WALTER BIERI/European Pressphoto Agency - The entrance of the UBS at the 'Paradeplatz' in Zurich, Switzerland, on Oct. 30, 2012. In recent months, the country’s strict banking secrecy has been under assault from countries such as Germany and Britain as never before.
“This untaxed money was very profitable for the banks,” said Peter Kurer, a former chairman of UBS, Switzerland’s largest bank. “This is combined with a situation where generally it’s getting more and more difficult to make profits. The margins will go down, and you have to be more efficient.”
Last week, UBS announced it was cutting 10,000 jobs, most of them from the investment banking side of its business, a measure not directly related to the changes in secrecy rules.
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The chief executive of UBS, Sergio Ermotti, recently broke a long-standing taboo in Switzerland when he told a local newspaper that the country ought to do away with banking secrecy altogether. He estimated that his bank held between $13 billion and $32 billion in untaxed deposits.
Many experts say it is only a matter of time before international standards are in place that would automatically hand over full information about depositors to other countries’ tax authorities. That would be the death knell for secrecy in Switzerland, an old tradition that was codified in 1934, making it a criminal offense for any bank employee to divulge information about a client’s accounts except in the case of the gravest crimes — a category that did not include tax evasion.
But even harder for this nation’s 8 million residents to accept is that the changes could hit deeply at their cherished, fiercely independent self-image.
“Banking secrecy has been associated here with basic Swiss values, like neutrality and discretion,” said Mark Herkenrath, a sociologist at the University of Zurich who works on tax equality issues. “People were shocked” when Switzerland was briefly placed on the Organization of Economic Cooperation and Development’s gray list of tax havens in 2009. Swiss citizens started to realize that tax evasion, not chocolate and fine watches, was defining them internationally.
The tax issues have put stress on Switzerland’s relations with its European neighbors, and some authorities have made a habit of purchasing stolen Swiss banking data to track down their own tax evaders. One German state, North Rhine-Westphalia, has raided the homes of bank clients whom it identified through stolen CDs of information. In Greece, a thumb drive of Swiss banking records has threatened to split apart the government, which has not decided whether to act on the information. A Greek journalist was arrested, tried and acquitted last week after he published some names contained in the records.
The United States has imposed far-reaching restrictions on banks that do business with U.S. clients abroad, inspired in part by revelations of wide-ranging efforts by Swiss banks to help Americans evade taxes. With penalties of up to 30 percent on foreign banks’ U.S.-based profits if the banks fail to hand over the foreign data of even a single U.S. account-holder, many Swiss banks are giving up on Americans altogether. They reason that there is not enough demand to justify the risks.
“Following the big crisis there is a regulation tsunami,” said Hans Kaufmann, a member of the far-right Swiss People’s Party. An expert on banking issues, he has fought to preserve secrecy.
The forces arrayed against him are searching for illusory revenue, he said. “If they do not get what they had in their fantasy, they always come back and say, ‘There must be more money in Switzerland.’ ”
Switzerland has been trying to reach agreements with individual countries rather than be forced into full-scale transparency. The treaties with Britain and Austria would hand over a chunk of investment income to tax authorities in those countries while preserving depositors’ anonymity.
Countries signing the agreements “only have to open their hands and money comes,” said Mario Tuor, a spokesman for the Swiss State Secretariat for International Financial Matters, the main office that is handling tax negotiations.
The same arrangement is under discussion with Germany, which believes that its residents have hidden away about $200 million in Swiss banks. Leaders of Germany’s main opposition party, the Social Democrats, have threatened to veto the treaty when it comes to a vote in the upper house of Parliament in late November because they say it is too lenient on tax cheats.
The debate has some Swiss residents eager to find a resolution — one that would result in other countries backing away.
“Switzerland does not want to be under pressure from foreign governments,” said Christine Hirszowicz, an emeritus professor of banking at the University of Zurich. “Switzerland is a small country. Its independence is all it has.”
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