14 ms·

Switzerland in the age of automatic exchange of banking information

133 points by baazaar 7y ago

pjc50 7y ago
This is not something that Switzerland was happy to do; it took a lot of pressure to get them to stop being an asset haven for international tax avoiders.
- baazaar 7y ago
  To be precise: pressure from the US. Now the US is Switzerland.
  - 2a0c40 7y ago
    Relevant: https://en.m.wikipedia.org/wiki/Common_Reporting_Standard https://en.m.wikipedia.org/wiki/Common_Reporting_Standard
  - csomar 7y ago
    Many people are missing this point. US banks, until this point, do not exchange information on their foreign customers. FATCA is more like: Hey Hong Kong, Swiss, London, nice business you have over there, maybe I can get in the action too. All of the action actually.
    - pentae 7y ago
      And as a result of that the US is now the worlds largest offshore banking center for the rest of the world. It's a pretty safe place to hold your money, after all.
- asdfasgasdgasdg 7y ago
  Minor technicality, but tax avoidance is legal. Saving in a tax-advantaged account is tax avoidance. The problem with what Switzerland was doing is that it was aiding and abetting tax evasion. Most of the time people get this wrong the other way. I've never seen the evasion->avoidance transposition. So, I thought I might share. No harm meant. :)
88840-8855 7y ago
I am no expert, it would be great to read it from someone with knowledge in this field. What if a shell corp is created in a country that is not included in the list of the ownership info automatic exchange? Instead of option A, someone could go with option B and would be fully protected: Option A: Owner in the UK -> Swiss Bank account Option B: Owner in the UK -> Shell corp & legal entity in a country not included in that list -> Swiss Bank account not on the name of the owner, but held by the shell corp/legal entity
- teunispeters 7y ago
  From following the Vancouver/BC/Canada real estate market, this is very common and normal. (related : Vancouver BC reaching third most expensive city in the world status a couple of years back, for reasons that have little or nothing to do with local populations) The closest I can get to sources though: https://www.cbc.ca/news/canada/british-columbia/laundered-money-bc-real-estate-1.5128769 https://www.cbc.ca/news/canada/british-columbia/laundered-mo... https://www.cbc.ca/radio/podcasts/current-affairs-information/sold/ https://www.cbc.ca/radio/podcasts/current-affairs-informatio...
  - magduf 7y ago
    >related : Vancouver BC reaching third most expensive city in the world status a couple of years back, for reasons that have little or nothing to do with local populations What is it due to? I imagine ease of access to Chinese people who want a place to park their savings, plus nice weather, are the biggest factors. After all, all those wealthy Chinese people could just go to another city, like Edmonton, but they don't: what kind of insane person would want to live in a place where it's -40 in the winter if they didn't grow up there?
    - teunispeters 7y ago
      Really healthy support of money laundering by other countries (eg USA, Russia). People blame China "because visible". Although chasing the money there it more seems like China too is making for a nice place for ultrarich (1%) and others (eg drug dealers) trying to dodge taxes or other laws in various countries. There's no data tracked though, and outside of the RCMP investigation there's basically no public information beyond speculation of possible causes. Other than it's not population pressure. There's very large ties between Vancouver, India and China visibly - but nothing to the degree costs hit. I found living there that the influences of India and China helped moderate things and help the city be more liveable.
kmonsen 7y ago
Swiss banks doesn't actually disclose to swiss authorities, even though the have a wealth tax based partially on the money in your bank account.
- lawl 7y ago
  > Swiss banks doesn't actually disclose to swiss authorities, even though the have a wealth tax based partially on the money in your bank account. (i'm swiss) I believe there is no way in hell they could have passed this legislation if it included giving data of swiss citizens to the swiss government. People here cherish their banking secrecy and it's still somewhat part of the national identity. From a swiss point of view it was/is pretty much: The US is pressuring us too much, we'll have to give up banking secrecy, but only for foreigners. If they didn't do that, i'm fairly certain it would have been shot down by the people with a referendum.
  - rolltiide 7y ago
    > From a swiss point of view it was/is pretty much: The US is pressuring us too much, we'll have to give up banking secrecy, but only for foreigners. Exactly, this is also what neighboring Austria did a few years ago. It is nice that Switzerland takes the attention for "banking secrecy" because other countries that have it in law get to fly under the radar. As always, people that have better reading comprehension skills get their advantage.
