Will France re-elect Sarkozy?
©2012 Chappatte, distributed by Globe Cartoon. More cartoons on Chappatte’s web site. Geneva-based Patrick Chappatte works for the International Herald Tribune, for Geneva newspaper Le Temps, and for NZZ am Sonntag. All cartoons reproduced with permission.
GENEVA, SWITZERLAND – The French go to the polls Sunday 22 April in a first round of voting for president, with a daunting 10 candidates vying for the job.
Incumbent Nicolas Sarkozy was lagging slightly behind Socialist Francois Hollande in last week’s polls but the two have been running a close race in recent days, each hovering around 26-29 percent, with right-wing Marie Le Pen and left-wing Jean’Luc Mélenchon each having 16-17 percent, depending on the poll (Wikipedia, polls).
Since none appear able to garner the 50 percent necessary to win, the likely scenario now appears to be a Sarkozy-Hollande runoff, with three days of frenzied campaigning left.
Le Monde 19 April has published a guide to where the 10 candidates stand on key issues (French). Voice of America provides a straightforward summary of the election in English.
Bern admits 2008 programme has “not always worked as planned”
BERN, SWITZERLAND – The Swiss federal government plans to put more federal money into providing medical and other help for asylum seekers who are being repatriated when their requests are denied and to increase financial incentives that would encourage more to return voluntarily to their home countries, it said Wednesday 18 April. The new system would give those who are returning CHF500 instead of the current CHF200 as an indemnity for the trip. Requests for asylum rose 63 percent in the first quarter of 2012, compared to a year earlier, and Bern wants to speed up the process of sending home those who do not qualify.
The plans to increase and redirect funding involve modifying three ordinances: financing for asylum seekers, for the integration of foreigners, and for repatriation and expulsion of foreigners.
The modifications are open to public consultation until 8 August.
BERN, SWITZERLAND – The European Commission 17 April gave its approval to two tax deals by its states with Switzerland. The German opposition may still be opposed to the tax deal drawn up with its neighbour, but European Commissioner Algirdas Semeta told a group of reporters in Brussels Tuesday that the agreement is legal and can go ahead, and the same holds for an agreement between the UK and Switzerland.
The EU has been cited frequently by the media since last September when the German agreement was signed, for arguing that the agreements were illegal or fly in the face of efforts to encourage EU-wide agreements. Both agreements underwent revisions as a result.
The newly-signed agreement with Austria is still under review by the commissioner’s office.
BERN, SWITZERLAND – A Swiss woman who lives in Timbukto, Mali, was kidnapped there, the Swiss Federal Foreign Affairs Department confirmed Monday 16 April. The DFAE has not provided details of when she was kidnapped nor how it was informed.
Bern has been warning Swiss citizens since 2009 not to travel to Mali because of the danger of kidnapping but since 30 March it has been urging Swiss people to leave the country temporarily because of the military coup and rebels operating in the north of the country.
The official statement: “The Crisis Management Centre (CMC) of the FDFA, in cooperation with the Federal Office of Police (fedpol) and the intelligence service, immediately started work to resolve this case. The FDFA is in touch with the family of the kidnapping victim. The SDC Coordination Office in Bamako and the Swiss embassy in Dakar, which is also responsible for Mali, are in touch with the local authorities, who are responsible for the solution of this case. The FDFA is making every effort to ensure that the kidnap victim is released unharmed.”
BERN, SWITZERLAND – Switzerland and its neighbour Austria Friday 13 April signed an agreement calling for Swiss banks to withhold tax on income from offshore accounts held by Austrian citizens. The account holders will then have to decide to either forfeit the tax or declare the accounts. The agreement is similar to those signed by Germany and the UK and, like those, opens up the Austrian financial services market to Swiss companies.
A flat-rate one-off payment “for regularizing the past” is 15-38 percent depending on the size of the assets and how long the client has had the banking relationship. A single rate of 25 percent will apply for future investment income taxation, which Bern explains corresponds to Austria’s capital gains tax. Austria has no inheritance tax, so this is not an issue.
Bern’s statement Friday afternoon states bluntly that Switzerland “does not want any further untaxed assets in the future”. It noted that “both sides acknowledge that the agreed system will have a long-term impact that is equivalent to the automatic exchange of information in the area of capital income.”
It outlined how the deal will work:
“Under this agreement, persons resident in Austria can retrospectively tax their existing banking relationships in Switzerland either by making a one-off tax payment or by disclosing their accounts. Future investment income of Austrian bank clients in Switzerland will be subject to a withholding tax, and the proceeds of this will be transferred anonymously to the Austrian authorities by Switzerland. In addition, mutual market access for financial services will be improved. The agreement requires the approval of parliament in both countries, and should enter into force at the start of 2013.”
Switzerland and Austria in tax deal negotiations
Swiss President Eveline Widmer-Schlumpf
BERN, SWITZERLAND – Switzerland cannot make more concessions as part of tax treaties with Germany and the US while respecting Swiss law, Swiss President Eveline Widmer-Schlumpf says in a lengthy interviewed published by Zurich newspaper NZZ 13 April. The Swiss president says, however, that the US case against St Gallen bank Wegelin has left open the possibility that the Swiss government may take some Swiss banks to court to avoid letting individual banks pose a threat to the entire system.
She says in the interview that the Swiss government has already completed reviews of a number of bank client cases requested by the US government and many stand unchallenged.
