Swiss banks easing secrecy norm. GOI should nationalise illicit wealth of PEPs, tax undeclared accounts.

Swiss banks easing secrecy norm. GOI should tax undeclared accounts, nationalise illicit wealth of PEPs (Politically Exposed Persons, a category defined under international financial regulations and laws,for e.g. of Swiss federation)and UN conventions.


Swiss banks easing secrecy norm

Subodh Varma, TNN | Jun 8, 2012, 12.39PM IST

NEW DELHI: Black money stashed away in foreign banks is an issue that refuses to go away in India, with all political parties and activists like Anna Hazare or Baba Ramdev too voicing demands for “getting it back”. But how exactly can this illicit treasure be forced to come back to India? Recent developments in Switzerland and its impending agreement with Germany shed some light on ways and means.

Switzerland’s parliament recently approved a tax information exchange agreement with Germany under which Swiss banks will make anonymous advance payments to German tax authorities for undeclared money, according to a report by the Task Force on Financial Integrity, a Washington based watchdog consortium of government and advocacy organisations. The country has made similar agreements with Britain and Austria and is in talks with Italy.

German lawmakers are proposing to levy a retroactive tax of 21 to 41 percent on their citizens with undeclared accounts. German citizens hold an estimated $291.8 billion in Swiss accounts, about 60 percent of which are undeclared. So, if the agreement goes through the German parliament, a huge amount of tax will be generated.

That’s a big if, because there is considerable opposition to the agreement both in Germany and in Switzerland. The Social Democrats in Germany are opposing the proposed law because it would allow Switzerland to preserve most client confidentiality. In Switzerland, the right-wing Swiss People’s Party and the leftist Young Socialists are both seeking a referendum on the new agreement. They have to collect 50,000 signatures in one hundred days to ensure a referendum.

Experts believe that Switzerland holds an estimated one-third of the $7 trillion in global wealth kept abroad. Such agreements may force illicit funds to flow out of Switzerland to more secretive tax havens like Hong Kong, Singapore or even some enclaves of UK and US, says the Task Force.

About three years ago, after an exhaustive investigation by the Internal Revenue Service (IRS), United States Department of Justice (DOJ) had filed criminal and civil charges against the giant Swiss bank UBS for systematically organizing tax evasion schemes for wealthy Americans. Criminal charges were later dropped after the bank admitted to fraud and conspiracy and paid a $780 million fine.

Later, UBS agreed to hand over the names of 4,450 tax evading Americans to the IRS. After much dithering, the two houses of Swiss Parliament agreed to sanction the deal.

Subsequently, the US launched legal action against several other Swiss banksincluding Credit Suisse, Switzerland’s second largest bank, and HSBC, which is London-based but has extensive Swiss operations under its Private Bank. There are now at least eleven Swiss banks under criminal investigation by the DOJ’s tax division, according to the Task Force.

In May this year, DOJ charged Swistzerland’s oldest private bank Wegelin & Co. with helping Americans evade taxes on more than $1.2 billion in assets, deliberately trying to capture UBS’s lost business in US.


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