  - captainpiggies 7y ago
    After the 2009 financial crisis and the regulatory requirements which followed the major international Swiss banks were forced to split their retail and investment business into separate entities at about the same time they also started restructuring some other things I am pretty sure they saw this coming after FATCA / MIFID because they have all since split their Swiss business from their international business at least legally (separate legal entities under one brand and holding corp etc.)
  - kmonsen 7y ago
    I loved in Switzerland recently, and I never really understood how the wealth tax works when the banks don't talk to the tax authorities. Is it entirely optional?
dbrgn 7y ago
To me as a Swiss citizen, born in Switzerland, living in Switzerland, it's an impertinence that every time I open a bank account with a Swiss bank I have to fill out at least 1 form with information about my relation to the US, about my travels in the US and whether I might have to pay taxes there. As a side note, the only other country besides the US that collects taxes based on citizenship and not based on residence is Eritrea. The tax policy of Eritrea is described as extortion by a lot of western governments and media.
- throwaway4792 7y ago
  Definitely understand that it feels like a slap in the face given Switzerland's tradition of bank secrecy, but the reason these (multinational) banks now do this is that, generally speaking, they and their customers are paying a modest inconvenience for their past criminal actions. These banks are not solely Swiss; they are multinational corporations and were probably breaking the law. Maybe not Swiss law, but the law of countries they had a nexus with. https://en.wikipedia.org/wiki/UBS_tax_evasion_controversies https://en.wikipedia.org/wiki/UBS_tax_evasion_controversies https://www.accountingtoday.com/articles/a-top-swiss-bank-settles-tax-evasion-dispute-a-decade-after-secrecy-began-to-crumble https://www.accountingtoday.com/articles/a-top-swiss-bank-se... https://www.independent.co.uk/news/business/news/swiss-bank-accounts-not-secret-tax-avoidance-money-laundering-crackdown-a7507696.html https://www.independent.co.uk/news/business/news/swiss-bank-... https://www.channelnewsasia.com/news/commentary/1mdb-najib-razak-jho-low-money-laundering-swiss-bank-accounts-10616388 https://www.channelnewsasia.com/news/commentary/1mdb-najib-r...
- ekianjo 7y ago
  > US that collects taxes based on citizenship and not based on residence is Eritrea I believe Japan also does that, for a few years now.
  - paulsutter 7y ago
    No Japan does not tax Japanese citizens with foreign residency. They did start an exit tax for departing Japan residents to discourage this. Japanese tax residency has a slippery legal definition, tax residency begins the day after you enter the country “for a purpose exceeding one year” (as determined by the tax authorities not you). So they do often challenge foreign residency claims.
rolltiide 7y ago
Don't worry, Switzerland is still attractive for many reasons as a stable, competitive, well connected financial center. I think a lot of people don't realize that bank account privacy is just 1 of 20 distinctive qualities of Swiss institutions and regulatory structure. Switzerland is attractive because its not just shell companies and PO boxes, compared to other nations that try to offer similar nominal regulations. Instead it has a vibrant regulatory system with competition amongst each state and no expensive federal government. As an example Google pays the same as it does in Silicon Valley, with employees being only subject state level tax. The state of Zug is a fintech hub with an income tax rate of 7%. Territorial only. The Swiss franc is currently pegged 1:1 with USD, having ditched Euro peg almost 5 years ago. The regulators and public sector representatives are very accessible because everything happens at the sparsely populated state level, and they all operate under the swiss brand which includes access to the global financial system. Switzerland is better thought of as a loose collection of sovereign states with a small national government. The concept may seem familiar but recognize how small all of Switzerland is and that has factored into why the national government never grew arbitrarily large to maintain cohesion and assume its own intrusive identity, and why direct representation has been possible there for almost 200 years (they did represenative democracy before that, like the US, but figured out how to remove it since the flaws were obvious and they're smaller) Outside of finance and regulatory structure, Americans may also find the vibrant gun culture and visible military to be refreshing and familiar. A stark contrast to the ideals and vocal opinions that neighboring Europeans would have about guns as soon as they find out you're American, possibly unaware of what Switzerland offers and has offered for a very long time.
