BERN, SWITZERLAND – The Swiss government announced the first phase of a strategy “for a credible, tax-compliant and competitive Swiss financial centre” Wednesday 22 February. The statement for the first time puts the emphasis on future offshore clients stating they are tax-compliant at home before an account will be opened.
The Federal Council says it has asked the Federal Finance Department to draw up the details of the strategy and it expects to announce a series of concrete steps by September 2012. Today’s statement provides an outline of what is to come.
The first step must be to settle past tax problems, says Bern, “in particular cases of clients living abroad whose assets have not been correctly taxed.” Existing clients’ assets will have to be “regularized” from a “tax viewpoint, thereby lowering the legal risks for banks”.
This will be followed by a three-prong programme that focuses on international cooperation and future taxation of investment income and capital gains for offshore accounts:
- International withholding tax agreements, beyond those negotiated with Germany and the UK: Bern calls this “an effective means of taxing taxpayers in accordance with the regulations of their country of domicile while safeguarding their privacy”. It notes that some issues “have not yet been fully resolved, [but] there is international interest in this approach”.
- Improved administrative and mutual assistance based on international standards as laid out in double taxation agreements (DTAs). Serious tax crimes and money laundering investigations will be more closely linked, but the key part of this will be the new Tax Administrative Assistance Act, out for public consultation until April. It replaces an ordinance that has been in place since October 2010, implemented quickly so that Switzerland could comply with an OECD deadline to observe its standards. The new law, Bern announced earlier, “assumes the basic features of the provisions of the ordinance. It contains the principle that administrative assistance will be provided exclusively upon request in individual cases. Switzerland will not provide any administrative assistance in the case of requests based on stolen data. Unlike the ordinance, which covers only administrative assistance in accordance with double taxation agreements, the Act also governs administrative assistance based on other agreements which make provision for the exchange of information relating to tax matters, for example the agreement on the taxation of savings income with the EU. The appeal procedure is to be streamlined and the deadlines shortened.”
- Tougher due diligence requirements for banks to more effectively prevent them from accepting untaxed assets; foreign clients will be required “to make a declaration on the fulfillment of their tax obligations”.
Switzerland manages the largest amount of private offshore funds in the world, 27 percent. The Swiss argue their share is more the result of financial management skills than banking secrecy and the new government strategy is banking on this. The Swiss have nevertheless found it hard to shake off the old cliche that the country is a tax haven (according to OECD definitions it is not, although Tax Justice Network views it differently), in a world where wealth management is rapidly changing.
Boston Consulting publishes an annual report on worldwide private assets under management and in May 2012 it noted that in the previous year these assets had grown by 8 percent to a record $121.8 trillion. It issued a press release noting that:
“‘Offshore private banking remains a tumultuous part of the business,’ said Anna Zakrzewski, a BCG principal and a coauthor of the report. ‘The relative importance of offshore centers is changing rapidly. Some are benefiting from continued asset growth, while others are suffering large asset outflows, with wealth being repatriated to onshore banks, transferred to other offshore centers, redirected into nonfinancial investments, or simply spent at a faster rate.’
“For most clients, however, the core value proposition of offshore banking remains, Zakrzewski said. ‘Offshore wealth managers offer a sense of stability and security that these clients cannot find in their home countries. Other clients value the expertise or access to certain investments provided by offshore private banks. To continue to grow, offshore wealth managers will need to adapt to the changes imposed by the push for greater transparency while accentuating their strengths in areas that remain extremely relevant to clients around the world.’”
Switzerland’s announcement comes at a time when media have been speculating whether the country and the US are reaching an agreement over a fine a group of 11 Swiss banks would pay, linked to US accusations they helped American citizens and residents hide money offshore in an effort to evade taxes. (Ed. note: The announcement was covered by Business Week/Bloomberg, Reuters, Wall St Journal)
The strategy outline was welcomed Wednesday by the Swiss Bankers Association, which notes that “the SBA has been working on risk-based codes of conduct that impose on banks due diligence measures, in a similar way to the well-established Swiss approach to combating money laundering.” The group cautions, however, some aspects could backfire. “The codes of conduct will stipulate a risk-based approach whereby it makes sense for banks to obtain a declaration from clients about their tax situation (“self declaration”) if they have indications that the clients have not complied with their tax obligations. However, the SBA rejects a systematic duty of self-declaration as it has no credibility abroad, is unlikely to become an international standard, does not provide a solution for assets already deposed in Switzerland and casts suspicion over all clients.”