The Federal Administrative Court decision this week in favour of a Credit Suisse client’s opposition to his bank data being given to the US covers just one category of clients, she points out, and should not have a major impact on the overall situation. But it will oblige the US to be more precise when it makes requests for administrative assistance in suspected tax fraud cases.
Widmer-Schlumpf also clarified that Switzerland is seeking two agreements with the US, one that would provide a framework in which the 11 Swiss banks under investigation by the US would negotiate fines with the US Justice Department, and another that would cover 300 other Swiss banks’ past activities to end the US starting new legal proceedings every year. Switzerland is not in negotiations with the US over amounts of fines for the 11; this is up to the banks themselves, she says, but Bern is discussing sums with the US for the Swiss banking industry as a whole, to settle potential differences over past activities. The accords could be intergovernmental agreements or treaties, she notes.
The tax treaty with Germany, already signed by both governments but not yet passed by their parliaments, has been the subject of heated debate in Germany. Widmer-Schlumpf says that if the new treaty as it now stands is not what Germans want, then the best solution is the status quo. The new double taxation treaty would require Swiss banks to charge a withholding tax on income earned by German citizens’ accounts, which they would then have the option to reclaim by declaring the income and thus their assets.
A similar treaty was signed with Britain. The European Union has objected to the bilateral agreements, arguing for a single solution. Widmer-Schlumpf confirmed in the NZZ interview that negotiations are underway with Austria and other states have expressed interest in similar agreements.
BERN, SWITZERLAND – A Spanish judge investigating a corruption case involving the king of Spain’s son-in-law, Iñaki Urdangarín, 10 April ordered the freezing of Swiss bank accounts used for “opaque payments”. The case, which has gripped Spain for weeks, flared up again with the announcement. But a spokesperson for the Swiss Federal Justice Office, which handles foreign requests to block accounts, told GenevaLunch 12 April that the office “has no knowledge of a request for judicial assistance in this case”.
A foreigner’s bank account in Switzerland cannot be blocked except by order of the Swiss government after it receives a request from foreign government authorities or in some cases, such as the fall of dictators, the Federal Council will act on its own.
Urdangarín, a former Olympic handball player married to the king’s daughter, Cristina, has been accused of siphoning euros 5.8 million of public funds intended for the Noos Institute, a Spanish non-profit foundation, which he headed between 2004 and 2006. The institute sponsored sports and tourism congresses with the regional financial backing of Valencia and the Balearic Islands.
Swiss accounts resurface during testimony
The Duke of Palma, as he is also known, was jeered at as he entered court in February, the Guardian reported at the time. The lengthy interrogation that followed turned up an Irish fiduciary, Alternative General Services Ltd, that was allegedly involved in transferring payments.
BERN, SWITZERLAND – UN specialist workers are being given, for work in the Republic of Congo, 300 systems to safely remove arms stockpiles from a distance. The systems are being supplied by the Swiss federal government at the request of the United Nations.
Switzerland is taking part in the UN’s Emergency Response Mission to rid the country of munitions following a deadly explosion 4 March in the capital, Brazzavile. The blast killed 250 people and left another 1,500 injured.
Decision says US request was not in line with tax agreement
Tribunal confirms to GenevaLunch that decision was based on 1996 agreement
Update 2 15:00 BERN, SWITZERLAND – The Swiss Administrative Court has struck a blow to US-Swiss tax administrative assistance discussions, ruling in favour of a Credit Suisse client who appealed a decision by Bern to hand over some bank account data to the IRS, the US government’s tax office.
The court notes, in a statement that could have wider implications, that “the Court reaffirms its case law that under the DTC USA-Switzerland 96 administrative assistance shall not be granted for presumed tax evasion, even if high amounts are at stake. It also confirms that the mere failure to declare a bank account may be qualified – at the utmost – as a tax evasion, which is not subject to administrative assistance.”
A court spokesperson told GenevaLunch that “The Court took its decision regarding the said case applying the agreement in force, ie the Double Taxation Convention USA-Switzerland 96″ since the new amendment is pending in the US Senate.
The Financial Times last month pointed out that “Legally, ratification of the change – via an amendment to a bilateral double tax treaty – has been blocked in the US Senate by presidential candidate Ron Paul.”
The court’s decision is final in Switzerland and cannot be appealed to the Swiss Supreme Court, the federal administrative judges note. The court rules on appeals to decisions made by the federal government and is the final authority for these; it is Switzerland’s largest federal court, with 75 judges.
No official government comment yet
The Swiss Federal Council has not yet issued a statement commenting on the ruling, which appears to complicate ongoing discussions about applying the newly approved double taxation agreement of 2009. The Swiss Parliament approved it 6 March, but the US Congress has not debated it or approved it. The amendment allows bank client data to be provided in some cases of suspected tax evasion and not just fraud, even if client names are not provided in a demand for administrative assistance.
Court’s review of US request shows conditions not met
The US asked for administrative assistance 26 September 2011 concerning clients at 11 Swiss banks. The court ruled 5 April, and published the results 11 April, that the requests were “too vague” and did not comply with the current treaty:
“The Federal Administrative Court concluded that the ‘search criteria’ for the identification of bank clients (category 2), as set out in the request for administrative assistance, are formulated in terms encompassing above all mere tax evasion, for which administrative assistance cannot be granted according to the applicable Double Taxation Convention USA-Switzerland 96. This is inconsistent with the principle of proportionality, which applies to proceedings regarding administrative assistance as well.”
