Facing Pressure Over Banking-Secrecy Tradition, Switzerland Braces for Fight
Sunday, March 29, 2009
BERN, Switzerland -- This country may be politically neutral, but the Swiss are girding for battle to protect one of their most cherished values: banking secrecy.
This week, when the world's economic powers meet in London to address the global financial crisis, the agenda will include a crackdown on tax havens -- places such as Switzerland, where tax-dodging investors can safely and anonymously hide their assets.
Swiss lawmakers and bankers, despite making recent concessions on tax policy, are worried about being placed on a blacklist or slapped with sanctions. Even worse, they fear that investors could panic and withdraw some of the estimated $2 trillion in foreign assets deposited here, threatening the economic fabric of the Alpine nation.
President Hans-Rudolf Merz, who is also the country's finance minister, predicted a domestic political revolt if Switzerland is blacklisted. "This would cause very, very violent reactions in our country," he said in an interview in Bern, the capital. "People here would consider it a humiliation."
Unlike in most countries, tax evasion is not a criminal offense in Switzerland. The confidentiality of financial transactions is strictly protected, with bankers obligated to safeguard information about their customers, akin to attorney-client privilege in the United States.
Banking secrecy is such an integral part of the national character that the normally peaceful Swiss turn to combative rhetoric if they sense a threat. Merz compared the Swiss right to secrecy to the Second Amendment to the U.S. Constitution, which guarantees the right to bear arms.
"We have a tradition of privacy. I don't want the state to sniff into my bank accounts as long as I'm paying my taxes correctly," he said. "I personally feel that we are mature persons and we behave in a reasonable way, and as long as we do so, we should not be followed by state authorities, like George Orwell described in '1984.' "
Swiss officials have taken what they consider revolutionary steps to avoid being named on the tax-haven blacklist.
On March 13, the government announced it would yield to pressure from the United States, Britain, Germany and France by adopting a model tax convention drawn up by the Organization for Economic Cooperation and Development, a group of 30 leading democracies.
The tax code would require Switzerland to share banking records with other countries when individuals are suspected of tax evasion at home, something the Swiss have refused to do for years.
Tax evasion -- failing to declare income or assets -- is a civil offense in Switzerland. It is viewed in the same light as jaywalking: a commonly overlooked offense that can result in a fine if you happen to get caught.
Switzerland does supply bank records to other countries in cases of tax fraud, a criminal offense that involves actively lying to authorities, instead of just neglecting to report income. Few other countries recognize the distinction, however, and had prodded the Swiss for years to cooperate more.