Swiss left out of G20 meeting
ZURICH, SWITZERLAND – Switzerland and Germany’s foreign ministers Sunday confirmed media reports that an agreement will shortly be announced on a tax deal. The Swiss Foreign Affairs Department said in a statement that Swiss President and Foreign Minister Micheline Calmy-Rey and German Foreign Minister Guido Westerwelle “both praised the progress that has been achieved in the area of taxation, as well as the generally intensive relations between Switzerland and Germany.”
The two met Saturday 7 August in Locarno, on the sidelines of the Locarno international film festival.
Calmy-Rey “stated that she was pleased that the negotiations concerning an agreement on withholding tax will shortly be brought to a conclusion, and she went on to underscore the fact that ‘Switzerland’s banking sector has no interest in untaxed assets.’ She noted that withholding tax is a fair way of taxing German assets without an automatic exchange of information, and it also guarantees the confidential management of client data,” according to the statement.
Switzerland has not yet confirmed details of the deal, but financial media have been reporting a 26 percent withholding tax as likely, in future.
Swiss newspaper SonntagsZeitung reported at the start of the weekend that a deal is expected to be announced Wednesday 10 August, with Swiss banks agreeing to pay an upfront lump sum for Swiss accounts held by Germans who did not pay taxes in the past 10 years. The amount agreed to, possibly CHF2 billion, is reported, by what the newspaper calls a source close to the deal, to be a fraction of what Germany initially demanded.
G20 meeting in Cannes won’t include Switzerland
Switzerland’s disagreements with its neighbours over accounts held by their citizens in Swiss banks was dealt a new blow over the weekend, however, when the Seco, Switzerland’s economy ministry, confirmed to news agency ATS that French President Nicolas Sarkozy has invited Singapore, but not Switzerland, to participate in the next G20 meeting. Switzerland has been busy for several months building its influence to counteract the possibility it would not be invited to the G20 talks.
Switzerland, despite its role as the world’s top fortune management centre, is not a member of the Group of 20, the world’s largest economies, created in 1999 “to bring together systemically important industrialized and developing economies to discuss key issues in the global economy.” The high Swiss franc is currently viewed by a growing number of investors as one of a small group of “shadow currencies”, reports the Economist and other international media.
It was not invited to the last meeting of the group, in Seoul, but Sarkozy has told Switzerland it will be “integrated” into the G20 meeting, even if it is not directly participating. Switzerland fears a repeat of one of the Seoul meeting outcomes. TSR/ats reports that “the objective of this offensive is to prevent a repeat of what happened in 2009, when Switzerland, without any advance consulation, was put on a gray list of tax havens by the OECD, at the instigation of the G20.”
The next meeting will be held in Cannes in November 2011, under France’s presidency.
India studies stolen HSBC-Geneva account holders data
Meanwhile, India Express 7 August published a story saying that France has handed over to Indian authorities the names of 700 holders of HSBC bank accounts in Switzerland. France received stolen data from a former employee of the UK bank’s Geneva branch, in 2008 and the theft increased tensions between France and Switzerland over the issue of tax evasion and the use of stolen data.
The Indian Foreign Ministry says it already had most of the data from other sources, but will be checking the accounts.
GENEVA, SWITZERLAND – Richard Branson, founder of the Virgin group among scores of other companies, and one of Britain’s best-known entrepreneurs, is reported by the Daily Telegraph in the UK to be moving Virgin Enterprises to Geneva. The move is being linked to Switzerland’s easier tax environment, compared to the UK.
Virgin Enterprises, a very small operation, is the licensing arm of the group. The newspaper quotes an unnamed Virgin official as saying that the group “has become increasingly focused on the development of the Virgin brand internationally and especially in emerging markets,” adding that “To reflect this, we are considering moving our licensing entity to Switzerland in the near future to co-ordinate our international growth and brand management.”
