Secret’s, Secret’s Are No Fun; US and others crack down on Swiss Bank Secrecy

Photo taken from internationalbusiness.wikia.com

 

Surely everyone has heard about, or knows a little bit about the infamous Swiss bank accounts. If you don’t know much about them, let me set you up with a little bit of background.

For decades Swiss banks have been a haven for wealthy foreign investors who are seeking to evade their country’s taxes. This all came about in 1934 when the Swiss Banking Act of 1934 made it illegal for a bank to divulge any information about a client who has created an account. This act was first created to protect Jewish German accounts from Nazi confiscation. Since then Swiss banks have grown to be some of the largest and strongest in the world due to their strict secrecy practices. The link at http://www.swconsult.ch/chbanks/faq.htm can give you more information about Swiss banks.

Recently, the United States and Germany have begun cracking down on Swiss banks to prevent any further loss of their tax dollars. According to Tax Justice Network, tax evasion costs governments about 3.1 trillion dollars annually. And according to a report from the Boston Consulting Group, Swiss banks house around 2.1 trillion dollars, or 27%, of off-shore wealth.

The United States has taken the hardest stand on off-shore tax evasion. They have recently breached UBS (Switzerland’s largest bank), forcing them to pay a 780 million dollar fine, and present information on more than 4,400 accounts. Other countries such as Germany and Britain have also taken a stance against Swiss banking secrecy. Last year both countries negotiated with Swiss banks, forcing off-shore account holders to pay a lump sum of their unpaid taxes. However, with the German and British victory they have allowed the names of the account holders to remain anonymous.

After all of these recent defeats for Swiss banks, many believe that secrecy for the banks is dead. International wealth consultant Osmond Plummer told a gathering of bankers in Geneva that “Banking secrecy is no longer there. That’s gone. It is over.”

Several other prominent members of the Swiss banking community have also spoken about recent trends, stating their need to change their whole approach. Head of Swiss banking group Reyl & Co., Francois Reyl, told members at the seminar that “It is time to change. The storm has swept everything away. We need to open ourselves to new cultures.”

Swiss bank accounts have been under pressure for quite some time for aiding wealthy foreigners evade their taxes. Recently, Swiss banks have been further scrutinized by Americans when it became known that Mitt Romney, Republican nominee for the United States Presidency, has also opened Swiss-bank accounts in an effort to escape from paying taxes on some of his earnings.

With the recent news of Romney’s foreign account, and the state of the American and European economies I understand why this issue has come to the forefront. I do believe that the tax dollars recuperated through this crack-down on foreign accounts will greatly help struggling economies, as well as aid in improving current political issues such as schooling, healthcare, unemployment, etc. But with the backbone of Swiss banking becoming extinct, what will Swiss banks do to remain strong, and keep the Swiss economy among the best in the world?

 

Related articles:

http://www.thelocal.ch/page/view/swiss-banking-secrecy-is-over

http://www.economist.com/node/21547229

http://www.spiegel.de/international/europe/switzerland-looks-to-a-future-without-banking-secrecy-a-857662.html

 

This entry was posted in Culture.