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.
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.
US approach contrasts with German tax collection deal
ZURICH, SWITZERLAND – There is not an official war open against Swiss banks, by the US Department of Justice, but continuing skirmishes, highlighted this week by Le Temps and the Financial Times, make it clear that peace is not around the corner, either. Officials from the two countries appear to be heading for another showdown, writes Zurich-based Haig Simonen at the British newspaper, just as Switzerland and Germany are on the verge of announcing that they have found a way forward with a similar problem of German citizens hiding money from their taxman in Swiss bank accounts.
Switzerland and Germany are expected to announce Wednesday 10 August that they have signed an agreement for the Swiss to withhold tax on Germans’ bank accounts in Switzerland while Swiss banks will pay a lump sum up front for tax revenues lost in the past by Germany. The new agreement would leave Swiss banking secrecy intact by Switzerland turning over the taxes collected without identifying account owners.
The New York Times describes the new agreement, as well as an upcoming one with Britain as putting a squeeze on tax evaders, in an article published late Tuesday.
The US is taking a more aggressive tack to uncover past tax cheats and a 2009 treaty with Switzerland covering a set number of accounts held by Americans at bank UBS looks increasingly like a one-off settlement. The DOJ 4 August announced yet another indictment, this time against Gian Gisler, a former UBS banker who left the company in 2008 and who now lives in Zurich. His indictment follows four against former Credit Suisse senior managers in late July that topped up four other ex-Credit Suisse indictments in February 2011.
According to the DOJ “While working at UBS and at two other Swiss asset management firms, Gisler had more than 38 U.S. taxpayer clients and allegedly opened and/or managed more than 60 hidden accounts on their behalf. Gisler left UBS in 2008 when it became public that UBS was the target of an IRS investigation, and moved to a Swiss asset management firm so that he could continue to assist his US taxpayer clients in hiding their accounts at other Swiss banks. When that firm ceased its private banking business, Gisler left for yet another Swiss asset management firm so that he could continue to engage in the same conduct.”
The Financial Times says six other banks, in Switzerland and Liechtenstein are now being investigated by the DOJ. “The US investigations have taken months to gather pace. But receipt of the names, along with thousands of voluntary self-declarations by US taxpayers, has widened the scope of the US inquiries. Although only 25 US taxpayers with undeclared Swiss accounts have been indicted so far – and the first case dates back to April 2009 – the pace is beginning to build.”
Sinopec, one of China’s largest oil companies, has signed a 20-year agreement with Exxon Mobil for liquefied gas supplies from Papua New Guinea, for an undisclosed sum. The move is the latest in a string of energy agreements and follows a major deal signed some weeks ago by competitor PetroChina and Australia. China’s energy needs are expected to grow by 8 percent this year, according to the Chinese government.
Links to other sites: BBC, Chicago Tribune, Xinhua