The distribution of Switzerland's 5,000 lump-sum taxpayers is uneven, notes Bern, with many of them choosing to live in resort areas - here, the view from Verbier
BERN, SWITZERLAND – Wealthy foreigners who benefit from Switzerland’s lump sum taxation rules are likely to find they are paying slightly more in taxes – soon for new arrivals but those already in the country have a five-year grace period before the new rules will apply. The actual dates depend on the speed with which parliament reacts to the message sent to it 30 June by the Swiss Federal Council, or cabinet, setting out tighter rules and raising the minimum payment, to ensure that all cantons have the same baseline.
Lump-sum taxpayers in Switzerland represent less than 0.1% of all taxpayers: 5,000 individuals in 2008.
The new rules raise the taxation base to a minimum of seven times the value of the taxpayer’s Swiss home, compared to the current rule of five times the value.
It also sets a minimum of CHF400,000 for the federal tax, which for Swiss citizens and residents who pay income tax is generally relatively small, compared to their local and cantonal taxes.
Cantons must set a minimum tax rate as well, not previously obligatory, but they are free to determine that amount.
Spouses can take advantage of lump sum taxation only if they also meet the criteria.
The government notes that it has taken the measures in response to growing criticism of the system, but that it wants to maintain the basic system. The changes follow a public consultation with interested parties and the council says the vast majority were in favour of tightening the rules.
Canton Zurich in 2010 abolished lump sum taxation after a popular vote, but efforts to change the federal law have failed to gather strong popular support.
Lump sum taxation, known in French as “forfait” taxation, is informally known as a tax on lifestyle. The following rules apply:
Geneva, marked by much coming (growth) despite the going (exodus): companies, individuals
GENEVA, SWITZERLAND – Geneva comes out looking pretty but at a price, in the latest “location quality” comparison drawn up by bank Credit Suisse for Swiss cantons. The report issued 22 June says Geneva’s growing economic success is thanks in particular to the availability of high quality labour and its easy accessibility. Geneva’s growth rate from 1995-2008 was the strongest in French-speaking Switzerland.
Victim of its success leads to greater regional cooperation
The canton is nevertheless a victim of its own success, the report notes, with companies and individuals moving to neighboring canton Vaud and across the border to France. A growing regional cooperation is developing as a result, the report notes.
Geneva is one of the country’s smallest cantons, at 282 square kilometres but it is ranked fourth for dynamic economic performance by the bank after Zurich, Zug and Aargau, wth the last two benefitting from their proximity to Zurich.
Geneva’s strength comes from its mixed role as a home to international organizations and as Switzerland’s second international financial centre plus main centre for private wealth management, but it has also been growing rapidly as a trading centre for raw materials. It is gradually going through a transformation from cutting edge industries to cutting edge value-added business, which means that measuring by the value created per employee is one of the country’s highest.
Disposable income in Geneva is by far the lowest in Switzerland
The downside is that Geneva has the tax rates, corporate and personal, that are among Switzerland’s highest, with some of the most costly housing in the country. As a result, Geneva’s regional disposable income, or RDI, used to calculate the financial attractiveness of cantons for residence, is by far the lowest in Switzerland.
Credit Suisse points to the exodus towards France and neighbouring towns, notably Nyon, Rolle and Morges, as the direct result of these high costs, both for companies and individuals.
Morges, a nice place to live - if you can find a home
LAUSANNE, SWITZERLAND – This may come as a surprise to Geneva and Lausanne residents, used to bemoaning the severe housing shortage in their cities, but Morges has just been identified as the Swiss commune with a population of more than 10,000 that has the lowest figure for available housing in 2010: 0.06 percent.
Switzerland’s largest cities nevertheless continue to have a clear shortage of housing. In Zurich the rate of available housing was 0.1 percent, in Lausanne: 0.2 and in Geneva 0.25percent.
The figures are part of new data released by Badac, the Base de données des cantons et des villes suisses (Swiss cantons and cities database), from a study carried out by Idheap, the federal graduate school of public administration.