The group also argues that “it is important that in Switzerland not only banks but also all financial intermediaries be required to implement these new provisions. In addition, Switzerland must make every effort to ensure that other financial centres also resolutely commit themselves to tax compliance and take appropriate measures involving locally based financial intermediaries.”
Possible overheating in real estate: tighten mortgage requirements, gov’t told
Home sweet home in Switzerland: signs the market is overheating
BERN, SWITZERLAND – The OECD (Organization for Economic Cooperation and Development) 2012 report on Switzerland, issued this week, cautions Bern against allowing consumer debt to build and warns that the real estate market may be overheating.,
The report’s overall assessment is that while Switzerland is weathering the eurozone crisis reasonably well, it remains at risk from the ongoing sovereign debt problems and economic stagnation in the region. The high Swiss franc will continue to pose problems for the export industry, the OECD notes.
“Exceptionally low” short- and medium-term interest rates are contributing to a mortgage boom and high real estate prices, the report states. Some areas are now showing signs of overheating, the report concludes. “Taking into account the high gross debt of households, the risk could increase, for small internal market banks, if there is a sudden rise interest rates.” Household debt in Switzerland is one of the highest in the OECD, it notes, although household wealth is “not negligible” taking into account assets held by the pension system.
Other key points from the report:
- The country’s two big banks, Credit Suisse and UBS, should be required to have higher leverage ratios than the 5 percent proposed by parliament, common equity should play a greater role and the reforms passed by parliament in 2011 should be implemented more quickly than the scheduled completion date of 2019. Parliament’s capital ratio of 19 percent has been praised as going beyond Basel III requirements for banks around the world, but the size of the two big banks in relation to the Swiss economy creates a risk that remains too high;
- Fiscal reforms would encourage economic growth; these should include a higher TVA (value-added tax) with broader coverage to consolidate growth and reduce distortion in the system. At the same time, the tax rate for individuals should be lowered, the OECD recommends, to encourage growth. Switzerland’s tax rates are modest on an international scale, but this is offset by the burden of mandatory health insurance and pensions.
- A number of measures are recommended to reduce CO2 in line with agreed limits by 2020; the OECD recommends an emissions tax on vehicles, saying this is a relatively inexpensive way for the country to reduce CO2 emissions, and it suggests peak traffic and congested area use taxes.
GENEVA, SWITZERLAND – RSR, Swiss public radio, reports Friday morning that Switzerland and Liechtenstein will not be promoted to the ranks of the good guys where taxes are concerned but that they will remain in a gray limbo for now. The information is based on a copy of the OECD report to the G20, scheduled to be released next week.
Switzerland had its OECD review in June and it appeared that changes made to the banking and taxation system would move it off the OECD’s list of countries that were not meeting its international standards. The new report appears to indicate that the two countries will have to wait until their next reviews to “pass” into the category with 48 countries. Only 9 have failed to meet OECD standards, according to the RSR: Antigua-and-Barbuda, Barbades, Botswana, Brunei, Panama, Seychelles, Trinidad et Tobago, l’Uruguay, Vanuatu.
BERN, SWITZERLAND – The Swiss and Indian governments Monday 10 October announced that their revised double taxation treaty enters into force today. The treaty, revised to accommodate OECD international standards, is being met in India with hope that this will pave the “way for obtaining data on black money stashed there,” says the Economic Times. “The move comes at a time when the issue of black money stashed in Swiss banks has become a major concern back home with political parties and civil society taking up the matter.”
The Indian Express noted during the Indian president’s visit to Switzerland last week that she would most likely review the issue of black money with her Swiss counterpart. The issue of black money has been widely covered by Indian media, with guesses at the amount in Swiss banks varying wildly.
