Swiss Banks are now requesting to disclose foreign bank account contents for tax purposes. What happened to their cloak of secrecy?
Jeffrey S. Freeman, J.D., LL.M
The United States started the investigation in Switzerland accusing foreign banks of aiding their clients in avoiding their tax responsibilities. Several years later this is more than just an investigation. Billions of dollars in fines, new legislation, reporting requirements for financial institutions, and intergovernmental agreements are proof that this problem was widespread in Switzerland and other foreign countries.
On a global scale the Organisation for Economic Cooperation and Development (OECD) developed the Global Forum on Transparency and Exchange of Information for Tax Purposes back in 2000. Increased momentum and involvement from member jurisdictions has improved along with the speed of the FATCA development. In July a Common Reporting Standard for Automatic Exchange of Financial Account Information in Tax Matters was released asking governments to secure detailed account information from their financial institutions for exchange with the appropriate jurisdiction of the residence of the account holders on an annual basis.
Now the tables have turned and Swiss banks are requesting that the government create agreements with neighboring countries. The head of Switzerland’s banking association is requesting this so that they can flush out all untaxed money held within Switzerland, thus making it easier for Swiss banks to do business abroad. From a business standpoint Swiss banks are no longer positioning themselves to protect their clients behind secrecy laws. They now want to be able to compete on a global scale after much bad press and are willing to commit to sharing tax information.
The Swiss government has entered into negotiations with several European countries and is working to determine how to deal with the remaining undeclared client assets held within Swiss Bank accounts. To date, withholding tax deals have been reached with Britain and Austria. In the last year alone, nearly 30,000 account holders from Britain and Austria paid taxes on bank accounts they had kept secret in Switzerland.
Neighboring countries have yet to enter into agreements with Switzerland. As the desire for Swiss banks to have these agreements completed is urgent so they can do offshore business with these countries; France, Spain, and Italy do not have the same urgency. Challenging points are similar to those faced with the United States and Canada, determining correctly how commuters between the two countries should be consistently handled. Additionally, inheritance tax is still being discussed and needs to be agreed upon before agreements can be signed.
Switzerland is now tackling the same challenge that the United States faced setting up IGAs, but their sell is not as great as the United States. The United States was willing to “scratch your back, if you scratch mine” whereas Switzerland is asking for agreements with the motive to improve their financial plight. Time will tell if they will be successful in swaying France, Spain, and Italy to join the tax transparency concern.
About Freeman Tax Law
Freeman Tax Law (FTL) is a boutique law firm consisting of a multi-disciplinary team of tax professionals including tax attorneys, CPAs and a professional staff that have vast experience with foreign tax compliance and regulatory matters for financial institutions. FTL consults with both FFIs and USFIs with regard to Foreign Account Tax Compliance Act (FATCA) and related regulatory matters and assists them developing procedures on how to comply with these laws.
Compliance with FATCA needs a distinctive approach. A simple change of processes or leveraging new IT infrastructure may not suffice. FTL has partnered with Newgen Software (Newgen) to offer a unique end to end solution for our clients to offer a comprehensive compliance strategy. Newgen buildings on two decades of domain expertise in Banking and Compliance along with its market leading BPM, Case Management, ECM and CCM applications. Utilizing Newgen’s FATCA Compliance Software along with the creation of proper procedures and training offered by FTL of the financial organization staff, allows for the creation of systematized approach to negotiating the finer aspects of FATCA.
With FATCA, the stakes of non-compliance are simply too high. Contact us today for a consultation to discuss how to further integrate your technology with the legal requirements of FATCA.
Freeman Tax Law