The only fraudulent behaviour may be that of some Credit Suisse employees, it says, but that cannot be extended to the client in the case under review.
“The request for administrative assistance does not indicate the names of the bank clients, but only describes the above-mentioned conduct of the CS employees. Furthermore, it contains four categories of identification criteria, through which the bank can determine the clients concerned by the request for administrative assistance.
“The Federal Administrative Court holds that the conduct of the CS employees, as set forth in the request for administrative assistance, from which the conduct of the clients themselves may also be deduced, is covered by the term ‘tax fraud or the like’ in the sense of the DTC USA-Switzerland 96.”
New rules more flexible, but US requests cannot be vague
The new amendment was widely reported to be more flexible but Swiss cautionary notes that “fishing expeditions” would still not be allowed were glossed over by media. The court decision underscores the vagueness of the IRS request.
The Swiss federal government clarified the situation in a report published 10 February, a month before the parliament’s vote, “Report on international financial and tax matters 2012″:
“Switzerland has been holding talks with the United States on unresolved tax issues for more than a year. These talks relate to the US investigations into alleged infringements of US tax legislation by Swiss banks and the potential handover of client data. Under Swiss law, client data may be handed over as part of an administrative assistance procedure at federal level, but not directly by a bank. The objective of the negotiations with the US authorities is to find a solution that is compatible with Switzerland’s current legal framework.
“The cases of the directly affected banks are to be dealt with through requests for administrative assistance: in the case of tax fraud in accordance with the existing double taxation agreement (DTA) of 1996, and in the case of both tax fraud and tax evasion in accordance with the new – but not yet ratified – DTA of 2009. Under the existing DTA, requests for assistance are possible even without the provision of specific names or personal details, as long as an alternative form of identification is supplied. Applications on the basis of specific patterns of behaviour should also be possible under the new DTA without the provision of specific names or personal details.”
Update: Interviews in French on RTS news with the president of the Tribunal, who says another 30 similar cases are in line to be reviewed by the court, and with a lawyer who notes that if the new amendment to the treaty were in effect the court might have ruled differently.
GENEVA, SWITZERLAND – A Montreal man who was among 1,700 whose names were provided to the Canadian revenue service after bank data was stolen by a Geneva HSBC computer employee is now suing his country’s tax department. The suit brought against the Canada Revenue Agency in March comes as a Zurich court has gone after German tax authorities for accepting stolen data.
The CBC broadcasting company reports that the “application seeks an injunction to prevent the government from continuing to use “stolen data” to find out more about Canadians with Swiss bank accounts.
It also suggests that because the Canada Revenue Agency may be conducting a clandestine criminal investigation, Canadians with offshore bank accounts should not have to give the CRA information that might lead to criminal charges.”
The case dates back to data stolen by Frenchman Herve Falciani, who called himself a whistleblower and who tried to sell the information, which was at least three years old, to a number of governments. A French high court ruled early in 2012 that the data could not be used.
Media charges of tense relations over tax issues denied by both governments
German political world, media reactions mixed
BERN, SWITZERLAND – German and Switzerland signed a “Supplemental Protocol” to their September 2011 tax agreement, Thursday 5 April. Bern issued a statement noting that “The essence of the agreement remains unchanged, that the taxation of German capital assets in Switzerland is ensured for the present and the future and thereby places relations between Switzerland and Germany on a forward-looking basis.” The new protocol and agreement are now ready for the countries parliaments to review.
The German government, like the Swiss government earlier in the week, denied press stories that relations are strained over another tax issue, arrest warrants issued by canton Zurich’s attorney general for three German tax collectors, linked to data that was stolen from a Swiss bank in 2008.
But in Germany, the political left reacted negatively while the media reaction was “more nuanced”, reports Swiss public broadcasting, adding that there is little likelihood yet more concessions on the part of Switzerland would muster support here.
The details of the new agreement, as listed in the Swiss statement, are likely to prove interesting to other governments looking for ways to force their citizens to declare tax money they have hidden in Switzerland:
- “After the agreement has come into force, inheritances which occur will be covered. In the case of inheritance, heirs must consent either to collection of a 50% tax or disclosure.
- “In the case of flat-rate taxation of the past, the size of the tax burden has been increased. Instead of being between 19% and 34% as it was up to now, the tax rate is now at least 21% and no more than 41%.
- “In addition the number of possible requests for information after entry into force of the agreement have been increased from a maximum of 999 to a maximum of 1,300 within a period of two years. This option extends and supplements the exchange of information according to the OECD minimum standard.
- “With the entry into force of the agreement on 1 January 2013, German taxpayers will no longer be able to shift assets out of Switzerland to third countries without notification. The appointed deadline was brought forward from 31 May 2013 to 1 January 2103.
- “It was made clear that interest payments which are covered by the Taxation of Savings Income Agreement with the European Union or will be covered by this in future, will be excluded from the scope of the agreement. In this way, the concerns of the EU Commission regarding compatibility with EU law have been removed as was the case with the tax agreement between Switzerland and the UK.
- “The regulations on the distribution in Germany of the revenue generated will be taken from the tax agreement. Within the scope of a German legislative procedure concerning the one-off flat-rate tax payment a higher proportion of the German Länder and communes will receive payment than would have resulted from the distribution key in the case of tax on investment income.
