and reveal the names of Americans who used Swiss bank accounts to evade U.S. taxes, according to a Bloomberg News article yesterday. The banks, including Credit Suisse Group AG (CSGN), the second-biggest Swiss bank, and several foreign institutions doing business in Switzerland, are hardly doing this out of some sense of moral duty. U.S. prosecutors held out the threat of criminal indictments, which is tantamount to a death sentence for a bank.
Finance Minister Eveline Widmer-Schlumpf said that the country wants to reach an agreement with the U.S. so that Switzerland isn’t confronted “with the same issue time and again.” If that’s the case, Switzerland shouldn’t assume the U.S. will accept deals like those reached earlier this year with the U.K. and Germany, allowing the identities of customers with untaxed assets to remain secret.
The U.S. should insist that Swiss banks be required by law to provide all necessary information — including the identities — of tax cheats on an ongoing basis. Swiss law now prescribes harsh penalties for anyone disclosing information about bank customers.
Switzerland also should adopt a broader definition of what constitutes tax evasion. Switzerland’s 1996 tax treaty with the U.S., adopted before numerous abuses were disclosed, lets banks protect account information if the depositor doesn’t participate in “tax fraud or the like,” which is absurdly vague. It would be far better if Switzerland fully reciprocated with current U.S. tax law and recognized that American citizens commit a crime when they skirt taxes, even if it doesn’t rise to the level of fraud.
Unfortunately, Switzerland has cooperated only grudgingly in meeting international banking standards, agreeing to do so in 2009 under threat of sanctions and being named as a tax haven by the Organization for Economic Cooperation and Development. Even so, the country this month was ranked at the top of a financial secrecy index developed by the London-based Tax Justice Network.
Switzerland should do itself a favor and abandon the financial opacity that has made it the world’s No. 1 destination for offshore wealth. It has no place in a globalized world where money can be electronically whisked from one place to another, except as a cloak for financial wrongdoing.