The latest Badac report, “Monitoring Swiss cities, 2000-2010″, shows that there is a growing disparity in incomes in Swiss cities, most marked in the Lake Geneva region. It also shows that taxes have fallen steadily for families with two children, making cities more attractive places to earn; at the same time social services have suffered, possibly as a result, in some cities.
Zurich, Switzerland (GenevaLunch) – Bank Julius Baer has agreed to pay the German government CHF50 million in a one-time payment, to close an investigation the bank describes as potentially lengthy and cumbersome for both sides.
The payment “will end the investigations against Julius Baer and unknown employees regarding undeclared assets of persons who are subject to taxation in Germany. The investigations were prompted by voluntary self-disclosures of German clients and – as the media reported already last year – by data acquired and collected by authorities,” the bank said in a statement issued Thursday 14 April.
The bank says it sees the action as leaving it “free from allegation” and there free to “now continue to fully concentrate on building and further expanding its business with German clients.”
Switzerland: IMF checks economic winds in 2011
Bern, Switzerland (GenevaLunch) - The IMF (International Monetary Fund) in its annual country report on Switzerland says the economy is broad-based in the aftermath of the global economic crisis. It is forecasting 2.1 percent growth for 2011 and 1.8 percent in 2012, when it expects exports to fall.
“Domestic demand is benefiting from low interest rates, increased employment and continuing immigration. In spite of the strength of the Swiss franc, exports have grown due to increased global demand.” Geopolitical tensions could have a negative impact and are the biggest risk factor, agreed the IMF team, who visited Switzerland from 18 to 28 March. Tensions in the euro zone could also spark difficulties.
The SNB (Swiss National Bank) could consider tightening monetary policy, the IMF group says, with rebuilding its capital a priority. The central bank’s capital was drained during the crisis, as were those of many governments. Future dividends to the cantons and the Confederation should be made subject to the ability of the SNB to replenish its capital.
The heaviest criticism was reserved for the banking regulatory system, which needs further work, according to the IMF. The Federal Department of Finance will create a working group to follow up one issue: the mandates of the SNB and Finma, the financial supervisory body, should be clarified, according to the IMF.
Additional capital requirements provided for in the Federal Council’s “too big to fail” consultation draft will be instrumental in limiting the risks posed by systemically important banks. Consequently, the IMF experts warn against allowing overly generous “rebate” possibilities. Switzerland’s new capital requirements are among the most stringent in the world, going well beyond bank capital requirements that are part of the new, global BIS (Bank for International Settlements) Basel agreement.
In the mortgage market, the IMF sees a certain degree of easing in financial institutions’ lending standards, says Bern. “The interest-rate sensitivity of banks’ balance sheets has increased due to the tendency towards fixed-rate mortgages with long maturities” and the IMF is in favour of “implementing more conservative affordability standards”, which could be bad news for new home owner wannabes.
The IMF has given its support to several ongoing improvements:
- “The neutral fiscal position to be expected over the next few years is considered appropriate” says Bern’s statement on the IMF visit
- the measures to restructure disability insurance must continue
- the IMF welcomes the ongoing efforts to strengthen financial planning and statistics.
Geneva, Switzerland (GenevaLunch) – The head of a Geneva-based hedge fund company, Edward Gurary, CEO of Dighton Capital Management, has pleaded guilty in the US to not declaring to the IRS (US tax arm) funds held at Swiss banks, including Credit Suisse. The US Department of Justice announced the news in a press release issued late Tuesday 8 March.
Gurary was named 23 February in a DOJ investigation. His office told GenevaLunch at the time that he was on vacation and unavailable for comment.
The latest statement, with Gurary’s admission of guilt, lays out how the financier hid the funds he failed to report; at the time he was living in Ohio, in the US. He moved to the Geneva region in 2010.
“Gurary admitted that from approximately 2002 through 2008, he owned and controlled a financial account at UBS AG which was in the name of a Bahamian entity called Demko Ltd. and which contained balances ranging from $490,000 to $947,000. Gurary controlled transactions in the Demko account by sending faxes using a code name “Vanda” to UBS from an OfficeMax store in the Cleveland area rather than his home or business. UBS would in turn send his requests for authorizations to officers of Demko in the Bahamas in order to make it appear that Demko owned and controlled the account. During the prosecution years, interest was paid by UBS into the Demko account, in amounts ranging from $3,400 to more than $21,000, all of which Gurary admitted he failed to report on his tax returns.”