- “Individual models which come under the anti-abuse provision will now be described. In addition, monitoring implementation of the agreement by the competent Swiss authority and by an independent auditing company and the appointment of German Länder representatives on the so-called joint commission has been specifically laid down.”
GENEVA, SWITZERLAND – Geneva is lending legs 4 April to the UN’s international day for landmine action: around the world, for the fourth such day, people are rolling up one pants leg to show solidarity with efforts to ban landmines and rid the world of those already planted.
The Swiss federal government in Bern today published its strategy for landmine action for the 2012-2015 period, noting that Switzerland spends CHF16 million a year supporting the
“Since the 1990s, Switzerland has been actively campaigning for the implementation of international instruments to prohibit these weapons. The current strategy is its third in succession, and it not only outlines Switzerland’s commitment, but also presents the results that have been achieved to date. It is partly thanks to Switzerland’s support that countries such as Albania or Burundi have been cleared of landmines. Switzerland has made a significant contribution to improving the living circumstances of the affected populations in various regions and countries, including Colombia, Niger, Laos, Libya, the Horn of Africa, and South-East Europe.
“Each year around 16 million Swiss francs are spent on supporting the Geneva International Centre for Humanitarian Demining (GICHD), for the implementation of specific projects in affected countries and the secondment of demining experts.”
The Anti-Personnel Mine Ban Convention, also known as the Ottawa Convention, was adopted in Oslo in 1997 and opened for signature in Ottawa the same year. It entered into force on 1 March 1999. To date 159 States are parties to the Convention with 155 of them no longer holding stocks of anti-personnel mines. Over 44.5 million stockpiled mines have been destroyed by the States Parties.
Of the 50 States that at one time manufactured anti-personnel mines, 34 are now bound by the Convention’s ban on production. Most other States have put in place moratoria on production and / or transfers of mines.
Demining has resulted in millions of square metres of once dangerous land being released for normal human activity. On 1 January 2012, Guinea Bissau became the 20th State Party to declare that it had complied with its Convention obligations to clear all areas containing anti-personnel mines.
Mine Action Strategy of the Swiss Confederation 2012 – 2015 (pdf)
Bern to review electronic voting in 2013
Limits on numbers raised for Geneva, Neuchatel
GENEVA, SWITZERLAND – The Swiss Federal government 4 April authorized 12 cantons to allow electronic voting during federal elections 17 June 2012. In all but two of the cantons the electronic vote is available only to their citizens abroad. Geneva and Neuchatel are the exception and in both cases the Federal Council Wednesday agreed to raise the limit on the percent of citizens who may vote electronically, from 20 to 30 percent.
Bern cited the long experience these two cantons now have, as pioneers in electronic voting. Neuchatel has used the system 16 times and Geneva 11 times.
Some 164,000 citizens will be able to vote electronically, about 3.2 percent of the population of 5.1 million qualified voters and one-third of the total number allowed by the constitution, although Bern notes that the limit is lower, 10 percent, for non-obligatory federal votes.
The federal government, which has been authorizing “trial” electronic voting, will assess the experiences of various cantons, at the cantonal and federal level, in 2013 as part of longer term plans. A priority, the government notes in a statement Wednesday, is to encourage the Swiss abroad to vote.
GENEVA, SWITZERLAND – Myanmar/Birma opposition leader Aung San Suu Kyi was easily elected to parliament, a move widely applauded in the West, after her years of house arrest by the country’s military regime.
Recognition by the state of her election is part of a series of reforms that in January led the European Union to lift some restrictions on the country’s leaders. Tuesday 3 March, Switzerland’s ministry for the economy said it is also easing travel restrictions, in line with EU measures. The change affects 87 Burmese, including President Thein Sein, but assets frozen since 2000 remain blocked and other restrictions such as an embargo on arms and precious stones remain in place.
Modernized Super Pumas delivered to Swiss air force
BERN, SWITZERLAND – The first two Puma TH06 helicopters that are part of a modernization programme for the Swiss air force’s helicopter fleet were officially received in Emmen Monday 2 April by Armasuissse. The new choppers are equipped with: a modern Flight Management System, two global position systems (GPS), inertia navigation system, modern digital card system, anti-collision alert system, and new radio (police, encryption and satellite transmission) systems.
The two are part of a fleet of 15 that is being re-equipped over three years. They were bought in two batches, from 1987-89 and 1991-93, but once modernized the fleet will be equipped to last another 15 years and should be comparable to the Cougar transport helicopters also used by Armasuisse.
The fleet has been used for armed forces transport needs, but also for civilian emergencies abroad, and the modernization project is designed to meet the needs associated with the varied uses of the helicopters. They have been used in Albania, in Sumatra when Indonesia suffered heavy flooding, in the Balkans and to help put out fires in Israel.
ZURICH, SWITZERLAND – The dust was starting to settle over the tax deal between Switzerland and Germany Friday 30 March when a new whirlwind was kicked up with the Swiss asking for German assistance in charges brought against three German tax inspectors.
The Swiss Federal Tax Office announced late Friday that the German government had confirmed during the day it intends to approve the tax deal, which has caused heated debate in the European Union. Switzerland had asked for clarification of the situation by the end of March in order to put the new agreement into effect at the start of 2013, as planned.