- dbrgn 7y ago
  > The Swiss franc is currently pegged 1:1 with USD, having ditched Euro peg almost 5 years ago. It's not.
  - rolltiide 7y ago
    The Swiss central bank actively tries to maintain parity Use whatever word you want to quickly convey that thought to a broad population “Peg” also does that.
somberi 7y ago
A related read: Swiss bank employees who are domiciled outside Switzerland are exempt from Swiss banking secrecy laws. https://www.economist.com/finance-and-economics/2018/10/18/a-court-ruling-knocks-another-hole-in-swiss-banking-secrecy https://www.economist.com/finance-and-economics/2018/10/18/a... Also at https://archive.is/lbO8j https://archive.is/lbO8j
JacKTrocinskI 7y ago
USA is overreaching, European countries should stand up this crap. I'm a Polish and US Citizen and I remember a situation where I was at an airport in Poland and was not let onto a flight after presenting a valid US passport and Polish ID card to the Polish border patrol. They didn't allow me onto my flight due to lack of a Polish passport (Polish law says I need a Polish passport when travelling to the US). I called the US embassy which told me they couldn't help me because I was Polish citizen on Polish soil. In that case why should I pay taxes while abroad? Will the US come to my rescue if a war broke out or major disaster occurred? They couldn't even get me onto a flight back to the US. I ended up getting a hotel for the night, bought a plane ticket to Germany the next day and another one from Germany to the US. I was offered a small refund for my round trip tickets from Poland to the US. Only person I could count on was myself that day.
- kgwgk 7y ago
  > USA is overreaching, European countries should stand up this crap. [Recounts story about issues at Polish border due to Polish law and Polish citizenship.] So you would have liked the US to stand against Polish crap on your behalf?
  - JacKTrocinskI 7y ago
    I pay Polish taxes on the money I earn in Poland and I abide by Polish law while in Poland, why should I abide by US law while in Poland? What's the benefit to me? I mean if I'm paying an overreaching tax then yeah I kind of expect them to overreach for me.
    - kgwgk 7y ago
      > (Polish law says I need a Polish passport when travelling to the US) What would you have expected the US to do? Smuggle you out of the country?
      - JacKTrocinskI 7y ago
        Honestly, one call from the embassy and I would have been on that flight, believe me.
shadowprofile77 7y ago
I have to say that I find the attitude I quoted below from the link, ever more prevalent in today's political and social climate, to be extremely dangerous in how one-sided it is.For one thing, competition is a cornerstone of better development. Yes, it sometimes needs to be moderated but as a basic rule of anything economic, it works at delivering more and better options and keeping exploitative tendencies in check. This applies to the regulatory frameworks of countries just as much as to any other economic actor and the just as many of us would probably agree that it's a bad idea for every company in X industry to collude on fixing prices, the notion of stamping out competitive tax regimes among nation states should be looked at with the same suspicion and for the same reasons of curtailing abuse against those who have to pay for everything. Secondly, at what point does it allow for the question of just how much government should be allowed to spend? The entire onus should not simply be placed on crushing tax avoidance, and a serious debate about the size, scope and sheer spending done by governments today needs to balance things out. This isn't an argument against social programs or helping the poor it's just a recognition of the basic fact that a tremendous amount of money extracted by states gets wasted on all sorts of immense bloat. We complain about bureaucratic mismanagement by various countries all the time but for some reason should applaud their obsessive efforts to crush any exit valves on abusive tax practices by them, and not just tax avoiders or evaders? With the support of the G20 and the EU, the Organisation for Economic Cooperation and Development (OECD) therefore drew up international standards in 2014 to enable countries to exchange bank information automatically. More than a hundred countries have so far decided to adhere to these standards, almost half of which have already started to exchange information in 2017. Participating countries must undertake to treat the data they receive confidentially and only for tax purposes. These rules also aim to create a level playing field for all financial centres by putting an end to tax havens. Countries - or territories - that do not meet the criteria set out in international standards or that are not cooperative are included in grey or black lists of the OECD and the EU. “Defensive measures", in other words sanctions, are envisaged against them.

