Swiss banks welcome global tax standard

The Swiss banks have welcomed the new information exchange standard announced on Wednesday by the Organisation for Economic Co-operation and Development, which is set to improve tax transparency and help to fight offshore tax evasion.

The Swiss banks have welcomed the new information exchange standard announced on Wednesday by the Organisation for Economic Co-operation and Development, which is set to improve tax transparency and help to fight offshore tax evasion.

The Swiss Bankers Association (SBA) said in a statement on its website that it had contributed to the drafting of the standard. It welcomed the fact that the foreign authorities receiving data on a bank’s non-domestic clients will have to adhere to strict data protection rules and that any information they receive may solely be used to gather taxes.
 
But at the same time, the SBA criticised the fact that the new standard will not create level playing fields. The United States, for example, will not offer full reciprocity, it said. Clients of US banks will be able to hide behind certain offshore vehicles, using a provision in the Common Reporting Standard (CRS) as a loophole, the SBA said.
 
The SBA is also concerned about the fact that domestic money laundering regulations are to be used as the basis for client identification. Since Switzerland has very strict money laundering regulations, this means that it will have to exchange more information than other countries which are less strict.
 
The OECD had been mandated by the G20 countries to work out a new global standard for the automatic exchange of information between tax authorities to make it more difficult for people to make, hold and manage investments outside their country of residence and to inject greater trust and fairness into the international tax system.
 
In future, financial institutions will have to exchange information on non-domestic clients automatically with other jurisdictions on an annual basis. The new standard specifies the checking procedures institutions will have to follow and who will have to report what information on what types of account.

ʻGame changerʼ

«This is a real game changer,» said OECD Secretary-General Angel Gurría on Wednesday. «This new standard on automatic exchange of information will ramp up international tax co-operation, putting governments back on a more even footing as they seek to protect the integrity of their tax systems and fight tax evasion.»
 
The SBA called the OECD recommendations «a step in the right direction». The association added that it will further analyse the detailed comments on the standard that the OECD will provide later this year. The association particularly hopes that it will get more information on how to implement the new rules easily and cost effectively.
 
It estimates that the introduction of the complex set of rules will costs Swiss banks between CHF500 million ($556 million) and CHF800 million and will required at least two years to implement from the date when the standard comes into effect.
 
The OECD will formally present the new rules at the G20 meeting of finance ministers in Sydney on February 22 and 23. In September 2014 the organisation will give technical guidelines on how to implement the exchanges of information. Once the rules have been approved by the OECD, the member countries are obliged to comply with them.
 
However, the Swiss cabinet has always stressed that it will only implement the new rules once other important financial centres have also recognised and implemented the new standard.
 
More than 40 countries have committed to early adoption of the standard, which should eventually be implemented in 121 jurisdictions worldwide.

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