The Austrian parliament has given the go-ahead to a bilateral deal with Switzerland aimed at legalising undeclared assets in Swiss banks and introducing a withholding tax, completing the ratification process for the accord signed in April.
The Social Democrat and Conservative parties, both members of the governing coalition, voted in favour of the accord, which should come into force on January 1. The Swiss parliament had already ratified it during its summer session.
Austrian Finance Minister Maria Fekter told parliament that it would be wishful thinking to expect the Swiss to give up on banking secrecy. “We sought a way and a solution to impose a fair taxation of funds deposited by Austrians in Switzerland,” she said.
Opponents of the deal however called it a law designed to prop up the budget, stating either it had little to do with fiscal justice or that it was a slap in the face for honest taxpayers.
Under the agreement, residents in Austria can make a one-off payment – at a rate of between 15 per cent and 38 per cent on the assets concerned – or disclose their accounts to regularise their existing banking relationships in Switzerland.
Future investment income will be subject to a withholding tax at a rate of 25 per cent. In 2013 alone, the total collected could be worth €1 billion for the Austrian finance ministry.
Both countries also agreed to ease access to cross-border financial services and facilitate conditions for banking licences in Austria.
Rubik trio
However, its implementation could well depend on a nationwide vote in Switzerland in November if organisations such as the Action for an Independent and Neutral Switzerland, the youth section of the rightwing Swiss People’s Party or the centre-left Young Social Democrats collect the 50,000 signatures required to force a ballot.
If they do, voters will have to decide whether to accept the Austrian deal, along with two other so-called Rubik accords signed with Britain and Germany.
These two deals have yet to be ratified by the British and German parliaments. The German Senate, which represents the federal states’ interests and dominated by the centre-left Social Democrats, is particularly hesitant about giving the green light as many of its members fear tax cheats will be let off too lightly.
These treaties have been Switzerland’s answer to mounting calls from the European Commission for an automatic exchange of tax information, that could spell the end for banking secrecy.
In exchange for cloaking the identity of offshore account holders, Rubik promises to pay compensation for past tax dodging and compel banks to cream off a withholding tax on the future profits of client assets.
However the EC has threatened legal action because it believes these accords infringe the Savings Directive – an existing agreement for Swiss banks to levy withholding taxes on the accounts of European Union clients.
The Rubik principle was devised by the Association of Foreign Banks in Switzerland. The project wants to separate income from wealth and hand over tax at source to third countries, while keeping the Swiss bank account holder’s anonymity.
The inventors say this strategy will also afford more protection to foreign bank employees in Switzerland from legal action by third countries.
It is hoped that guaranteed anonymity will encourage foreigners with assets being managed in Swiss banks not to take them away.