133 points by baazaar 7y ago

This is not something that Switzerland was happy to do; it took a lot of pressure to get them to stop being an asset haven for international tax avoiders.

baazaar 7y ago
To be precise: pressure from the US. Now the US is Switzerland.
- 2a0c40 7y ago
  Relevant: https://en.m.wikipedia.org/wiki/Common_Reporting_Standard https://en.m.wikipedia.org/wiki/Common_Reporting_Standard
- csomar 7y ago
  Many people are missing this point. US banks, until this point, do not exchange information on their foreign customers. FATCA is more like: Hey Hong Kong, Swiss, London, nice business you have over there, maybe I can get in the action too. All of the action actually.
  - pentae 7y ago
    And as a result of that the US is now the worlds largest offshore banking center for the rest of the world. It's a pretty safe place to hold your money, after all.
asdfasgasdgasdg 7y ago
Minor technicality, but tax avoidance is legal. Saving in a tax-advantaged account is tax avoidance. The problem with what Switzerland was doing is that it was aiding and abetting tax evasion. Most of the time people get this wrong the other way. I've never seen the evasion->avoidance transposition. So, I thought I might share. No harm meant. :)

88840-8855 7y ago

I am no expert, it would be great to read it from someone with knowledge in this field. What if a shell corp is created in a country that is not included in the list of the ownership info automatic exchange? Instead of option A, someone could go with option B and would be fully protected: Option A: Owner in the UK -> Swiss Bank account Option B: Owner in the UK -> Shell corp & legal entity in a country not included in that list -> Swiss Bank account not on the name of the owner, but held by the shell corp/legal entity

teunispeters 7y ago
From following the Vancouver/BC/Canada real estate market, this is very common and normal. (related : Vancouver BC reaching third most expensive city in the world status a couple of years back, for reasons that have little or nothing to do with local populations) The closest I can get to sources though: https://www.cbc.ca/news/canada/british-columbia/laundered-money-bc-real-estate-1.5128769 https://www.cbc.ca/news/canada/british-columbia/laundered-mo... https://www.cbc.ca/radio/podcasts/current-affairs-information/sold/ https://www.cbc.ca/radio/podcasts/current-affairs-informatio...
- magduf 7y ago
  >related : Vancouver BC reaching third most expensive city in the world status a couple of years back, for reasons that have little or nothing to do with local populations What is it due to? I imagine ease of access to Chinese people who want a place to park their savings, plus nice weather, are the biggest factors. After all, all those wealthy Chinese people could just go to another city, like Edmonton, but they don't: what kind of insane person would want to live in a place where it's -40 in the winter if they didn't grow up there?
  - teunispeters 7y ago
    Really healthy support of money laundering by other countries (eg USA, Russia). People blame China "because visible". Although chasing the money there it more seems like China too is making for a nice place for ultrarich (1%) and others (eg drug dealers) trying to dodge taxes or other laws in various countries. There's no data tracked though, and outside of the RCMP investigation there's basically no public information beyond speculation of possible causes. Other than it's not population pressure. There's very large ties between Vancouver, India and China visibly - but nothing to the degree costs hit. I found living there that the influences of India and China helped moderate things and help the city be more liveable.

kmonsen 7y ago

Swiss banks doesn't actually disclose to swiss authorities, even though the have a wealth tax based partially on the money in your bank account.

lawl 7y ago
> Swiss banks doesn't actually disclose to swiss authorities, even though the have a wealth tax based partially on the money in your bank account. (i'm swiss) I believe there is no way in hell they could have passed this legislation if it included giving data of swiss citizens to the swiss government. People here cherish their banking secrecy and it's still somewhat part of the national identity. From a swiss point of view it was/is pretty much: The US is pressuring us too much, we'll have to give up banking secrecy, but only for foreigners. If they didn't do that, i'm fairly certain it would have been shot down by the people with a referendum.
- rolltiide 7y ago
  > From a swiss point of view it was/is pretty much: The US is pressuring us too much, we'll have to give up banking secrecy, but only for foreigners. Exactly, this is also what neighboring Austria did a few years ago. It is nice that Switzerland takes the attention for "banking secrecy" because other countries that have it in law get to fly under the radar. As always, people that have better reading comprehension skills get their advantage.
- captainpiggies 7y ago
  After the 2009 financial crisis and the regulatory requirements which followed the major international Swiss banks were forced to split their retail and investment business into separate entities at about the same time they also started restructuring some other things I am pretty sure they saw this coming after FATCA / MIFID because they have all since split their Swiss business from their international business at least legally (separate legal entities under one brand and holding corp etc.)
- kmonsen 7y ago
  I loved in Switzerland recently, and I never really understood how the wealth tax works when the banks don't talk to the tax authorities. Is it entirely optional?