New interpretation of treaty obligations sends amendments to parliament
France may more easily ask the Swiss for tax fraud help, thanks to new amendments - if parliament agrees
Bern, Switzerland (GenevaLunch) - Revised tax treaties with the US, UK and France among others, already signed by both parties, will need amendments that will send them back to the Swiss Parliament, the Federal Department of Finance announced Tuesday 15 February.
The amendments would allow other countries to ask the Swiss for help even if they can supply only bank account numbers, in some cases, although Bern insists “fishing expeditions” will still be excluded, says Bern.
The change could face a hurdle in parliament, with Bern’s statement on the new amendments noting that “the Federal Council is aware that the wish was expressed in the parliamentary debates that administrative assistance be permitted only if the name and address of the person and the information holder concerned are indicated in the request. This is why the revision decided will also be submitted to parliament.”
30 new treaties at various stages will require amendments
Switzerland’s peer review by The Global Forum on Transparency and Exchange of Information for Tax Purposes, which began at the end of October 2010, lies behind the change.
The group examines compliance with the administrative assistance standard in countries affiliated to it by means of peer reviews.
Bern’s statement on the treaties notes: “Identifying the taxpayer and the holder of the information is an indispensable prerequisite for the granting of administrative assistance. In most cases, this occurs by indicating the name and address. Other means of identification should also be admissible in the future. Switzerland thereby eliminates a foreseeable obstacle to the effective exchange of information in tax matters and reduces the risk of failure in the peer review process. Fishing expeditions continue to be impermissible.”
Switzerland decided in March 2009 to revise all its double taxation treaties (DTAs) after agreeing to adopt the OECD Model Convention for administrative assistance in tax matters. Thirty agreements have been negotiated, but they are in various stages of implementation:
Digital age facilitates more frequent census-taking and broader range of information
Annual census in Switzerland to more closely, quickly track the population
Neuchatel, Switzerland (GenevaLunch) - The Swiss government is moving to an annual national census, a ground shift in how the population is counted and how other data is gathered, Bern announced 21 December. The first day of the new census will be 31 December 2010, but don’t expect a phone call that day from people counters. Only about 5 percent of the population will be surveyed, in writing or by phone, at the start, with questions that round out data supplied by official registers in all the country’s communes and cantons.
The new system will save the government some CHF100 million.
Cantons and cities will begin to gather a broader range of data to contribute to the national census, which will also take data from federal registers, notably for housing information. Surveys of 10-20,000 people will present five themes, rotating so that one is presented each year. A survey of 3,000 people covering current affairs will be carried out each year, as well.
The increase in rates of overweight and obese people in middle-income countries, such as Mexico, Brazil and China, is worrying health experts who say that taking measures now would be more cost-effective than when rates have reached rich-country proportions. A study by the OECD published in The Lancet 11 November comes to the conclusion that “a strategy [including] mass media campaigns promoting healthier lifestyles, taxes and subsidies to improve diets, tighter government regulation of food labeling and restrictions on food advertising” would add five million years of added life expectancy over 20 years in India and China.
India and China could spend the equivalent of $2 annually per person on such a strategy, while Mexico, Russia and South Africa would need to spend $4 per person per year, say Michele Cecchini and his team. “The strategy would pay for itself – through reduced health care costs – in half the countries surveyed, and would become cost-effective in the others within 15 years”, says the OECD.
The authors studied rates of overweight and obese adults in Brazil, China, India, Mexico, Russia and South Africa. Seventy percent of Mexicans fall into this category; in India, 15 percent of adults are overweight or obese, and the proportion is rising rapidly, the report says.
The World Health Organization (WHO) projects that by 2015, world wide, 2.3 billion people will be overweight and 700mn will be obese.
Background: GenevaLunch
The sale and advertising of junk food in schools will be illegal, thanks to an anti-obesity law approved by Mexico’s senate 4 November with one vote against. Although the law has been passed, parts of it will go back to be reworked in committee before it goes to the chamber of deputies. Sellers of junk food and advertisers have been fighting the law, which they say is too restrictive.
The OECD says 70 percent of Mexican adults are overweight and 3 out of 10 are obese, according to the Economist. The OECD report says that 27 percent of primary school girls were overweight in 2006. The figures match closely those published by World Health Organization in Geneva.