Belt-tightening to remain in place, but traffic, research and training will receive additional monies
Balancing the Swiss budget: in the black in 2010
Bern, Switzerland (GenevaLunch) - The final figures for 2010 are in and the Swiss government can confirm it was in the black: a surplus of CHF3.6 billion for the regular budget replaces the budgeted deficit of CHF2 billion for the Swiss federal budget.
The turnaround, ascribed to a “surprisingly good development” of the economy led to additional revenues of CHF4.6b, says Bern, while expenses were CHF1b less than budgeted. The economic recovery was more “robust” and earlier than expected, the Federal Council notes in a statement.
Two-thirds of the additional revenues come from the federal income tax, CHF1.4b and the federal withholding tax, CHF1.7b.
Taking into account “extraordinary expenses” of CHF0.4b, the final balance is a 2010 surplus of CHF3.2b.
The budget programme for 2012-2015 was approved by the Federal Council once it accepted the 2010 figures 16 February, with funds released that had been approved in reserve for research and education, as well as traffic improvement plans.
The Washington Post reports that the governments of Afghanistan and the United States are now at odds over who gets to tax suppliers working under US programmes in Afghanistan, the latest in a series of disputes between the two countries over details of US involvement in Afghanistan. The US says the suppliers fall into a tax-exempt category but Afghanistan says not, and it has started sending dunning letters to non-Afghan companies that have not paid tax bills sent earlier. “Non-Afghan contractors who have recently received tax bills for work done under US government programs say they have appealed to the Defense and State departments to clarify the matter with the Afghans. But they have been told simply to ignore the bills and ‘stand up for our rights,’ said one official of an American company that has multiple US defense contracts in Afghanistan,” reports the newspaper.
Canton Geneva in the distance and the city of Geneva with its jet d'eau fountain
Update 17:00 / Geneva, Switzerland (GenevaLunch) – Standard & Poor’s, the credit rating institution, at the end of 2010 gave the canton an AA-/stable rating. The full report, in English, was made available this week by the canton. S&P’s assessment for Geneva was mostly upbeat: “The rating on the Republic and Canton of Geneva in Switzerland reflects Standard & Poor’s Ratings Services’ view of Geneva’s very stable, predictable, and supportive institutional framework; the canton’s recent sustained solid budgetary performance; and its large debt reduction since 2006.”
S&P’s notes that while the canton has finished paying out for the losses of BCG that resulted from a mismanagement scandal in the 1990s, a weakness is its “still sizable unfunded pension liabilities, even though a reform of public pension pensions is under way”.
The forecast for Geneva is relatively bright, with a short-term dip in the tax revenues that make up the bulk of the canton’s resources, expected to fall by 13 percent in 201o compared to 2009 as the impact of the economic recession is felt. But S&P’s expects this revenue to pick up again in 2011-2012, “even if at a low pace. Despite management’s strong commitment to control costs, this expected trend in tax revenues will likely result in a slightly negative operating margin over 2010-2012.”
Source: Standard & Poor’s, reproduced with permission
Economic profile of Geneva shows wealth, higher wages, far higher than average foreign population
S&P’s report profiles the city using a rich set of statistics that include these details:
Bern, Switzerland (GenevaLunch) – A revised double taxation agreement between the UK (Great Britain and Northern Ireland) will go into effect 1 January 2011, based on OECD standards that cover the exchange of information. The new agreement is one of several Switzerland has been signing since mid-2009 to be compliant with the standards in the area of tax fraud and tax evasion. The new agreement with the UK includes a clause on arbitration that notably allows the two countries to work directly together to reach an amicable settlement in cases where a taxpayer appeals that he or she is being taxed unfairly under the terms of the agreement.
