Tax havens agree to crack open the vault
Vienna, March 14, 2009
Switzerland, Austria and Luxembourg have offered to relax strict bank secrecy in some tax evasion cases in a response to a global crackdown on tax havens that is rattling the offshore banking industry.
The three countries made the concessions ahead of a meeting starting on Friday of finance ministers from the G20 group of developed and emerging countries due to discuss tax havens, and after similar moves by Andorra and Liechtenstein on Thursday.
All were on a list handed to the G20 this week by the Organization for Economic Cooperation and Development (OECD) of financial centers where it deems bank secrecy rules as undesirable.
British Prime Minister Gordon Brown, who is chairing a G20 summit in April, welcomed the Swiss moves and said he hoped this was the beginning of the end for tax havens.
'The G20 summit in London next month is an opportunity for global agreement on the further actions we need to take to clean up the global financial system,' Brown said.
Switzerland, Austria and Luxembourg said on Friday they would abide by OECD rules by cooperating on sharing information about savers with other countries on a case-by-case basis, but not automatically, as many countries want.
'The decision will permit the exchange of information with other countries in individual cases where a specific and justified request has been made,' the Swiss government said.
Critically, Switzerland will now cooperate in cases of suspected tax evasion, at least once double taxation agreements are renegotiated with other countries, which could take time. It also said it could seek an amnesty for existing clients.
Previously, the world's biggest offshore center would only cooperate with foreign authorities when they could prove outright tax fraud, which has hindered U.S. access to client data of Switzerland's biggest bank UBS in a tax probe.
Swiss Finance Minister Hans-Rudolf Merz, who also holds the rotating presidency, said Switzerland was acting now because being put on a blacklist, possibly resulting in sanctions, would have hurt the economy.
The OECD blacklist currently only includes Liechtenstein, Andorra and Monaco, but France and Germany have been pushing for others, including Switzerland, to be added.
The tax debate is crucial for the wealth management industry, which manages an estimated $7 trillion of assets out of offshore centers around the globe, of which about $2 trillion is held in Switzerland and about $1 trillion in Luxembourg.
Merz said it was hard to say whether Friday's moves would prompt an outflow of money, noting that other tax havens like its rising Asian rivals Singapore and Hong Kong have also adopted the OECD's rules recently.
'No open door policy'
All three countries insisted that the move would not lead to 'fishing expeditions' by other states for client data and said their banking secrecy rules would be otherwise upheld.
'It is not an open door policy. It is an easing of access to information in respect to tax crime,' Merz said.
Switzerland has accused the United States of being on a 'fishing expedition' by pursuing a civil case against UBS to try to access details of 52,000 clients, even after the Swiss bank paid $780 million to avert related U.S. criminal charges.
In a separate statement on Friday, the Swiss government said it would instruct a U.S. law firm to defend the country's position in the civil case against UBS.
The right-wing Swiss People's Party said the government had betrayed citizens and bank customers with its concessions. 'With today's decision the government is sacrificing a centuries-old principle of protecting citizens,' it said in a statement.
The moves by Austria and Luxembourg, both European Union members, may not be enough to satisfy fellow bloc member states li