Agreements with Britain and Germany were two of the nearly 40 revised double taxation agreements Switzerland has drawn up with other countries since it agreed to follow OECD recommendations in this area, but they prompted negative reactions from the EU, which threatened to take its two member states to court. Earlier this month the UK and Switzerland signed their deal, which goes into effect in January 2013.
The German agreement is similar to the UK one in that it calls for a withholding tax on income from accounts in Switzerland held by Germans but an important element for the German government is a one-off payment by German citizens on capital in Switzerland to settle past unpaid taxes. The statement by the Swiss did not clarify the amount of the withholding tax, which some media are reporting is still being negotiated. The treaty that was negotiated and initialed in August 2011, listed as 25 percent at the time.
The German SPD opposition party insists the treaty will have trouble getting approval by the Bundesrat (parliament).
Industrial spying charges add new twist to tax chases
Saturday the Swiss attorney general announced his office has issued arrest warrants for three German tax inspectors who are accused of accepting stolen goods in a case that dates back to February 2010. The three are accused of industrial espionage in accepting bank data offered to them on a CD in 2008.
Reuters cites him as saying in a statement that “There is a concrete suspicion that specific orders from Germany were issued to use espionage to obtain information from Credit Suisse. The attorney general has asked German authorities for assistance.”
BERN, SWITZERLAND – Journalists have been hounding the Swiss government for months about the number of US clients of Credit Suisse targeted by the US Justice department and Wednesday evening the information came out, but through a back door: it was tucked into a budget note from the Federal Council. The number of clients whose data the bank turned over to Swiss authorities in order for the government to share them with US authorities is 650, and the expected cost is CHF4.7 million, a tab the government expects the bank to pick up
In addition, the council is requesting CHF1.1m to cover the end of the work linked to a 2009 agreement between Switzerland and the US concerning tax evaders who were clients of UBS.
What isn’t clear from the budget message is where the US and Switzerland are with a political agreement that would cover all Swiss banks, but it appears that the deadline to review the Credit Suisse cases, which is not provided, is linked to the larger discussion.
The information was part of a request by the Federal Council (cabinet) to parliament to approve 13 additional credits, beyond the basic budget, for CHF90 million. Two of the largest projects are CHF14 million for European research organizations including CHF12.2m for Cern, and CHF60 million to encourage technology and innovation in the face of the strong franc. CHF7 million is earmarked for a new alarm system to alert the population and, last item on the list, CHF5.8 million to “cover the cost of the additional work done for the administrative assistance request from the United States, an extra burden linked notably to the Credit Suisse affair.”
The discreet budget item: a request for CHF5.8m to cover the cost of office space, specialists and other expenses linked to the Credit Suisse affair with the US Justice Department
The budget request notes that the US request for administrative assistance was made 26 September 2011 but that work had already begun a year earlier to prepare for such requests to enable Swiss authorities to move more quickly on grouped requests, based on the experience with UBS.
The federal Service d’échange d’informations en matière fiscale (SEI), the office within the tax department which handles information requested by other governments, “was reinforced by taking on temporary staff, lawyers and administrative staff, as well as external collaborators (who had already been hired for the [UBS case]. Additional office space had to be hired and the IT infrastructure had to be adapted to handle the new situation. The additional credits requested (CHF4.7m) must cover the extra costs incurred by the administrative assistance request and concern for the most part (CHF2m) the cost of consultants.”
Credit Suisse will be billed for the total cost, says the Federal Council.
Christoph Blocher, parliamentary immunity under review in Hildebrand case
ZURICH, SWITZERLAND – Christoph Blocher’s argument that he has parliamentary immunity that protects him from charges of breaking bank secrecy laws will be considered by the Parliamentary Commission on Immunity 24 April. The group held an initial meeting 28 March and decided to put off for a month both the overall immunity question and the issue of timing.
Blocher was elected to parliament but had not yet been sworn in 3 December when he received from a lawyer stolen personal bank data for Philipp Hildebrand, chairman of the Swiss National Bank. Blocher, strategist for the right-wing People’s Party and a long-time adversary of Hildebrand, was sworn in 5 December.
The larger issue is whether Blocher’s involvement in the Hildebrand affair was directly linked to his parliamentary job. Hildebrand resigned in January because of questions raised about the legality and appropriateness of currency transactions made by his wife. He was later cleared of wrongdoing.
Credit Suisse reported to be asking Americans for tax advisors’ names, proof of filing in the US
Swiss flag, more portable than a bank account
BERN, SWITZERLAND – The Council of the Swiss Abroad (CSE) is demanding that the government and Swiss banks find a reasonable solution to the growing banking problems of Swiss citizens who live outside the country, particularly those in the US.
The move by the group that represents the 700,000 Swiss who live abroad, about 10 percent of the total population, comes as Aarguer Zeitung, a Zurich area newspaper, reports that Credit Suisse has sent out some 4,000 letters asking American clients to sign by 23 April that they have filed their 2010 US taxes and asking for the names of their tax advisors.
The newspaper quotes a bank official as saying the request is not linked to new demands by the US but is a precautionary move by the bank. Credit Suisse has been under investigation by the US Justice Department for helping wealthy Americans avoid taxes by hiding their money. The bank is widely thought to have given bank data on about 130 clients to the US early this year.
