Swiss banking secrecy laws have been further relaxed, with parliament passing a law on tax cooperation and backing – in principle – a special deal with the United States
In a lengthy and at times passionate debate which included discussion of some two dozen proposed amendments, the House of Representatives voted 113 to 58 on Wednesday to pass the government’s proposed law on administrative assistance in taxation matters.
The new law replaces a previous regulation for assistance on tax matters and is based on standards set out by the Organization for Economic Cooperation and Development (OECD).
Previously, Switzerland had differentiated between tax evasion and fraud, allowing only for providing assistance in cases of fraud. In a blow to banking secrecy in 2009 it agreed to lift this legal distinction.
In Wednesday’s other big result, the House of Representatives voted 116 to 51 to back revisions to the Swiss-US double taxation accord. But as time ran short in the debate, parliamentarians will decide formally on Monday whether to approve the accord. It already has the backing of the government and the Senate.
The accord would allow for administrative assistance to be provided to the US in matters involving grouped requests for information, based on a suspicious “pattern of behaviour” by people or financial institutions. US tax authorities would not have to provide names or addresses of its suspects in order to receive assistance.
The House did vote against a proposal which would have seen this allowance extended to other countries and against another by the rightwing Swiss People’s Party which would have explicitly excluded grouped requests from benefiting from assistance.
A proposal by the Greens to send the project back to the government on the grounds it should apply to all countries and not only those with which Switzerland has taxation agreements, was also rejected by the House.
In the meantime, the US will not be able to act on the new law until its Senate ratifies the revised double taxation accord with Switzerland.
“Tax secrets”
In calling on the House to pass the administrative assistance law, Finance Minister Eveline Widmer-Schlumpf pointed out that grouped demands for assistance would soon be included in the OECD standards which Switzerland was involved in drafting.
She emphasised that administrative assistance would only be forthcoming in cases where strong evidence of wrongdoing was provided, only between taxation agencies, and that assistance would not be provided on the basis of information obtained from stolen data.
“Nobody in this chamber wants to remove banking secrecy and that is not the subject of the debate today, we are talking about tax secrets,” Widmer-Schlumpf said.
Not perfect
Arguing in favour of the law, Christian Democrat parliamentarian Dominique de Buman said the text was “not perfect” but nonetheless essential for providing judicial security in international tax assistance matters.
Applying the law to assistance on tax matters with all countries and not only those with which Switzerland has an agreement would be “dangerous”, de Buman said.
Widmer-Schlumpf said it was certain that the question of grouped requests for assistance would be included in the revised OECD standards before the end of the year, but how to define these as compared to so-called “fishing expeditions” had not yet been clarified.
“That is why the text of the law is the way it is,” she said, adding it was better “to confront head on” issues that would surely come up in the future.
Rightwing anger
Setting off a series of terse exchanges with her former People’s Party colleagues, Widmer-Schlumpf rebuked the party’s Hans Kauffman for equating administrative assistance with the death of the “innocent until proven guilty” principle.
“Innocent until proven guilty applies in judicial matters before the court and this is administrative assistance only,” she said.
People’s Party strongman Christoph Blocher followed by asking why Switzerland, involved as it was in OECD discussions on defining criteria for assistance on grouped requests, did not simply reject the issue at the OECD level.
“Yes, we could veto it but in this context, imagine that Switzerland puts itself in opposition to 33 other countries who are in favour? Formally it would be possible, but I don’t think that it would be good for Swiss businesses, particularly those working in the international environment,” she said.
Continuing the People’s Party attack, Caspar Badaar questioned the finance minister about how grouped requests would be defined.
The People’s Party also proposed amending the law to ensure that all requests for information be formed in a Swiss national language and not in English, and that only requests which included the name and address of a suspected tax evader or fraudster be permitted. The House rejected both amendments.
Introduced in the 1930s, banking secrecy protects clients’ privacy.
But it can be lifted in cases of tax fraud – trying to defraud tax by for example falsifying documents – or serious crimes committed by the account holder.
Until now the government has only granted administrative assistance in tax fraud cases but not for tax evasion – the omission, intentional or not, to declare your assets to the authorities.
In 2009 the Swiss government had for the first time to provide data of thousands of UBS clients to the US. The US authorities had threated heavy penalties against the big Swiss banks, which it accused of allegedly helping thousands of its clients avoid tax (fraud and evasion).
In January this year Washington announced that 11 Swiss banks were under investigation and Bern was requested to pass on the data of tens of thousands of Swiss bank clients in the US.
As a result of international pressure, Switzerland has signed around 30 double taxation agreements in recent years, in which administrative assistance can also be given in tax evasion cases, according to OECD standards.