Black Money
The End of Swiss Secrecy
Since 2007, the US has forced Swiss banks to provide information on Americans who have overseas accounts with them
Alam Srinivas Alam Srinivas 18 Jul, 2011
Since 2007, the US has forced Swiss banks to provide information on Americans who have overseas accounts with them
Swiss banks are no longer as safe as they used to be. In the past six years, the veil over thousands of American account holders in these secretive banks has been lifted. Within a year or so, the European Union aims to enforce transparency laws that could unveil European account holders too. In the near future, you would be foolish to assume that you can escape the clutches of your country’s authorities by vaulting your illegal money up in Switzerland.
To begin with, it is a myth that Swiss bankers don’t ask any questions on the origin of the money you deposit. Whether you open an account in person, by mail, or through an intermediary, you have to produce documents like tax returns and other papers (for instance, a contract or sale deed) to show that the money has been earned through a business deal or asset sale.
Since 2007, the US has pressured Swiss banks such as UBS and Credit Suisse for information on Americans who have overseas accounts with them. After a former UBS banker-turned-whistleblower told the US authorities that his bank had helped tens of thousands of Americans duck domestic taxes by routing money into these accounts, US taxmen swung into action. Since then, strong legal steps led to the disclosure of information about account holders, and conviction of several bankers. In addition, UBS agreed to pay a huge penalty of $780 million.
It also resulted in the flight of US capital from Swiss accounts. A 2010 study by BCG [Boston Consulting Group] revealed that the proportion of North American assets in Swiss banks fell from 18 per cent of their total assets in 2006 to just 2 per cent. Banking experts contend that this figure could be near zero within a few years.
American pressure, thus, has forced Swiss banks, which earlier revealed information only in cases related to criminal offences, tax frauds, inheritance issues, and debt recoveries, to do so in tax avoidance cases as well. By 2013, the US plans to levy an additional tax on foreign banks that don’t part with information on the overseas accounts of their American clients.
The UK and Germany are also pushing Switzerland to tax on their behalf income earned by their citizens from investments made of funds held in Swiss banks. At present, Switzerland only taxes income earned locally by way of interest and/or investments in Swiss equities and bonds.
So, if you are planning a quick trip to Zurich, think again. It is time to look for other tax havens.
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