Two sides of a rough coin
Swiss citizens who live or have lived in the US are finding themselves in an uncomfortable seat that closely resembles that of many Americans in Switzerland. Swiss banks are increasingly turning them down their own citizens as clients, including people who have been with the banks for a number of years and use their Swiss bank accounts to pay mortgages on homes back in Switzerland, for example.
Home away from home, but where's the bank for the mortgage payments?
The cost to a Swiss person of doing regular foreign banking from the US is prohibitive. The same is true for Americans living in Switzerland who try to do regular Swiss banking through a US-based bank, assuming they are allowed to maintain an account. A Swiss person who takes the desperate measure of keeping quiet about a Swiss account by, for example, using a Swiss address, risks getting the client in trouble with the Swiss bank, not to mention tax authorities.
US citizens in Switzerland have been faced with similar tax and banking dilemmas thanks to the rising cost to Swiss banks of showing they are compliant with American laws covering US taxpayers.
UBS in 2008 and now Credit Suisse have been investigated by the US for helpingAmerican citizens resident in the US to hide money in their offshore Swiss accounts.
But even US citizens who live in Switzerland and pay taxes here have been caught by the fallout from the offshore legal battles as banks move to avoid further legal hassles.
At a recent meeting in Geneva of American Citizens Abroad, half of the people in the room, 90 or so, raised their hands when asked if they have had bank accounts closed or been refused bank services recently because of their US nationality.
Greencard holders not spared, new US Supreme Court decision implies
Swiss or other non-US persons who spend more than four months in the US are considered residents and thus liable to US taxes, as are greencard holders.
A 21 February US Supreme Court decision makes it clear that US green card holders who withhold information about bank accounts outside the country risk deportation and face a possible and potentially costly exit tax, tax experts at the Venable Tax Group wrote last week.
Right-wing UDC strategist was not told ahead of search for breaking banking secrecy laws
BERN, SWITZERLAND – Zurich public prosecutor Andreas Brunner says “pertinent” material was found during a search of the home and office of Christoph Blocher, a UDC People’s Party leader. Blocher was not told in advance that his home and office would be searched on suspicion that he had broken banking secrecy laws, news agency ats reports.
Brunner does say, according to the agency and other Swiss media, that Blocher’s attorney was told Monday evening his client was under suspicion and would be called in for questioning.
When the attorney said that Blocher would use his parliamentary immunity, Brunner and the police, who were not convinced the immunity applies to the case, moved quickly to do the search Tuesday.
Blocher is suspected of breaking Swiss banking secrecy laws in December when he was the recipient of information about the private bank account of Philipp Hildebrand, then chairman of the Swiss central bank, the SNB. He then told Micheline Calmy-Rey, who was the Swiss president in 2011, that Hildebrand may have acted illegally in buying and selling currency. Hildebrand subsequently resigned to allow an investigation to go ahead; his name was cleared but in February the SNB changed its rules for members of the board’s own financial transactions, to improve transparency.
BERN, SWITZERLAND – The Federal Chancellery said late Wednesday that enough signatures have been verified to put the UDC-sponsored popular initiative “Against mass immigration” on the ballot. More than 135,000 signatures were gathered; 100,000 are needed to put an initiative to voters.
Muehleberg peaceful anti-nuclear protest, ©2011 Herbi Ditl on flickr
BERN, SWITZERLAND – The Swiss Federal Department of Environment, Transport and Energy (Detec) is asking the Swiss supreme court to rule on the closing of the Muehleberg nuclear power plant, it said Wednesday evening 21 March.
The Federal Administrative Court ruled two weeks ago that the plant must be closed, a ruling at odds with a 2011 review of the plant’s viability for remaining in operation until its license runs out.
The government says critical questions about the competence and the tasks of the judges in making the decision as well as questions being asked by the public make it imperative that the issue be resolved quickly, for the sake of the country’s energy programme.
A decision was made by the government in May 2011 to ban future nuclear plant construction, efffectively ending Switzerland’s nuclear energy programme. The government said in November 2011 that it will cost about CHF2 billion to shut down all five Swiss nuclear power plants, and that after reviewing their safety levels, it had decided they could continue operating until their licenses run out.
Muehleberg in particular, in Bern, has been the site of a number of protests. Its owners, BKW, said 14 March they would take the administrative tribunal decision to the higher court and 20 March it said that the board of directors “assumes that the plant will not continue to operate beyond 2022″, repeating its contention that shutting the plant down “prematurely … would entail significant financial and technical implications.”
Blocher, strategist for right-wing People’s Party, ironically under suspicion for breaking bank secrecy laws
Blocher, during a TV appearance in 2010
ZURICH, SWITZERLAND – The search Tuesday 20 March by Zurich police of both the home and the office of Christophe Blocher startled the Swiss political world, in part because Blocher has been a staunch supporter of Swiss bank secrecy.
The searches were ordered by Zurich’s public prosecutor, after an official inquiry was opened, making it official that Blocher is under suspicion for breaking bank secrecy laws at the end of 2011.
He was part of a chain of at three people who saw private bank information for an account belonging to the Swiss National Bank (SNB) chairman and it was Blocher who contacted the Swiss president to suggest that the head of the Swiss central bank may have illegally profited from a personal currency transaction.
Blocher was on the receiving end of copies of private bank account information for Philipp Hildebrand, then head of the Swiss National Bank, in December. The two had clashed, and Blocher made no secret of his desire to see Hildebrand go.
