GENEVA, SWITZERLAND – This is an appeal to intelligent readers, and I know there are many out there, to at least reflect on the other side of the story if you’ve read the New York Times editorial published Friday 10 February on US pressure on Swiss banks.

It’s a remarkably trite piece of writing, with generalized and inaccurate remarks like “the Swiss banking industry refuses to exit the business of tax evasion” which are an embarrassment to more honest journalists who spend time researching, interviewing and pulling the threads that make for balanced reporting.

Our goal is to inform the public so public opinion can help drive negotiations to be based on understanding and fairness rather than acrimony; the NY Times appears to have another agenda.

For a start, look at the Reuters story today on Swiss banking and business industry suggestions, run by the Chicago Tribune, although I would have liked to see a suggestion that US banks in Florida ask for proof of tax payments from Latin American clients, just to put the comments about proof of payment difficulties in perspective.

The Economist can’t be accused of coming down soft on the Swiss, but its story this week provides better balanced reporting than that from NewYork.

Ironically, one of the people quoted there seems to admire the NY Times editorial but in the way you love a football team whose weaknesses you’re willing to overlook. You just want them to win.

The NY Times editorial has at least six factual errors (I got tired of counting after that), mostly just slight exaggerations, but they undermine any credibility the writer had at the outset. One of the errors is this: “The United States would like details of all secret Swiss bank accounts used by Americans to evade taxes”, as if every American who has a Swiss bank account is hiding money and evading taxes.

No, either the writer should say that within the scope of these negotiations the US is asking for help with data from 11 banks out of the 325 that provide wealth management or he or she should say bluntly that the US is asking for details of all Swiss bank accounts held by all Americans. Both of those statements are accurate. Most of the US accounts are not Jame Bond-style numbered accounts and they are not “secret” in the sense that Americans who live in Switzerland  routinely file reports from their banks when they file Swiss taxes.

Americans at town hall meetings in Switzerland in the past two years, and more recently in Canada, have been objecting to the new Fatca rules because they object to the underlying principle the US follows, the only major country in the world to tax on the basis of citizenship rather than residence. Participants have said it forces them to bear a heavier burden than Americans who live in the US. Others object to the unfair treatment of double taxation, the case for Americans who are retired in another country, for example. And yet others object to the high cost of filing US taxes they don’t owe.

Fatca, the tool for obtaining this information, is part of the current US-Swiss negotiations, for a good reason. It will place a huge financial burden on Swiss banks, as well as banks elsewhere, with its extra-territorial legislation, and the ramifications of this go beyond the current situation where Swiss banks are refusing American clients, to the dismay of Americans who live in Switzerland.

The NY Times would have us believe, taking the American bully approach of bluffing, that it’s just a question of the Swiss government dragging its heels: “There is no need for the United States to accept this sort of arrangement. If Switzerland stonewalls, the Justice Department can indict banks that benefit from tax evasion and seize their assets in the United States, moves that could put them out of business. At some point, the Swiss government will find that result a lot more costly than handing over information on American tax cheats.”

The negotiators for both countries are perhaps wiser, well aware that Swiss banks, and those elsewhere, could also recommend to clients that they pull out of US securities investments, a move that would be dire for the US economy. Switzerland has a far larger chunk of offshore private banking than the US, a business American banks would love to get their hands on, particularly in Florida. And Americans are just a small part of that Swiss wealth management business, so losing that group won’t put Swiss banks out of business.

These distinctions are important for an intelligent debate to take place and for negotiators’ efforts on both sides to be understood at home. The Swiss, contrary to the image US media perpetuate, don’t love crooks. The income tax non-compliance rate in Switzerland, which uses the carrot more than the stick to get its citizens to pay, is estimated to vary from 12 to 35 percent a year. It hit the peak abruptly in 1990 as non-compliance  in the cities of Basel and Geneva soared, then rapidly dropped again by 1995 to 21 percent, according to a study in 2007 by Lars Feld and Bruno Frey.

The IRS said in a 2006 report that non-compliance in the US was “low”, at an estimated 26 percent.

To balance out the debate a bit, here is what the Swiss government says in a report published Friday 10 February, “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. However a decision has yet to be made by Swiss parliament in this respect.

“At the same time, a global solution is being sought that will apply to the entire Swiss financial centre and thereby put the past to rest. Another development geared to the future is the US “Foreign Account Tax Compliance Act” (FATCA), which was passed by Congress in March 2010. This legislation is designed to ensure comprehensive worldwide reporting on US taxpayers who hold bank accounts and assets with financial services providers outside the United States. The US authorities have set out a staggered timeframe for the implementation of this Act (expected to apply from 1 January 2014 onward).