The agreement entered into force 15 December but the provisions covering the exchange of information apply in the tax year that follows, thus 1 January, Bern notes. The arbitration provisions enter into force two years later, 15 December 2013.
Switzerland has double taxation agreements with about 70 countries.
Links to other sites: HM Revenue & Customs page on Switzerland, New Swiss/UK double taxation agreement (Fre)
Pressure grows on Bern to
The Gotthard tunnel, the day it was pierced: seen by the EC as a project critical to the future of European rail travel, came in for praise in the EC 2010 report
Bern, Switzerland and Brussels, Belgium (GenevaLunch) – The European Commission (EC) came down hard on Switzerland 14 December for the low tax rates offered by some Swiss cantons and confirmed it wants to find a simpler way to work together than through the current maze of bilateral agreements.
The EC made the expected statements in a report, the first review since 2008, on European Union and Efta relations. Efta has four members who are not EC members: Iceland, Liechtenstein, Norway and Switzerland.
A series of taxing discussions where EU condemns Swiss “state aid”
Harshest criticism was reserved for some Swiss cantons, which are attracting European companies with low tax rates (see swissinfo video, below). This has long been one of the greatest divides between Switzerland and the EU, and the philosophical gap is clearly not closing. According to the EC:
“The Council remains very concerned regarding certain cantonal company tax regimes of Switzerland creating an unacceptable distortion of competition, and reaffirms its position on this matter. It regrets that the lengthy dialogue on this issue has not yet led to an abolition of the state aid aspects of these regimes. The Council reiterates its call on Switzerland to abolish these tax incentives and to avoid taking internal measures, such as certain aspects of the New Swiss Regional Policy [ed. note: covering state aid for under-populated rural and mountain areas], which would be incompatible with the Agreement and may have the effect of distorting competition between EU border regions and Switzerland.”
But the Swiss take a different view:
Crime rate low, but insecurity an issue; de-centralization carries day on higher taxes for wealthy: voters strongly refuse initiative
Geneva rejects longer shopping hours, Vaud town says yes to Lake Geneva public access
Update 2, 21:10 Bern, Switzerland (GenevaLunch) - Swiss media and political parties are scrambling Sunday evening 28 November to analyze the significance of a solid majority of voters approving the right-wing UDC (SVP, Swiss People’s Party) popular initiative to automatically expel foreigners found guilty of serious crimes. Fifty-two percent of voters went to the polls and approved the foreign criminals initiative by 52.9 percent. Not a single canton accepted parliament’s alternative counter-initiative. French-speaking cantons, with the exception of bilingual but French-majority Valais , rejected the UDC proposal, but all German-speaking and German-majority cantons voted for it except the city of Basel.
Voters also resoundingly rejected a Socialist popular “fair taxes” initiative that would have obliged some cantons with low taxes for wealthy people to raise their tax rates. It failed by 58.5 percent.
The Federal Justice and Police Department Sunday evening issued a notice that the government will set up a working group before the Christmas break to begin looking at how the foreign criminals vote can be implemented. In its statement it noted that:
“The working group will have the task of examining open questions and drafting a proposal as to how the initiative can be implemented, which the FDJP can subsequently put to the Federal Council. Ultimately it will fall to parliament to decide how the initiative is to be implemented in the form of a federal act. The Federal Council will also be counting on the sponsors of the initiative to keep the pledge they made before the vote to contribute constructively to producing a solution that is compatible with the constitution and international law.”
Sunday and late shopping in Geneva fails while La Tour-de-Peilz says yes to public lakefront
Voters also settled a number of cantonal and communal issues. In the Lake Geneva region: Geneva voters rejected later shopping hours while in canton Vaud the town of La Tour-de-Peilz voted in favour of making the Lake Geneva waterfront accessible to the public.