An employee at the bank where Hildebrand and his wife had a personal account became suspicious about the sale of a large amount of currency. He took the information to a lawyer and politician, who contacted Blocher. The information was shared with then-President Micheline Calmy-Rey and it was leaked to the press.
The end result was that Hildebrand resigned in early January, the central bank hired an outside firm to investigate and Hildebrand was subsequently cleared of any wrongdoing, but the incident resulted in the SNB tightening its rules for board members’ own transactions, for greater transparency.
Timing, of the essence, for opening the investigation and for the search
La Liberté in Fribourg quotes a former police officer and vice’president of the UDC, Yves Perrin, as saying the searches were inevitable. “I’m surprised, though, that they weren’t carried out earalier because, with the passage of time, proof becomes harder to find. If I were in possession of compromising documents or materials, I would have lit a fire in the fireplace long ago.” That said, he adds, not finding proof is not proof of innocence, either.
Timing in the affair has been and remains a critical issue, reports the Tribune de Geneve: Blocher’s lawyer is reported as saying his client is invoking parliamentary immunity, which means that the materials seized, reportedly including Blocher’s cell phone and computer, are under lock and key while a parliamentary commission decides if the charges against him are linked to his role in parliament.
Heated debate in canton Valais over Alpine second homes
BERN, SWITZERLAND – The Swiss voted to clamp down on second homes earlier in March, but the new law is leading to a debate as heated as the pre-vote one. At issue: when precisely the law goes into effect and what exactly constitutes a second home.
Canton Valais, which voted overwhelmingly against the new law and which is arguably the canton most affected by it because of the large number of resorts, is taking a tough stance.
The conference of Alpine communes issued a statement Monday 19 March that the law, which limits communes to 20 percent second homes, does not go into effect until 2013. Federal Councilor and Environment (Detec) Minister Doris Leuthard says no, the law takes effect immediately and affects any building permits as of the day of the vote.
Detec has put together a commission that meets in April to look at the several gray areas that have become apparent since the vote: defining a second home, how the transition period will be handled and the legal implications if land owners who now cannot build take their cases to court.
Too big to fail banks should increase capital base more quickly
BERN, SWITZERLAND – The International Monetary Fund’s annual review of the Swiss economy holds no major surprises, but the IMF did warn of the risk of fallout from eurozone crises. It was firm that the country needs to heed its three recommendations, the federal government said in a statement issued Tuesday 20 March:
- In order to counter the financial consequences of demographic developments, the IMF recommends taking measures quickly to reform the pension system; in particular it recommends a “a binding rule that would link the retirement age and pension benefits to life expectancy”
- Given the environment of persistently low interest rates, the IMF experts see a growing risk of a real estate bubble in parts of the real estate market: “Against this backdrop, it considers it advisable to swiftly introduce the countercyclical buffer proposed in the report of the “Financial stability” working group and strengthen the capital requirements for the mortgage lending business. Moreover, the IMF recommends including affordability limits in the macroprudential oversight toolkit”; for future homeowners, this translates as larger downpayments.
- Finally, the big banks should raise high-quality capital more swiftly.
Your home is your castle, but getting the mortgage to buy it might get tougher
The IMF forecast reflects those issued in recent days by the big banks and Seco, the state economy ministry: “the IMF anticipates subdued economic growth due to slower export demand. It sees an upturn in the economic outlook in the second half of the year. This is mainly due to global economic growth picking up and improved competitiveness.”
The overall note for Switzerland was positive, with the IMF finding the cap on the Swiss franc, CHF1.20 to the euro, an “appropriate policy response” although in the medium term it would like to see a freely floating currency.
The pension system will begin to feel pressure at the end of this decade, the IMF warns, and measures should be taken now to improve the situation.
“Under unchanged policies, the increase in aging-related expenditure will already start to bite in earnest around the end of this decade. Consequently, time for reform preparation and implementation is running out quickly. Specifically in the pension system, equalization of the male and female retirement age and pension indexation to inflation only (rather than both inflation and wages) could be considered. Most important, drawing from the experience of other countries, a specific “fiscal rule” that automatically links the retirement age and/or pension benefits to life expectancy could be introduced. Such a rule would reduce the need for repeated and often difficult reform discussions.”
Beware the bubble in housing hot spots
Minimum affordability ratios should be more widely used to reduce risk in the housing market, the IMF says.
“As monetary conditions loosened in 2008, housing price growth accelerated and there are signs of overheating in some ‘hot spots’ and market segments, as well as evidence of loose mortgage lending policies. Since monetary conditions are unlikely to be tightened for some time, the risk that a bubble may form is intensifying. Domestically-oriented banks (and to a more limited extent, the insurance sector) are exposed to the domestic real estate market through both credit and interest rate risk. The latter is building up as longer-term mortgages at low fixed interest rates are becoming more widespread.”
Swiss parliament, Bern
BERN, SWITZERLAND – Data exchanges between the US and Switzerland, including fingerprints and DNA, must be limited to serious crime cases, the foreign affairs commission of the upper house of the Swiss parliament says.
The commission voted 20 March, 15-8, in favour of the government concluding agreements with the US covering data swaps as well as the exchange of information about supposed terrorists, but with reservations about data protection.
The commission noted that Switzerland should follow the example of Austria in particular, which has been negotiating a similar agreement with the US.
