Swiss banks still in the spotlight

by Bill Blevins [email protected]

Bill Blevins is Managing Director of Blevins Franks. He has specialised in expatriate investment and tax planning for over 35 years. He has written books and gives lectures on this subject in Southern Europe and the UK.

According to the Organisation for Economic Co-Operation and Development (OECD), Switzerland has made “considerable progress” when it comes to tax transparency:  “There has been a massive change and the difference between 2009 and now is like night and day.”

The result of this is that more and more people who have used Switzerland to hide assets from the taxman will be found out. And while Switzerland has already taken steps to help other countries in their fight against tax evasion, I am sure it will come under pressure to do more over the coming years.

Europe vs Switzerland

At the November G20 Summit in Cannes, French President Nicolas Sarkozy called on Switzerland (along with 10 other countries) to be “excluded from the international community” for refusing to sign up to an automatic exchange of information agreement. “We don’t want to have tax havens any more”, he warned, “our message is clear”.

The European Commission (EC) is committed to a multilateral automatic exchange of information system, where countries hand over confidential data on demand to support tax evasion investigations, and it wants Switzerland to sign up (as it did to the EU Savings Tax Directive).  

The UK and Germany have signed landmark bilateral tax deals with Switzerland, where Swiss banks will start to deduct a withholding tax from future interest earnings by UK and German residents and a back tax to settle past irregularities.  

The problem, as the EC sees it, is that the deals allow account-holders to retain anonymity, and this goes against the EC’s stated aim of automatic exchange of information across the board.  The EC is therefore considering whether to challenge these deals if they are in breach of EU law.  

The UK vs Switzerland

HM Revenue & Customs (HMRC) has sent letters to taxpayers who hold, or have held, accounts in HSBC Geneva, giving them one last opportunity to declare any previously undisclosed assets.  It is believed that up to 6,000 people could be on the list.

The letter explains that it has been sent based on information relating to accounts with HSBC and associated banks in Switzerland, but prompts recipients to declare any offshore tax irregularities.

Recipients reportedly have just five weeks to respond.  They have three options and have to fill in a certificate accordingly and return it to HMRC.

Certificate A – For individuals who have already fully declared all their offshore income and gains on their UK tax returns.

Certificate B – For individuals informing HMRC that they have made, or intend to make, a disclosure under the Liechtenstein Disclosure Facility.

Certificate C – For individuals informing HMRC they intend to disclose all irregularities directly to HMRC.

Anyone who has been hiding income and assets and who does not reply to HMRC faces large penalties as well as possibly criminal prosecution and being ‘named and shamed’.

It is understood that the information on the 6,000 individuals and companies was included in a data disk of client information stolen by an ex-employee of HSBC Geneva.  HMRC has already begun criminal and serious fraud investigations into over 500 HSBC Geneva bank accounts.

US vs Switzerland

US authorities are proving particularly successful at breaking down Swiss banking secrecy.  They have been conducting a widening criminal investigation into Swiss banks and have forced some to provide data on American clients suspected of tax evasion.  

A successful offensive in 2009 against UBS bank resulted in it handing over names and information on 4,000 bank clients and paying a $780 million fine to settle charges that it had helped wealthy Americans hide assets from the US tax authorities.  

More recently Credit Suisse was reportedly made to disclose information on some US clients.  Under the terms of a tax treaty, Washington formally asked Bern to hand over data of Credit Suisse’s US clients.  In November Credit Suisse began informing some account holders that their details may be handed over to the US authorities.  It is understood that the bank has sent 130 files on US clients to the Swiss tax authorities, who will later forward them to their US counterparts.

The clients have been given a choice of allowing their data to be forwarded to the US Internal Revenue Service (IRS) or hiring a lawyer in Switzerland to contest the process.  If they decide to contest they have to inform the US attorney general, which would effectively be handing the IRS their names.  

The Swiss government is keen to put this US attack behind it and has been negotiating a sweeping settlement that would cover a number of Swiss banks that have helped US clients evade US taxes.

The IRS has received information on the Swiss banks from a 2009 amnesty programme for taxpayers with offshore accounts.  30,000 taxpayers came forward and avoided prosecution by paying back taxes and providing information on who helped them evade tax.

It is important that you declare all your worldwide income and gains as per the tax laws in your country of residence.  You should only use legitimate and approved arrangements to lower your tax bill.  Speak to an adviser like Blevins Franks for information on arrangements available in Portugal.

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