What the foreign criminals vote means
Rolle, Switzerland (GenevaLunch) – The idyllic little town of Rolle, population 7,000, might seem a little less so now to one of its fans, French filmmaker Jean-Luc Godard, who has lived there for 35 years. He told a journalist in an interview in 2009 that he has never paid taxes in Switzerland, preferring for “cultural” reasons to pay them in France. The comment drew attention at the time in part because of media attention focused on French singer Johnny Halliday and other celebrities accused by the French government of avoiding taxes by using Switzerland as their tax base.
In Godard’s case, Swiss television TSR reports that after the interview appeared the Rolle tax office was contacted by taxpayers wondering how they could organize a similar arrangement, and since then the cantonal tax office in Lausanne has taken an interest in the case, to determine if the Vaud village is indeed Godard’s residence for tax purposes.
Balancing act, Swiss budget 2010
Bern, Switzerland (GenevaLunch) – The Swiss economy’s recovery in 2010 is good news for taxpayers: Bern confirmed Thursday morning 4 Novmber that, based on figures at the end of September 2010, the Swiss Confederation will have a CHF1.4 billion surplus rather than the CHF2b deficit which is in the budget. Cost-cutting and the economic recovery, which has resulted in more tax revenue from a variety of sources, are behind the improvement, whose likelihood was announced after Q2 figures were in. Companies have sought more financing, withholding tax is up 10 percent compared to a year earlier and value-added tax revenue has risen.
Italy is the latest member of the eurozone to tighten its belt, announcing 2011-2012 budget cuts of €24 billion Tuesday 25 May. The main area will be cuts in public sector pay and a freeze on new hiring, to bring spending in line with revenues. The government also says it will step up its programmes to nab people who avoid paying taxes. The UK and Denmark also announced austerity plans this week, joining Greece, Ireland, Portugal and Spain. Italy, reports the Wall St Journal, is heavily indebted, with its debt at 115 percent of GDP, but its budget deficit is “relatively modest”.
Links to other sites: Bloomberg, Business Week, Wall St Journal
The Queen’s speech to Parliament Tuesday 25 May laid out the agenda of the new coalition government, with the accent put on reducing the budget. A new Office for Budget Responsibility is part of the plan. The new government’s agenda also includes higher capital gains tax, limiting the number of non-European Union immigrants and making UK airports more competitive.
Links to other sites, with highlights of the speech: BBC, Reuters, UK, Telegraph
Michael Ambuehl meets US press at end of two-day visit
UBS agreement and new tax treaty were on the agenda
Michael Ambuehl, Switzerland's State Secretary for International Financial and Tax Matters
Washington, DC, USA (GenevaLunch) – Switzerland’s new Head of the State Secretariat for International Financial Matters in the Federal Department of Finance Michael Ambuehl Tuesday concluded two days of meetings with a number of high-level US tax, treasury, justice department and foreign affairs officials in Washington. The US-Swiss double taxation treaty and the treaty covering the UBS agreement were on the agenda, Bern said Tuesday evening.
Ambuehl met with US reporters at the end of his visit and said that if the Swiss parliament rejects the agreement with the US over the UBS case, a new legal battle between Switzerland the US would be likely, and the double taxation treaty would also be at risk.
The latter could have major repercussions for Switzerland as a place of business, he noted.
Bern said in a press release issued late Tuesday that:
“Rental value” tax to end to simplify tax system
Maintenance fee and mortgage interest deductions also to disappear
Goms Valley, canton Valais, 16 May 2010
Bern, Switzerland (GenevaLunch) – Owners will no longer be taxed on the rental value of their property (the valeur locatif), as part of efforts to simplify the tax system, the Swiss Federal Council said Monday. Deductions allowed for property maintenance will also stop, as will interest payments on mortgages, to offset the loss in tax revenue.
The changes are part of the government’s counter-project to a popular initiative that would have reduced but not cut the rental value tax. The government asked the federal finance department to draw up a proposal, which was then opened to consultation for several weeks.
Geneva, Switzerland (GenevaLunch) - Taxpayers who met with tax and estate planning experts in Geneva Tuesday 4 May complained that the jargon which surrounds US taxes for those who lived abroad is a barrier to filing. Here is a list, by no means extensive, of some of the terms that came up at the meeting. The meeting was organized by US Citizens Abroad.
