An uneasy peace treaty – Switzerland steps out of tax neutrality

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An uneasy peace treaty – Switzerland steps out of tax neutrality

“Another nail in the coffin of tax secrecy” was how the Financial Times announced that the Swiss government is to allow the country’s banks to divulge information about their clients to US authorities, albeit for a one-year period only. The US hopes that this will enable it to identify US citizens using Swiss banks for tax avoidance purposes. It is indeed unusual for this small European country to have been drawn into any form of conflict, particularly a transatlantic one, and the developments have been interesting to watch. After all, this is a war that has already seen the closure of Wegelin, Switzerland’s oldest bank; disgraced in its confession to helping American citizens dodge the IRS. But, this week, the running battle between Bern and Washington seems to finally have come to some kind of a truce, or perhaps one should call it a cease-fire. The law, which the Swiss Federal Council claims will ‘put the past to rest’ will, they hope, help all banks resolve their relationship with the US authorities. One should however be cautious before picturing Swiss banks delivering their clients like lambs to the IRSlaughterhouse. Many feel that this law is primarily aimed at reducing the reputational issues that are hindering Swiss financial institutions in the US market. However, it remains unlikely that individual customers will be prosecuted. Rather, Swiss banks have started to accept the consequences in the form of steep fines should they be found guilty of misdemeanours. This is money that they can certainly afford to pay, and which will be more than offset by greater access to the US market. The Swiss have labelled this initiative ‘Lex USA’. It is undeniably headline grabbing and plays to our predilection for financial regulation in an age of austerity. This may, however, prove an uneasy truce. Indeed, the law has yet to be passed by the Swiss parliament, and all three main parties are against it. The IRS might well have to wait before the opacity that cloaks this gesture of peace is cleared up, and even longer before it gets its hands on any documents. Hugo Minchin, Account Manager

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