Thursday, December 17, 2009

Switzerland bankers determine Swiss policy - again

Update: the FT has an article on the witholding tax we've mentioned.

The Swiss Federal Council has just published a new report, Strategic directions for Switzerland’s financial market policy, which is predictable in its genuflection to Swiss bankers. Indeed, as the accompanying press release notes:

"The Federal Department of Finance (FDF) prepared [it] in consultation with financial market players, defines goals and measures to further strengthen the Swiss financial centre. The responsibility of the Confederation is limited to the creation of an appropriate regulatory framework."

Just as has happened in several other countries, this statement suggests that it is bankers, not a wide array of affected stakeholders, who have been given the task of deciding what is appropriate for the economy as a whole. And yet the report itself seems to contradict this, stating that

"It is not the role of the federal government to practise industrial policy. It has an interest in defending the interests of the Swiss economy at large and, in general, creating favourable conditions for private enterprise."

But promoting one economic sector, especially one decided through a consultation with that sector's market players, is an industrial policy. As we've noted before.

And guess what. The report has decided that Switzerland will continue to defy and insult ordinary citizens around the world, who will have to pay the price of their own Ă©lites being afforded Swiss secrecy. As the press release notes:

"The declared goal of the Federal Council is to ensure protection of client privacy. It continues to reject the automatic exchange of information."

This disgrace is, however, leavened by a morsel - no more than that - in terms of co-operating with foreign tax authorities.

"It is willing, however, to expand existing cross-border cooperation within the framework of bilateral negotiations. The precondition for this is, however, that it is linked to better market access and the regularisation of existing accounts with respect to the tax authorities of the state in question, with no repatriation obligation. In return, the Federal Council is willing to consider the introduction of a final withholding tax and the conclusion of a services agreement with the EU, as well as other measures that promote fiscal honesty among bank clients (e.g. introduction of a self-declaration)."

What would be far better is for Switzerland to confess to the error of its ways, institute normal bank confidentiality as in any normal country and get rid of its pernicious bank secrecy arrangements, and start a new relationship with the world on the basis of openness, transparency and co-operation. A full national apology for past crimes would be a good component of any new leaf. The internal logic of the Swiss position is, as this superb and hilarious Daily Show clip exposes, incoherent - even incompatible with reason. And the report itself notes that Switzerland needs to pursue:

"the protection of privacy, and an attractive tax climate for the financial sector and the economy as a whole. . . . The relevant authorities, and FINMA in particular, should ensure that the issue of competitiveness is sufficiently addressed in current and future regulation projects."

In other words, we'll keep your dirty money secret; we'll help you avoid or evade tax on that money, and we'll ensure that we're at the forefront of the race to the bottom on regulation.

Still, if you're interested in this kind of thing, this report does contain some useful facts and figures.


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