See GenevaLunch article 6 May: “US taxpayers abroad struggle to make sense of tax laws, lingo.”
Egttra = Economic Growth and Tax Relief Reconciliation Act of 2001, major piece of US tax legislation
Bern, Switzerland (GenevaLunch) - Swiss citizens who put in time as volunteer firefighters will be treated on a par for tax purposes with the citizen militia and people who opt for civil service instead of the military. Daily allowances and pocket money up to CHF3,000 a year should be exempt from federal tax, the Swiss Federal Council said Wednesday morning 21 April in a recommendation to parliament. A ceiling was set to avoid abuses and professional firefighters and managers will continue to be taxed on their income. Bern expects the measure to cost CHF18-26 million in lost income.
Fire department operations are overseen by cantons, not the federal government in Switzerland, but communes generally have responsibility for fighting fires.
Alexandria, Virginia, USA (GenevaLunch) - A doctor based in Virginia in the US pleaded guilty Tuesday 16 February to conspiracy to evade taxes. This is reportedly the first IRS (US tax authority) case where a non-US bank other than Switzerland’s UBS is cited as providing advice about how to evade taxes.
Swiss Finance Minister Merz confirms no automatic data exchanges
Canada initials agreement, France confirms Davos “understanding”
Bern, Switzerland (GenevaLunch) – Switzerland’s push to build up its stable of bilateral tax agreements in line with OECD standards moved ahead last week. Among other moves, a new agreement with Canada was signed, the same day that a Mafia boss in Montreal pleaded guilty to hiding $5 million in three Swiss bank accounts from the Canadian taxman.
Monday 15 February Figaro newspaper in France published a list of 18 countries that France is calling its black list of governments that are not cooperative in fiscal matters, with the bulk of them in Latin America. Switzerland does not figure on the list.
Update 20:25 Bern, Switzerland (GenevaLunch) – The Swiss government will not automatically hand over details of UBS accounts to the IRS, the US tax authority, without giving account owners a chance to defend themselves, Bern announced Tuesday 17 November: if Switzerland’s tax authority decides to turn over information to the IRS, account holders will first be notified and given a “chance to state their case.”
The announcement appears to be at odds with a remark attributed by the New York Times to Douglas Shulman, IRS commissioner, at a press conference held in New York Tuesday. He is reported to have referred to “‘the obligation that the Swiss have taken to the US government to produce 4,450 names’ to the IRS, he said.” But Switzerland says it will review the 4,450 accounts agreed upon and make a legal decision in each case about providing assistance to the IRS.
The Swiss government and the IRS Tuesday separately announced details of the process covered by their agreement, signed in August, concerning 4,450 UBS accounts where the IRS has asked for assistance as it chases tax evaders. Switzerland says the UBS affair will cost the government CHF40 million, with a team of some 40 legal and tax experts working fulltime for a year to decide in which of the cases Switzerland will provide assistance. Additional help from specialists will be called in if necessary.
The IRS’s Shulman also announced that more than 14,700 people had come forward under a tax amnesty that ended 15 October, for non-compliant taxpayers, well over the 100 or so who turn themselves in, in most years. He noted that the IRS case brought against UBS in 2008 will be dropped only if the US tax authority receives the names of 10,000 UBS clients, either through Swiss assistance or by the clients turning themselves in. The taxpayers who took advantage of the amnesty were from several countries and from many banks.
Tax adviser Gregory Dean of US Tax & Financial Services in Geneva Tuesday evening cautioned that “We should not lose sight that the voluntary disclosure programme still exists – the special programme promoted by the IRS closed October 15, but this has created the wrong impression that people can no longer come forward under the voluntary disclosure programme. This programme still exists, though the IRS approach to a post-October 15 disclosure is a little uncertain. What is certain is that voluntary disclosure is not available where the IRS has initiated an investigation of a taxpayer.”
Ed. note: The documents which make up the annex to the agreement between the two countries are available, but only in German, on the federal government’s web site.
