Switzerland agrees to sharing tax information with United States

Monday, September 28th, 2009

The assault on offshore tax evasion continues with Switzerland signing an agreement with the United States to exchange information on tax.
Switzerland also signed a double taxation agreement with Qatar last week and now will be removed from the “grey list” published by the OECD (Organisation for Economic Co-operation and Development.) The OECD, which is pushing an international tax standard to fight offshore tax evasion, welcomed the US signing and said international tax evasion and the implementation of the internationally-agreed standard remained a priority.

But a statement from Switzerland’s Federal Department of Finance said the adoption of the OECD standard on international administrative assistance in tax matters had no effect on Swiss residents or banking secrecy. “The privacy of domestic and foreign bank clients (banking secrecy) in terms of unjustified intrusion by the State remains intact,” the statement said.

The Swiss government denies the country is a tax haven and says its banking secrecy laws offer no protection in the case of tax offences.

US President Barack Obama has committed to fighting tax evasion and the OECD has several projects aimed at tax havens and improving transparency by sharing information between tax authorities. Although it has been working on combating tax evasion for some years, the work has gained a higher priority following various evasion scandals and the global financial crisis.

Switzerland and the US already have a tax treaty but by signing the protocol to the treaty, Switzerland has agreed to the standard on sharing tax information. However, such exchanges do not give blanket coverage to tax records that might allow “fishing expeditions” by tax authorities trying to find funds held abroad by their citizens. They only relate to specific tax inquiries.

OECD Secretary-General Angel Gurría said the agreement showed that OECD countries were “prepared to step up to the mark” in fighting tax evasion. But he said signing agreements was only one step in the process. “What we will now be looking for effective implementation by all countries”.

The OECD has had a successful year in bringing countries to the table. In April, the Organisation produced a “Progress Report” on countries that had signed up to the international tax standard. It published a list of those which had implemented the standard, others that had committed to the standard but not substantially implemented it and a “grey list” of eight other financial centres, which included Switzerland, Austria, Belgium, Singapore and Chile.

The “naming and shaming” embarrassed many on the lists and brought the threat of sanctions from other countries. The Commission said that since April all 88 jurisdictions surveyed had committed to the standards and those that had not substantially implemented the standard had signed more than 150 agreements.

As a result, 11 jurisdictions - Aruba, Austria, Belgium, Bermuda, British Virgin Islands, Bahrain, Cayman Islands, Luxembourg, Monaco, Netherlands Antilles and San Marino, had moved to the category of jurisdictions having substantially implemented the standard.

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