Sergio Ermotti, who was appointed CEO of Switzerland’s largest bank in November in the wake of a trading scandal, says Switzerland now is “stuck in the middle of economic warfare’’ and its opponents’ goal is to weaken UBS and the next biggest bank, Credit Suisse, according to Zurich Sunday newspaper SonntagsZeitung.
U.S. authorities in particular have dealt Switzerland and its banks several serious blows over the past few years, resulting in several significant concessions to Swiss banking secrecy. Investigations against at least 11 banks, including Credit Suisse, are still pending, on suspicion they too helped Americans hide money abroad, following the successful case against UBS AG, which had to pay a $780 million fine and hand over 4,450 clients’ files to Washington in 2010.
...But Switzerland has insisted throughout its negotiations with other governments that it won’t accept any automatic transfer of information on foreign account holders — ensuring that a semblance of its banking secrecy remains in place.
“For us this is an economic war,’’ Ermotti was quoted as saying. “Since 2008, Switzerland has been attacked.’’The most recent shot in this "war" is Switzerland's apparent refusal to hand over bank information on one (unnamed) client to the IRS:
The [Swiss] Federal Administrative Court ruled that a 1996 treaty between Switzerland and the United States doesn’t allow the U.S. Internal Revenue Service to request the account details of potential tax cheats without clear evidence of fraudulent intent.So we see from this that the info sharing between the US & Switzerland is weak and when people start using the rhetoric of war to describe the sharing of tax information, I'd say we're into some difficult territory.
The new treaty between the US and Switzerland might ostensible change thing incrementally but automatic exchange is probably the only long-term fix, hence the resistance.
Bloomberg followed up on the story yesterday with an equally provocative editorial from Swiss business and comparative law professor Peter Viktor Kunz, who says that Swiss banking will and should rise again:
"Swiss banking remains a world-class brand, for reasons of legal, political and currency stability, as well as the high level of training and language fluency among staff at the country’s more than 300 banks. These strengths remain, regardless of secrecy laws. ...
...In a world where citizens’ privacy is being diminished daily, the idea of banking with the assurance that your details are private may seem almost quaint, but these laws have deep roots in Switzerland’s history as a haven. Many people came to the country seeking refuge for themselves and their money, particularly before and during World War II.
As a result, the Swiss don’t see banking secrecy as something to be ashamed of. They see it as just one form of protection, together with the right to nondisclosure of one’s religious beliefs, sexual orientation or health status. These are rights that anybody coming to the country should enjoy, regardless of what their home government demands. It’s our strong belief that what you do with your legally gained money should be nobody’s business but your own.
Like every other right, banking secrecy can be abused. Many tax evaders from abroad have tried to hide behind numbered Swiss bank accounts. However, criminal activities such as money laundering by terrorists and organized crime, or tax fraud, don’t find refuge in Switzerland.
...Many see hypocrisy on the part of countries, especially the U.S. and the U.K., that aggressively pick on Switzerland, while ignoring their own tax havens, such as trust funds in the U.K. and its Channel Islands, or the U.S. shell-company factory epitomized by Delaware, which offers foreign-owned companies anonymity and a virtually tax-free home for profits booked abroad.
Switzerland shouldn’t be treated as a pariah, or rogue state. Banking secrecy is not Switzerland’s foundation. Whatever the future holds -- whether a tax retention concept like the ones in recent treaties signed with Germany, the U.K. and Austria, or an automatic information exchange such as demanded by the European Union -- Switzerland will remain an international banking center. ...Difficult to argue with the hypocrisy point, but if it is hypocrisy it means both are behaving badly, not that neither are.