Bank secrecy. Switzerland signs the OECD Convention

Under the pressure of the Global Forum on transparency and exchange of information, established by the OECD member countries, Swiss government was prompted to relax legislation on bank secrecy and to help other countries hunt tax evaders. After the tax havens campaign launched by the G20 and the OECD in 2009, Switzerland signed the minimum 12 bilateral tax treaties required by the Global Forum to be removed from an OECD “grey list” of tax havens after threats of political sanctions by the Group of 20 most powerful countries.

The first phase of Switzerland “peer review process” started at the end of October 2010. If the agreements prove not to meet the standards, they should be renegotiated. In the case of Switzerland it seems to be less the agreements which are the problem than the interpretation by the government, as it resulted that Swiss requirements concerning administrative assistance are too restrictive and could prove to be a possible hindrance to an effective exchange of information for tax purposes. Switzerland is therefore urged to meet the international standards on transparency by allowing identification of taxpayers and holders of information. As a general rule, identification of taxpayers and holders of information in administrative assistance requests occurs with their name and address. Tax agreements already sealed with other countries should be amended accordingly, and in those cases where the name and the address of the suspect is not known other means to identify the person, such as the IBAN number alone, should be possible. Fishing expeditions, i.e. a search for tax evaders where there are no specific grounds for suspicion, are still prohibited.
Although the Global Forum does not impose sanctions, the famous OECD coloured list are still in vigour and the G20 keeps a close watch on these peer review process.

Whereas the European Commission is pushing for an automatic exchange of information on tax matters, arguing that it is the best way to allow different States to access taxpayers’ funds, Switzerland is firmly opposed to automatic exchange of information and would release account information only in response to specific requests. According to the Swiss Finance Minister Eveline Widmer-Schlumpf, the changes are likely to come before the Swiss parliament in June, but they should not disadvantage Switzerland as other financial centres have also agreed to uphold the OECD standards.