Links to other sites: El Universal (Spa), WHO tables
Tax cuts due for Canadian pensioners in Switzerland
Bern, Switzerland (GenevaLunch) – Canada and Switzerland Friday 22 October signed an amended double taxation treaty that is expected to go into effect in 2012 as well as an expanded version of their 1975 bilateral aviation agreement. The accords were signed as part of the official visit by Canadian Prime Minister Stephen Harper to Swiss President Doris Leuthard Friday, near Bern.
Harper is one of nearly 70 top officials and heads of state visiting Switzerland for the Francophonie Summit that officially starts Saturday 23 October. Canada has chaired the summit and tomorrow it hands that role over to Switzerland.
The amended double taxation agreement, like others that Switzerland has signed in recent months, contains provisions for the exchange of information that are in line with OECD standards laid out in 2009 and affect primarily requests for judicial assistance in suspected tax fraud cases.
But for anyone living in Switzerland who receives a Canadian pension, whether they are Canadian, Swiss who worked in Canada or other citizens who at some point earned a Canadian pension, the revised treaty brings a tax cut.
OECD report says Swiss approach to unemployment generally good, but private agencies weaken public effort in some areas
Bern, Switzerland (GenevaLunch) - Switzerland’s decentralized unemployment system is basically sound and works relatively well, a review by the OECD (Organizastion for Economic Cooperation and Development) published Thursday 21 October shows. But the strength of private employment agencies to some extent undermines public agencies’ efforts, and two groups who suffer are the unskilled and foreign workers, for whom jobless figures are always highest.
“Immigrants could be better integrated on the labour market through more substantial up-skilling measures and efforts in recognizing of foreign diplomas/qualifications,” an OECD press release states.
Two areas where Switzerland could improve, the OECD says, are in helping the long-term unemployed get back to work and in providing better assistance for young people with learning difficulties.
Bern, Switzerland (GenevaLunch) - Corporate and value-added taxes levied by Switzerland remain among the lowest for OECD (Organization for Economic Cooperation and Develoopment) countries, show figures for 2009 pubished 16 December. Corporate taxes include federal taxes that are far lower than most, at 8.5 percent, plus local taxes of about 18.3 percent. Federal tax is deductible in Switzerland, rarely the caes elsewhere. The “TVA” or value-added tax (VAT), at 7.6 percent is well below other European VAT taxes and on a par with the retail sales taxes in many US states. There is no federal sales tax in the US.
Tables of 2009 sales tax, corporation taxes
Swiss representation to OECD, Paris. © 2009 délégation suisse près l'OCDE
Bern, Switzerland/Paris, France (GenevaLunch) – Switzerland’s official assistance to developing countries obtains high marks in general in an evaluation by the OECD’s committee on development aid. The committee notes that Swiss official development aid (ODA) was 0.42 percent of GDP in 2009, still short of the 0.7 percent recommended by the UN, but 6 percent higher than in 2008. Swiss ODA is praised for its concentration on the poorest countries, and on multilateral agencies, but the committee’s report notes that Switzerland is still trying to do too many things in too many different places with its ODA.
Bern, Switzerland / New York, NY, USA (GenevaLunch) – Swiss President Hans-Rudolf Merz capped off a busy political week for Switzerland with an address to the United Nations General Assembly where he argued that because “the G-20 lacks legitimacy” exchanges between the UN and the G20 group of nations “must be strengthened. The G-20 has taken over a role in discussing important global issues. This development must not take place at the expense of other nations or global institutions such as the UN.” Libya and Switzerland’s removal from the OECD gray list also made headlines in Switzerland and elsewhere.
G20 needs to create level playing field: Merz
Merz told world leaders Thursday 24 September at the assembly that “basic considerations of due process are absent in the sanctions procedures. The members of the G-20 themselves are not subject to the same scrutiny. Switzerland advocates a level playing field and a much better consultation among non-members of the G-20.”