dbrgn 7y ago

To me as a Swiss citizen, born in Switzerland, living in Switzerland, it's an impertinence that every time I open a bank account with a Swiss bank I have to fill out at least 1 form with information about my relation to the US, about my travels in the US and whether I might have to pay taxes there. As a side note, the only other country besides the US that collects taxes based on citizenship and not based on residence is Eritrea. The tax policy of Eritrea is described as extortion by a lot of western governments and media.

throwaway4792 7y ago
Definitely understand that it feels like a slap in the face given Switzerland's tradition of bank secrecy, but the reason these (multinational) banks now do this is that, generally speaking, they and their customers are paying a modest inconvenience for their past criminal actions. These banks are not solely Swiss; they are multinational corporations and were probably breaking the law. Maybe not Swiss law, but the law of countries they had a nexus with. https://en.wikipedia.org/wiki/UBS_tax_evasion_controversies https://en.wikipedia.org/wiki/UBS_tax_evasion_controversies https://www.accountingtoday.com/articles/a-top-swiss-bank-settles-tax-evasion-dispute-a-decade-after-secrecy-began-to-crumble https://www.accountingtoday.com/articles/a-top-swiss-bank-se... https://www.independent.co.uk/news/business/news/swiss-bank-accounts-not-secret-tax-avoidance-money-laundering-crackdown-a7507696.html https://www.independent.co.uk/news/business/news/swiss-bank-... https://www.channelnewsasia.com/news/commentary/1mdb-najib-razak-jho-low-money-laundering-swiss-bank-accounts-10616388 https://www.channelnewsasia.com/news/commentary/1mdb-najib-r...
ekianjo 7y ago
> US that collects taxes based on citizenship and not based on residence is Eritrea I believe Japan also does that, for a few years now.
- paulsutter 7y ago
  No Japan does not tax Japanese citizens with foreign residency. They did start an exit tax for departing Japan residents to discourage this. Japanese tax residency has a slippery legal definition, tax residency begins the day after you enter the country “for a purpose exceeding one year” (as determined by the tax authorities not you). So they do often challenge foreign residency claims.

rolltiide 7y ago

Don't worry, Switzerland is still attractive for many reasons as a stable, competitive, well connected financial center. I think a lot of people don't realize that bank account privacy is just 1 of 20 distinctive qualities of Swiss institutions and regulatory structure. Switzerland is attractive because its not just shell companies and PO boxes, compared to other nations that try to offer similar nominal regulations. Instead it has a vibrant regulatory system with competition amongst each state and no expensive federal government. As an example Google pays the same as it does in Silicon Valley, with employees being only subject state level tax. The state of Zug is a fintech hub with an income tax rate of 7%. Territorial only. The Swiss franc is currently pegged 1:1 with USD, having ditched Euro peg almost 5 years ago. The regulators and public sector representatives are very accessible because everything happens at the sparsely populated state level, and they all operate under the swiss brand which includes access to the global financial system. Switzerland is better thought of as a loose collection of sovereign states with a small national government. The concept may seem familiar but recognize how small all of Switzerland is and that has factored into why the national government never grew arbitrarily large to maintain cohesion and assume its own intrusive identity, and why direct representation has been possible there for almost 200 years (they did represenative democracy before that, like the US, but figured out how to remove it since the flaws were obvious and they're smaller) Outside of finance and regulatory structure, Americans may also find the vibrant gun culture and visible military to be refreshing and familiar. A stark contrast to the ideals and vocal opinions that neighboring Europeans would have about guns as soon as they find out you're American, possibly unaware of what Switzerland offers and has offered for a very long time.