The US has linked access to its visa waiver programme to these two agreements, the commission notes. The visa waiver programme, in which Switzerland currently participates, allows Swiss citizens to visit the US without a visa.
Related tax news: Upper house commission backs government’s proposed fiscal administrative assistance process
BERN, SWITZERLAND – The United Kingdom and Switzerland signed a Protocol of Amendment to their new double taxation treaty Tuesday 20 March, with the Swiss government noting that “The agreement remains unchanged in essence” and that “the concerns of the EU Commission regarding compatibility with EU law have been removed.” The agreement was initialed 6 October 2011 and followed a new treaty between the two countries that entered into force in January 2011.
Agreements with Britain and Germany were two of the nearly 40 revised double taxation agreements Switzerland has drawn up with other countries since it agreed to follow OECD recommendations in this area, but they prompted negative reactions from the EU, which threatened to take its two member states to court.
Switzerland, in a statement Tuesday notes that “Effectively, nothing will change for bank clients; their tax obligations will be fulfilled. Only the legal structure will change.”
Key points of the final version include:
- Interest payments will be excluded from the agreement; “at the same time, it will be ensured that UK taxpayers can discharge their tax liability on interest payments”
- Inheritance is now also covered by the agreement in order to eliminate a loophole. In the case of inheritance, the heirs must consent to either collection of a tax or disclosure.
The agreement is now ready for the two countries’ parliaments, which must approve it before the agreement enters into force in 2013.
The economic commission of the upper house of parliament agreed Tuesday to back the Federal Council’s revised process in case of requests from foreign goverments for fiscal administrative assistance, also adapted as a result of OECD criticism of Swiss agreements with other countries. Revised procedure, fiscal administrative assistance (Fre), pdf
BERN, SWITZERLAND – Olivier and Daniela, whose last names are not given by Bern to protect their privacy, are indeed free and the Swiss ambassador has spoken with them: the travelers from Bern were reported by the Pakistan army earlier in the day to have been picked up at a checkpoint and taken to safety.
Video RTS, Swiss public broadcasting
The two were kidnapped in July 2011 by Taliban but escaped. The Taliban reported earlier Thursday that they had released the hostages for a ransom and several prisoners in exchange, but the Swiss Foreign Affairs Department confirmed late afternoon Thursday that they escaped by their own means and no ransom was paid by either Pakistan or Switzerland.
Both appear to be in good health, under the circumstances, and were unharmed, according to Bern. They were taken “by helicopter from the Miranshah region to Peshawar and later to Islamabad”, says Bern. “The FDFA had set up an interdepartmental task force which coordinated the activities of the various services responsible – the Federal Office of Police fedpol, the Federal Intelligence Service, and the cantonal police forces of Bern and Aargau. The Head of the Crisis Management Centre of the FDFA, Ambassador Christian Dussey, was in charge of this task force.”
Pakistan is on the list of countries that the Swiss government warns should be avoided by travelers except in case of emergency and it strongly urges other Swiss citizens to heed the advice offered on its travel advisory pages.
Swiss National Bank says its policy is paying off, expects 1% growth as economy stabilizes
ZURICH, SWITZERLAND – The Swiss National Bank Thursday 15 March issued a relatively optimistic quarterly report despite the Ides of March date. It confirmed that it is maintaining its CHF1.20 to the euro exchange rate cap, and is keeping in place the rest of its four-pronged policy:
- the SNB will continue to maintain liquidity on the money market at an exceptionally high level
- the target range for the three-month Libor (interest rate to prime banks) will remain unchanged at 0.00–0.25 percent
- the SNB will continue to maintain liquidity on the money market at an exceptionally high level.
Swiss franc, Swiss economy balancing act: the SNB will continue to intervene in currency markets (photo, Ellen Wallace)
“While the high value of the Swiss franc continues to present enormous challenges to the economy, the minimum exchange rate is having an impact. It has reduced exchange rate volatility and given business leaders a better basis for planning. There are growing indications that Switzerland’s economy is stabilizing. For 2012, the SNB is now forecasting moderate growth, at close to 1 percent,” the bank notes in a statement Thursday morning.
The central bank remains very cautious, however, noting that “In the foreseeable future, there is no risk of inflation in Switzerland. Compared to December, the inflation forecast has even fallen further. If developments in the international economy are worse than foreseen, or if the Swiss franc does not weaken further, as expected, downside risks for price stability could re-emerge.”
Reminder: tax deadline 15 March
100 years to pay off mortgages may be less popular if bank interest is no longer a tax deduction
BERN, SWITZERLAND – The Swiss government is reviewing the tax deductions citizens with mortgages receive, with Finance Minister and President Eveline Widmer-Schlumpf working on ending these, Tages-Anzeiger reported Tuesday 13 March.
The deductions are keeping Swiss household debt high, the president is reported to believe, because they discourage the Swiss from paying off the principal on their mortgages; 100-year mortgages were long a banking tradition in Switzerland.
She has reportedly formed a working committee to review the situation, that includes Thomas Jordanof the Swiss National Bank and Patrick Raaflaub from the bank supervisory body Finma, but Bern has not confirmed the information.
A change would most likely also include an end to a tax on the rental value of property, the newspaper reports.
Reminder to Swiss residents: The deadline for filing 2011 Swiss taxes is 15 March for canton Vaud and 31 March in Geneva.