Hans-Rudolf Merz, Swiss president and finance minister
Bern, Switzerland (GenevaLunch) – Swiss Finance Minister Hans-Rudolf Merz signed a new double-taxation treaty with his French counterpart, Christine Lagarde in Bern 27 August. The new treaty is the thirteenth Switzerland has signed since March, after Luxembourg and Denmark.
It brings Switzerland in line with the OECD standards for administrative assistance in cases of tax fraud, according to the Swiss government. Lagarde said in Bern that banking secrecy can no longer be used by one of the two states to refuse to provide information.
The economies of the OECD (Organization for Economic Cooperation and Development) countries began to stabilize in the second quarter of the year compared to the first, according to numbers released by the Paris-based organization. Overall, the group’s economies declined by 0.002 percent. Of these, the G7 group of economies fell by 0.1 percent, the euro area GDP fell by 0.1 percent, and the EU economies as a whole declined by 0.3 percent. There is considerable variation among economies, however. Japan, France and Germany showed substantial growth compared to the first quarter, giving hope that their economies were seeing a rebound. The OECD report cautions that compared to last year – second quarter 2008 to second quarter 2009 – GDP growth continues to decline, with overall OECD growth is down by 4.6 percent, ranging from minus 6.5 percent for Japan to minus 2.6 percent for France.
Eveline Widmer-Schlumpf, Swiss minister for justice and police, press conference on UBS settlement
Update 4 23:15, Update 3 16:40, Update 2 16:27, Update 1 16:12
Ed. note: UBS shares dipped slightly during the afternoon, but began to rise slowly on the Swiss stock market during the press conference. In related news, Doug Shulman, the US Commissioner of Internal Revenue, who led comments by the US on the UBS case, took up his duties as the new chair of the OECD Forum on Tax Administration 18 August.
Bern and Zurich, Switzerland (GenevaLunch) - The seven members of the Swiss Federal Council (cabinet) Wednesday afternoon 19 August gave a press conference on the settlement in the UBS case. The government issued the following statement:
The Organization of Oil Exporting Countries (Opec) sees demand for its oil this year and next unchanged and casts doubt on the sustainability of a recovery. Demand for Opec oil is expected to be 28.4 million barrels per day (mbd), a drop of 2.3 mbd from 2008, according to its monthly report for August 2009. In 2010 demand will decline a further 0.5 mbd. Open says the price of oil today, a little more than $70, has reached its peak, after more than doubling since December 2008. Increased non-Opec oil production will contribute to the slack demand, according to the report.
Longer-term, Opec sees demand driven less by growth in OECD (Organization of Economic Cooperation and Development) economies and more by developing economies. The drive for energy independence in the US and commitments by developed countries to reduce carbon emissions will reduce demand for Opec oil, it said in a presentation on the world oil outlook 8 August. Oil Market Report, Reuters
Bern, Switzerland (GenevaLunch) – The United Kingdom is the tenth country to initial a revised double taxation agreement with Switzerland, followed Bern’s decision 13 March to follow OECD (Organisation for Economic Co-operation and Development) guidelines for tax treaties. The OECD has given Switzerland until December to initial new agreements with 12 countries in order to be removed from what is known as its gray list of countries considered to not cooperate fully in tax evasion investigations.
The initialing process indicates that the countries have agreed to the negotiated terms in principle.
Hans-Rudolf Merz, Swiss president
Bern, Switzerland (GenevaLunch) – Switzerland is ready to revise its double tax treaty with Germany, Swiss President Hans-Rudolf Merz told Peer Steinbrueck, the German finance minister, when the two met in Berlin Monday 22 June. Merz says the Swiss government wants to quickly implement its 13 March decision to bring Swiss tax law into line with international standards, but that Switzerland expects Germany to allow unhampered access by Swiss financial service providers to its markets and an agreement on taxation of Swiss airline employees who work in Germany, the government announced in a communiqué. Both men after the meeting played down the recent spat caused by Steinbrueck’s comments on Swiss banking secrecy.
Bern, Switzerland (GenevaLunch) – Switzerland made no concessions to the US in the tax agreement that was initialed 18 June, and the case of UBS, which is being taken to court in the US to reveal names of account holders, was not part of the discussions, says Swiss President Hans-Rudolf Merz.