dbrgn 7y ago
> The Swiss franc is currently pegged 1:1 with USD, having ditched Euro peg almost 5 years ago. It's not.
- rolltiide 7y ago
  The Swiss central bank actively tries to maintain parity Use whatever word you want to quickly convey that thought to a broad population “Peg” also does that.

somberi 7y ago

A related read: Swiss bank employees who are domiciled outside Switzerland are exempt from Swiss banking secrecy laws. https://www.economist.com/finance-and-economics/2018/10/18/a-court-ruling-knocks-another-hole-in-swiss-banking-secrecy https://www.economist.com/finance-and-economics/2018/10/18/a... Also at https://archive.is/lbO8j https://archive.is/lbO8j

JacKTrocinskI 7y ago

USA is overreaching, European countries should stand up this crap. I'm a Polish and US Citizen and I remember a situation where I was at an airport in Poland and was not let onto a flight after presenting a valid US passport and Polish ID card to the Polish border patrol. They didn't allow me onto my flight due to lack of a Polish passport (Polish law says I need a Polish passport when travelling to the US). I called the US embassy which told me they couldn't help me because I was Polish citizen on Polish soil. In that case why should I pay taxes while abroad? Will the US come to my rescue if a war broke out or major disaster occurred? They couldn't even get me onto a flight back to the US. I ended up getting a hotel for the night, bought a plane ticket to Germany the next day and another one from Germany to the US. I was offered a small refund for my round trip tickets from Poland to the US. Only person I could count on was myself that day.

kgwgk 7y ago
> USA is overreaching, European countries should stand up this crap. [Recounts story about issues at Polish border due to Polish law and Polish citizenship.] So you would have liked the US to stand against Polish crap on your behalf?
- JacKTrocinskI 7y ago
  I pay Polish taxes on the money I earn in Poland and I abide by Polish law while in Poland, why should I abide by US law while in Poland? What's the benefit to me? I mean if I'm paying an overreaching tax then yeah I kind of expect them to overreach for me.
  - kgwgk 7y ago
    > (Polish law says I need a Polish passport when travelling to the US) What would you have expected the US to do? Smuggle you out of the country?
    - JacKTrocinskI 7y ago
      Honestly, one call from the embassy and I would have been on that flight, believe me.

shadowprofile77 7y ago

I have to say that I find the attitude I quoted below from the link, ever more prevalent in today's political and social climate, to be extremely dangerous in how one-sided it is.For one thing, competition is a cornerstone of better development. Yes, it sometimes needs to be moderated but as a basic rule of anything economic, it works at delivering more and better options and keeping exploitative tendencies in check. This applies to the regulatory frameworks of countries just as much as to any other economic actor and the just as many of us would probably agree that it's a bad idea for every company in X industry to collude on fixing prices, the notion of stamping out competitive tax regimes among nation states should be looked at with the same suspicion and for the same reasons of curtailing abuse against those who have to pay for everything. Secondly, at what point does it allow for the question of just how much government should be allowed to spend? The entire onus should not simply be placed on crushing tax avoidance, and a serious debate about the size, scope and sheer spending done by governments today needs to balance things out. This isn't an argument against social programs or helping the poor it's just a recognition of the basic fact that a tremendous amount of money extracted by states gets wasted on all sorts of immense bloat. We complain about bureaucratic mismanagement by various countries all the time but for some reason should applaud their obsessive efforts to crush any exit valves on abusive tax practices by them, and not just tax avoiders or evaders? With the support of the G20 and the EU, the Organisation for Economic Cooperation and Development (OECD) therefore drew up international standards in 2014 to enable countries to exchange bank information automatically. More than a hundred countries have so far decided to adhere to these standards, almost half of which have already started to exchange information in 2017. Participating countries must undertake to treat the data they receive confidentially and only for tax purposes. These rules also aim to create a level playing field for all financial centres by putting an end to tax havens. Countries - or territories - that do not meet the criteria set out in international standards or that are not cooperative are included in grey or black lists of the OECD and the EU. “Defensive measures", in other words sanctions, are envisaged against them.