UBS Chairman claims systemic tax evasion is limited to USA

In a revealing interview given to Swiss sunday newspaper NZZ am Sonntag, UBS chairman Kaspar Villiger has suggested that the problems of systemic tax evasion uncovered by the indictment of his bank in the USA does not affect other countries. Who does he think he's kidding?

The globalisation of financial markets, and the extraordinary ease with which HNWIs (high net-worth individuals) can shift their assets offshore - as the New York Times acknowledges here - has made tax evasion a global phenomenom, and one which UBS and most other private wealth management banks have been keen to cash in on. Worse, such is the profitability of helping HNWIs with their tax evasion, since the 1980s these banks have been in a frenzy to attract such clients and shift their affairs offshore. This blogger has witnessed this firsthand, having worked in the tax haven racket for many years and attended a 'wealth management' conference in London in 1995 at which all the emphasis of the interventions by bankers and lawyers was on confidentiality issues (for those who don't know bankspeak, that means keeping client data secret from revenue authorities).

Villiger has a point when he argues, as reported in SonntagsBlick (another Swiss sunday paper), "The clients are not just harmless victims. They knew what they wanted to evade".

But what are we to make of the follow-up comments: "But they trusted the bank that it would work. Now we have to correct that," There's a nasty whiff of ambiguity about the second part of that particular comment: is he trying to suggest that having failed to keep client data from IRS discovery they now need to work harder at keeping the stuff secret? Or does he expect us to believe that they will work harder to dissuade clients from tax evading? If the latter were the case, why don't bankers report their suspicions about tax evading clients under anti-money laundering regulations?

Were UBS serious about trying to dissuade its clients from tax evading it would welcome moves towards Switzerland participating in automatic information exchange. This is undoubtedly the most effective way of deterring tax evaders. But Villiger makes it clear in the interviews this weekend that he expects Switzerland to continue resisting European Union requests to fully participate in the EU Savings Tax Directive: "If Europe took unilateral action to introduce an information exchange and also forced this on Switzerland, money would flow to Asia in a big way."

Money has been flowing to Asia in a big way since 2005, when the Savings Tax Directive came into force, and UBS has massively expanded its operations in places like Singapore precisely to profit from this exodus. This is one of the reasons why Tax Justice Network argues that the only solution to the globally systemic problem of tax evasion lies with a multilateral framework based on fully automatic information exchange. We are well aware that some regard this proposal as utopian. We counter that the alternative approach, based on bilateral treaties using the "on request" model for information exchange, is pissing into a hurricane.

Villiger's comments, supported by the massive hike in UBS share prices after the announcement of the light-touch treatment by the US authorities last week, suggests that international investors agree with our analysis. In the absence of a more ambitious global agenda, it remains business as usual for the tax evasion industry.