Switzerland and The Industry of Tax Evasion

Yesterday World Radio Switzerland reported on developments in Swiss banking secrecy, and tax evasion.

The piece "Credit Suisse faces U.S. tax evasion" discusses the global Swiss Private Banking player being the target of an inquiry by the U.S. Department of Justice. The IRS has been compiling a database of information, on Credit Suisse as well as other Swiss banking institutions, that has come in via the voluntary disclosures of U.S. tax evaders in the fallout from the UBS case.

Credit Suisse has been responding to requests for information, including subpoenas. A commentator observes:

The IRS and Department of Justice have so much information that in some ways that puts then in a worse situation than UBS was.

A widely held expectation amongst legal experts is that Credit Suisse will be trying to work out a deal.

A very, very important observation is that Credit Suisse could be cut off from access to the U.S. financial system, which would make it very difficult for the bank to operate in a global financial environment. So, the kind of leverage the U.S. government may have is substantial. And note:

Last month's ruling by the Swiss federal supreme court is very significant - allowing handover of 250 UBS client names and overturning the Swiss federal administrative court;'s ruling that this previous deal is unlawful. The ruling emboldens the ruling U.S. view that it can now increase the pressure on institutions like Credit Suisse, possibly to achieve another bulk disclosure occurring as a part of an overall agreement.

As a extra background here, readers may be interested to see how Credit Suisse has been in trouble with the U.S. Department of Justice before .

So, while there are some apparent very positive steps forward here in tackling tax crime, and in piercing the veil of secrecy that allows for massive other criminal activity, over in Europe the steps appear to be backward.

WRS also intereviews TJN's Director John Christensen, on the Swiss German tax deal that we have been blogging extensively, see here.

As John describes:

This a a very shabby deal. The people who will benefit will not be ordinary people - a step backwards for ordinary people across Europe.

There is no public benefit coming from this deal.

John emphasises:

We need to have a framework for international cooperation to share information. If the residents of Germany want to use Swiss banks - and I have no problem with that at all - then the Swiss banks need to share information with the German authorities authorities, so the German authorities can tax their residents in the normal way. We would like to see progress towards automatic information exchange on the European model because this is the emerging international standard. Its a good thing as it tackles tax crime, and everyone will benefit from that, apart from the very small minority of bankers and their clients who think that tax evasion is acceptable,

The interviewer poses the question:

So, basically what you are saying is that the client's details shouldn't be kept anonymous, they should be transparent?

John asserts the point that we have made, so very many times:

The information should be transparent within international authorities ... the information is NOT in the public domain.

And highlights:

In an era where money moves across borders and a large majority of wealthy people hold money in offshore accounts, we have to move towards a system where there is a system of automatic information exchange otherwise you have a framework for international tax evasion and everyone is jumping in on this game. Countries like Greece are collapsing around us as a result of long term tax evasion - this is a major structural problem and Switzerland is at the heart of it

And again John puts the privacy and confidentiality issue in context. John explains that he has no problem at all with the right to privacy. The point is that the vast majority of us pay tax on our income and interest on money, and and most of us don't see any problem with that. If you look at what has been happening over the past 30 to 40 years across the world, the tax burden has been shifting away from the rich to the poor, and this is partly as a result of the massive tax evasion.

People have to understand that the scale of tax evasion across the world has become enormous, and Switzerland is a part of it, but other jurisdictions such as the UK and US are too - it's a global phenomenon.

The result is less employment, and less investment. In the long term it hurts everybody.

John brings home the issue that the Swiss/German deal lets the bankers and the clients off the hook for their criminal behaviour - and this sends a very strong negative signal.

But as a commentator on the Credit Suisse story observed, a storm is brewing. While an elite strives to hold onto secrecy as a veil to assist criminal acts, public opinion is gathering power for change.