In ZURICH — For decades, Switzerland was the place where money went to hide. Cash sent to its mountain aeries was protected by some of the strictest secrecy laws in the world.
But with the euro crisis forcing Switzerland’s revenue-starved neighbors to search out new sources of money, the Alpine country’s bank vaults are suddenly looking irresistible. In recent months, the nation’s strict banking secrecy has been under assault from countries such as Germany and Britain as never before. Experts say the last veils may soon be dropped altogether, bringing the hush-hush tradition to an end.
Last week, the council that serves as Switzerland’s executive branch met to discuss new steps toward banking transparency after having been threatened with painful isolation if it did not agree to changes. This month, the upper house of Germany’s Parliament is set to vote on a treaty with Switzerland that would require the banking stronghold to withhold taxes from the accounts of German residents. Similar deals have been signed recently with Austria and Britain, and the possibility is being discussed with others.
The United States has also been cracking down on international tax evasion since 2009 and has extracted punishing damages from Swiss banks that were found to have helped Americans escape the Internal Revenue Service.
Many in Switzerland’s banking capitals have resigned themselves to handing over their ledger books to international tax authorities sooner or later. In the hushed, marble-lined hallways of grand banks in Zurich and Geneva, the whispers are of a future when the country no longer serves as a hub for tax evasion.
“You can hardly understate what is happening,” said Luc Thevenoz, director of the Center for Banking and Financial Law at the University of Geneva. “Switzerland has created this image that the big value that Swiss bankers brought their clients was secrecy. It was an attractive proposition, especially with regard to tax issues.”
No one is sure quite how much Switzerland’s private wealth management sector depends on tax evasion. Bankers’ estimates of deposits from private individuals range from 30 percent on the low end to 60 percent or more. Many say that a significant portion of those funds will drain away from Swiss coffers.
Even the measures already taken could put pressure on the Swiss economy, which is heavily dependent on profits from the financial sector. Some economists forecast a loss of 10,000 jobs and a full percentage point off the country’s gross domestic product. In recent weeks, banking giants such as UBS and Credit Suisse have cited the impending changes as one source of their lackluster third-quarter profits.
But they also say that they can make up the outflow of European and American money with new deposits from developing countries, especially in Asia, where citizens might not be evading taxes but are simply seeking a safe place to stash their money. Overall, deposits in Swiss banks have increased in the past year even as Western European money has been withdrawn, according to Switzerland’s central bank.