“Given its significant international activity, particularly with the United States, Switzerland will be greatly affected by this legislation. FATCA envisages the imposition of a withholding tax of 30% on all payments of dividends, interest, sales proceeds, etc. from the United States to a foreign financial institution, irrespective of whether the financial institution in question is accepting payment on behalf of a US taxpayer, another client or indeed itself. To avoid payment of this withholding tax, a financial institution must sign an agreement with the US tax authority (the IRS) in which it accepts comprehensive reporting obligations with respect to all clients who are liable to pay US taxes. This will involve a substantial amount of administrative work. After the Federal Council instructed the FDF to initiate discussions, SIF made it clear to the US authorities during a number of different meetings that the implementation of FATCA had to take account of the concerns of the financial institutions that would be affected. Modalities for a simplified implementation of FATCA will be sounded out within the scope of talks on general financial issues.”

GENEVA, SWITZERLAND – American Citizens Abroad are hosting a fourth Town Hall meeting in Geneva Wednesday evening 16 November to talk about US tax obligations. Among the odd questions likely to come up is this one: does the US Justice Department really expect people to inform the Justice Dept. that they are appealing a Swiss federal government decision, if their bank accounts are slated to be turned over to the IRS by Credit Suisse at the behest of the Swiss government?

Swiss law allows the account owners to appeal before any data is turned over, so their privacy is respected until the day the Swiss court rules that the client’s case meets the criteria for “administrative assistance” under the terms of the the bilateral double taxation treaty.

In other words, the day the Swiss tax office says they do indeed appear to be committing fraud or tax evasion involving a substantial amount of money.

Nasdaq, which published a Dow-Jones article Sunday 13 November about Credit Suisse turning names over, ends with this startling sentence: “Taxpayers who challenge the release of the information are supposed to report their challenge to the US Justice Department.”

It takes a bureaucratic mind to come up with that one.

I don’t object to the IRS or any other government going after frauds and schemers who are hiding millions from the taxman, but I do feel uncomfortable when the taxman begins to talk as if God is on his side and we’re probably all tax sinners. The IRS’s stridently righteous tones in recent months sounds far too like the talk of the McCarthy era in the 1950s, which threw a net so wide to catch Communists that it caught anyone wearing pink. So I appreciate the Time magazine article entitled “Foreign tax cheats find the US a safe haven”, published in October. It puts a little balance back into the holier than thou accusations coming out of the IRS office.

What’s that phrase, about the pot calling the kettle black?

Stories not making front page headlines but that are worth a moment’s reflection:

The US Justice Department says crimes by girls have been rising and by 2004 girls’ crimes were 30 percent of the total by juvenile delinquents. Little research has been done in this area, so no one seems to know why crimes by girls are increasing, although one part of the answer could be changes to the justice system in the US.

Meanwhile, in Copenhagen where the IOC (International Olympic Committee) just awarded the 2016 Games to Rio de Janeiro, the sports group also adopted a number of recommendations. One of these is the challenging Recommendation 66: “The Olympic Movement should strengthen its partnership with the computer game industry in order to explore opportunities to encourage physical activity, and the practice and understanding of sport among the diverse population of computer game users.” (good luck!) Olympic Congress Recommendations in full

And, in a peculiarly American news approach, both Bloomberg and Associated Press have now managed to put Roman Polanski (sex crime escapee) and tax cheats (IRS tax dodgers) into bed together with a lovely duvet-style Swiss feather cover over them (read that: Switzerland and Swiss neutrality = haven for all crimes committed by right-thinking Americans, which indicates editorial confusion).

After this dubious snuggle-down, what comes out is that a) Switzerland is “no longer” a haven, which implies that it has been, for all crimes, while forgetting completely about accurate reporting and b) that Switzerland, tut-tut, will have to live like the rest of the world, which is a sign that the writers, or more probably their editors, haven’t budged since 1980. Switzerland may not be a member of the European Union, but it has adopted much of the legislation, for a start and, frankly, the days when Switzerland was an island of oddity are over. Now Switzerland is as odd as any other country around. Back in 1980 all Swiss stories published in the US had to include gold under the streets of Zurich, cheese with holes, chocolate and cuckoo clocks, even though the Swiss have tried for years to point out that cuckoo clocks are Austrian, not Swiss. As for the other three, my editors at three major US news publications all told me this, at one point or another during the early 1980s. It made for some slightly skewered reporting at the time.

Looks like some things never change, but I’m not talking about the Swiss, who have.