Swiss banking secrecy in the news again as germany seeks data
by Linda Beale
Swiss banking secrecy in the news again as Germany seeks data
The Swiss are fighting hard to maintain their edge in providing tax evasion services for the euro zone and the US. In spite of the modest changes to the US-Swiss tax convention, we can expect difficulty in acquiring information from Swiss banks that should be turned over routinely. Germany is experiencing the same problems. But, as many will have read, a whistleblower offered Germany more data on Swiss bank accounts, for a price. And Germany bought it last month for $3.5 million, gleaning the names of 1500 account holders and other information (information that may also be shared with other countries such as the US and provide additional ways to hone in on US tax evaders with secret accounts).
Now starts the internecine wrangling between the two EU countries. Before the deal was finalized, the Swiss authorities and a German Taxpayers Association complained that the German deal would reward a criminal who had engaged in industrial espionage. See Bild.com, Is It Right to Do Business with Criminals? Feb. 2, 2010.
And now that the deal is done, the Swiss are considering how to get even. See Dempsey, Battle over Tax Data Heats Up between Switzerland and Germany, NY Times Feb 15 2010. At least one Swiss lawmaker has proposed a law that would have Switzerland releasing the names of all German politicians who have secret bank accounts in Swiss banks. Hmmm. That might be a very good idea. The trifle of a breach to the wall of Swiss banking secrecy would be a good start towards a law that does away with it altogether. Having German politicians exposed for speaking out of both sides of their mouths–those who have secret Swiss accounts but are publicly making a big show about Germans who are using the accounts to escape German taxation–might provide enough Schadenfreude to help shame the system back into greater compliance. And once people realize that Swizterland is still intent on maintaining its tax evasion services no matter what it has agreed to in its newer tax treaties, maybe countries will get even tougher on the country and insist on real tax information sharing.
But note the result mentioned for one of the German account holders identified in the earlier LIchtenstein bank information. A court awarded the holder millions of euros, on a finding that the bank should have warned him about the release of his information so that he could have voluntarily come forward to the German authorities. The account holder obviously knew that he had created a secret account and that he was evading German tax lawyers. The bank, of course, must have known that it was facilitating such evasion. The court apparently assumes that the bank owed its co-conspirator notice that its role in the conspiracy had been compromised. That’s a pretty strong dose of due process protection, when an aider of your tax evasion is required to inform you when it can no longer perform as expected, so that you can call short your tax evasion with the least possible damage to yourself! Ends up rewarding the tax evader with the damages. I must admit that seems to challenge common sense. Tax evasion is one “venture” where the co-venturers should all be at risk if one of them falters…..
Switzerland has facilitated tax evasion for decades. It’s time to end this farce and force the Swiss to close down their tax sheltering business.
[editorial comment: sorry for being offline most of the last week, folks; I’ve been ill but now am much better so hopefully can return to regular postings.]
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crossposted with ataxingmatter
“Now starts the internecine wrangling between the two EU countries.”
I feel I should point out that Switzerland isn’t in the EU.
Thanks for this informative post
Couldn’t US law require every U.S. taxpayer to report any payment received from a Swiss bank account and the person on whose behalf such payment was made ?
Today you are supposed to report if you have foreign accounts over 10k on form TD f 90 22.1 with a significant fine attached if you do so. Since a lot of these accounts never pay anything in the US its hard for the IRS to find them. In particular since it appears the IRS can’t get access to foreign credit card info in US citizens names. (What one would likely use the money for is to travel outside the US and never give the IRS a hint.
Make that if you do not do so.
Thanks Linda…do you figure that CIA et al do not have this information? Wouldn’t this be a huge hole in our security if they did not know who had big piles of dough? The systemic collapse, nearly missed according to some, takes on a worrisome character if you assume they know and need to know in some detail, who has what and where.
Lyle and H-Bob: the rules for the TDF 90 whatever form were changed over the last year, so that the penalties for not reporting were dire. Also, MOST people of US citizen status who have a foreign-based credit account are NOT tax-dodgers, they’re probably either immigrants who have gained US citizenship or US citizen expats, who have lines of credit in their former/new countries. It’s much, much easier and cheaper to have a credit card in the country you live in.
The law to file the TD makes no differentiation between immigrants/expats who have assets abroad and folks taking their money overseas for tax purposes. Nor does it differentiate between actually owning the account or having power of attorney over somebody else’s money (e.g. immigrant has signatory power over her mother’s retirement fund, in case her mom becomes incompetent).
Of course as a US citizen you are supposed to pay taxes on worldwide earnings, so in the immigrant/expat case there should be no downside to filing a TD form, assuming you report the income on your 1040. The third case probably needs to consult a tax lawyer to get the right treatment, but then often anyone with assets in more than one country probably needs to as well. Note that many expats if on company assignments get their taxes done by the corporate accounting firm.
Lyle–you are correct in your statements.
My point was that something that seems potentially dodgy–such as having credit cards overseas–may not be so, and that the law does not distinguish between dodgy and non-dodgy purposes. (This isn’t a judgment on anything, by the way, just a statement of the obvious.)
Where we run into problems is when we make the assumption that every foreign transaction/bank account/whatever is dodgy and act accordingly. They aren’t, and we shouldn’t.
Switzerland is not a member of the EU.
If you report the income on the foreign accounts, and other foreign income the TD form is an attempt to provide an equivalent of a 1099 for foreign accounts. How is that dodgy any more than a 1099 is dodgy (the 1099 was put in to avoid people not reporting various items ) If you report and pay there is not a problem, its an attempt to get people to pay their due taxes. Now if you could get the G-20 to move to require banks to report interest to the country of citizenship if us and the country of residence of all account holders then the TD form would not be needed. The G-20 would then lean on the swiss and the offshore centers to report or be in trouble.
Lyle–again, I’m not disagreeing with you, nor am I arguing with you.
My point is that assuming that anybody who has an offshore account is participating in something dodgy is a bad assumption, and that the number of people who have/are likely to have foreign accounts for perfectly legitimate reasons vastly outnumbers tax dodgers and cheats.
It’s a perception problem.
By the way, the US doesn’t share US bank info with other countries, so it doesn’t exactly have clean hands.
Bryan,
Do you have examples?
Germany is like the wounded tiger who would even bite the warden that tries to help him. How can a nearly bankrupt Germany (http://crisismaven.wordpress.com/2010/02/08/bloom-of-doom-v-we-have-control-of-the-ship-we-have-a-plan/) upset one of its best neighbours when they might soon need them in timesof crisis?
I rather think that Switzerland is the topic of last month. This month it should be Cyprus, with it’s near proximity to Greece.
I would like to point out to earlier comments that its not necessarily the citizenship which counts but moreover the county of residency. Also there is a clear distinction between tax evasion and tax planning. Not all foreign account holders, even citizens are evaders, some choose to invest in countries, even onshore which offer better tax incentives which is also the case for Cyprus.
http://cyprustax.blogspot.com
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