Washington DC, USA (GenevaLunch) – Swiss negotiators from the Federal Department of Finance met their US counterparts in Washington Tuesday 16 June to hammer out a new double-taxation treaty between the two countries. Time is of the essence: Switzerland wants to get off the Organization of Economic Cooperation and Development’s (OECD) gray list of non-compliant states, and both sides need to find a way around the US tax authority’s (IRS) demand for the names of 52,000 US clients of UBS bank. The case is currently being tried in a Miami, Florida courtroom. Switzerland would like the US to drop its charges against UBS, reports Le Temps.
Geneva, Switzerland (GenevaLunch) – Money has not been flowing out of Swiss banks in a significant way as a result of the government’s decision in March 2009 to ease its strict interpretation of banking secrecy, “There has been no meaningful outflow of assets” from Swiss banks since Switzerland said it would adopt Art. 26 of the OECD (Organisation for Economic Cooperation and Development) Model Tax Convention, says Pierre Mirabaud, president of the Swiss Bankers Association. The convention obliges Switzerland to renegotiate tax treaties with other countries.
Mirabeau, speaking to the American International Club of Geneva 27 May, said the main factor that will lead to Swiss banks regaining trust is for them to begin to be profitable again. Asset values have dropped across the board because of very poor market conditions since the onset of the crisis late last year, but this has affected all banks.
Bern, Switzerland (GenevaLunch) – Switzerland’s first report on black market labour highlights a good deal of illegal activity, but it draws no clear conclusions about the extent of the problem. Labour inspectors in 2008 conducted more than 9,000 inspections that involved 35,000 workers. Nearly half of the inspections, 46 percent, involved suspicions of law-breaking by the employer’s canton, which the report says is not surprising: a large number of investigations were prompted by tips from the public or other public agencies. More than 1, 300 resulted in sanctions.
The report covers the first year in which cantons sent inspectors into every industry in Switzerland in compliance with a federal law to combat the shadow economy, which came into force in January 2008. The report is published by the State Secretariat for the Economy (SECO).
Bern, Switzerland (TSR, Fre) – The OECD has told Switzerland it must have 12 renegotiated bilateral tax treaties in place by the end of 2009 in order not to be on the organization’s list of “uncooperative” countries in tax matters.
Updated 09:45 Bern, Switzerland (GenevaLunch) – The OECD should provide clarification about how its tax haven list was drawn up, and it needs to be more transparent about “how the standard on the exchange of information for tax purposes” will be implemented, Swiss President Hans-Rudolf Merz has written to Angel Gurria, secretary-general of the OECD (Organisation for Economic Cooperation and Development). Merz Wednesday told Swiss German radio DRS that he will be attending a June OECD finance meeting in Berlin. The Swiss president argues in his letter that the role of the OECD and other bodies in setting criteria, deciding how they are applied and to whom, and in monitoring tax information exchanges is unclear.
Update 14:30 Bern, Switzerland (GenevaLunch) – Tuesday noon four countries joined the “gray” list of those willing to abide by OECD standards to exchange information on tax evasion and fraud, but who have not yet implemented the change: Costa Rica, Malaysia, Philippines and Uruguay. Switzerland was also named to this list 2 April.
Brussels, Belgium (Le Temps, Fre) – Mirek Topolenek, Czech Republic prime minister whose country holds the rotating European Union presidency, confirmed at a Thursday evening press conference that Switzerland, Austria, Belgium and Luxembourg will not appear on any OECD (Organisation for Economic Cooperation and Development) list of fiscal havens. His remarks are headline news in the Swiss media, after weeks of political concern and parliamentary debate linked to the possibility Switzerland would be blacklisted.
Updated 20:00 Vaduz, Liechtenstein (GenevaLunch) – The Principality of Liechtenstein as well as Andorra reportedly have agreed to follow OECD standards for banking transparency with one exception: like Switzerland, they will retain banking secrecy. Thursday evening 12 March mixed reports were appearing in the media about what exactly this meant, with Reuters reporting from Zurich that Liechtenstein is going further than Switzerland in relaxing bank secrecy regulations, and few details about Andorra that could be confirmed.