Highlights of the agreement
Mixed signals from banks, for US citizens in Switzerland
Updated 01:00 Geneva, Switzerland (GenevaLunch) - Swiss banks have become more cautious in their relations with US citizens in the wake of problems the country’s largest bank, UBS, ran into in 2008 with the IRS over unreported income on the part of some of its clients. GenevaLunch, in a survey of several Lake Geneva area banks, found that without exception the banks say they do not discriminate against US citizens, and they continue to welcome new accounts. Stories nevertheless abound in Switzerland of US citizens who received letters in early 2009 from their banks saying their accounts were being closed – but few of of these people will speak openly about such letters, in part because the IRS tax authority encourages citizens to report on others who are not “compliant” in filing taxes as well as listing all worldwide assets.
US Ambassador Beyer suggests UBS could turn over fewer names
A GenevaLunch reporting team this week spoke with several people to determine the extent to which the personal banking problem is real or a recent urban myth. The team talked to seven of the eight banks which returned its calls and to a number of US citizens resident in Switzerland, as well as with members of American Citizens Abroad (ACA). Some of those interviewed participated in an informal meeting in Geneva 12 November with the new US ambassador to Switzerland, Donald Beyer, where the banking problem was raised.
Beyer later in the day told WRS public radio in Geneva that some 9,000 Americans took advantage of an IRS amnesty for citizens overseas that ended 15 October. He suggested in the radio interview that the number of names UBS will turn over to the IRS is likely to be lower than the numbers – up to 50,000 – tossed about earlier in 2009 by international media.
Geneva, Switzerland (GenevaLunch) – Voters in canton Vaud decide Sunday 27 September if they want to create a single canton-wide police force that combines the existing cantonal police and the various municipal forces. Lausanne’s voters will also decide where to put two new stadiums that the city wants to build.
On the same day in Geneva, voters will decide yet again on smoking in public places, and they will vote on whether or not to lower taxes. Also on the ballot: a change in the annual automobile fee. The city wants to penalize carbon dioxide-emitting passenger cars.
Details:
Swiss Federal Tribunal, Bern
Updated 14:00 Bern, Switzerland (GenevaLunch) – The Swiss cabinet has agreed to allow up to five additional but temporary posts for Federal Administrative Tribunal judges, to allow the high court to handle a sudden increase in legal cases likely to arise in relation to UBS client names requested by US tax authorities.
Bern said Friday 18 September that it expects some 500 appeals by the end of the year in cases where the Swiss finance ministry agrees to provide judicial assistance to the IRS, the US tax authority. The request for assistance are being made by the IRS as par of a 31 August agreement between Switzerland and the US.
No fishing from France, please, say Swiss
Bern, Switzerland (GenevaLunch) - The Swiss government says “so-called ‘fishing expeditions’ remain out of the question, even ones from France.” The Federal Department of Finance Monday 14 September clarified details of the treaty signed 27 August 2009 with France, saying that although the wording differs slightly from that of some of the new double taxation treaties with other countries, administrative assistance requests from France in tax cases “will not deviate in practice” from agreements with other countries.
See also: part 2 – Taxes overboard! Americans reconsider the IRS at the Geneva T party
and part 1: US-Swiss treaty details may not come in time to help US citizens abroad
[Update 3, 21 September: note that the IRS has announced it will delay the deadline to 15 October 2009, from 23 September - details here; correction added to point 5 below] Geneva, Switzerland (GenevaLunch) – US citizens and greencard holders living outside the US should be aware of new tax rules, but also new enforcement procedures, according to several groups and tax experts who organized a taxpayers’ information evening 2 September in Geneva: American Citizens Abroad, Democrats Abroad and Republicans abroad. Many US taxpayers living in Switzerland and elsewhere have only gradually become aware during 2009 that the IRS (US tax authority) has imposed new rules, a six-month amnesty that ends 23 September and it is taking a tougher stance with “non-compliant” taxpayers. Rumours have been thick on the ground, but hard facts few.
