Archive for category US

Swiss Private Banks Untroubled by US Demands Over Secrecy and “Immediate” Transfer of Information

While UBS is still embroiled in its own troubles, it looks like Swiss private banks are enjoying the demise of their larger international brothers. While UBS has been strong-armed into confession and penalties because of its activities in the US, small Swiss private banks are feeling righteously confident that US authority cannot touch them.

Private bankers from the Swiss bankers association have put on a unified effort to defend secrecy laws, which are still punishable by up to 3 years in jail for breaking confidentiality. In fact, they are keen to point out, its still illegal to share financial information concerning their clients with the Swiss government let alone a foreign tax authority.

But there’s a monster on the horizon.

The Swiss government has agreed to follow the OECD model on exchange of tax-related information, and to comply with this agreement at least 12 tax treaties with other nations will have to be renegotiated - the upshot being that in future Swiss banks will have to divulge the financial records of their clients if foreign authorities can provide evidence of tax evasion.

Not only that, but US authorities like the IRS are pressing for “automatic” exchange of information of suspected tax evasion, which Switzerland previously did not treat as a crime, only cooperating in cases of suspected tax fraud (e.g. willfully forging a tax return). This will not be the first time American has pressured Switzerland to change its sovereign laws. In 2004 the treasured “numbered bank account” was essentially phased out by US instigated anti-money laundering legislation.

Despite this, the secret weapon could be the Swiss themselves. Secrecy is ingrained in the Swiss psyche. And why not? It has brought them a lot of money over the years.

It’s not only the financial sector which has a stake in this, but the people who recognize that a huge flight of capital from their country isn’t going to benefit them one bit. Individual treaties could find themselves the subject of a national referendum - only 50,000 signatures required to vote. With over three
quarters of Swiss citizens believing their nation’s Secrecy laws should not be changed (according to an SBA poll), the battle is not over yet.

Source: Bloomberg.

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Offshore Bank Accounts: Obama Lays Down His Cards

Obama has announced moves against offshore tax haven abuse by big corporations and wealthy individuals.

On the premise of ending tax breaks for companies that re-locate overseas, and therefore lose American jobs, the administration is introducing a set of measures designed to keep US companies firmly grounded to their US tax base.

The changes are aimed to pull in a total $210bn over the next 10 years, which may be used to help fund middle-income tax cuts and a permanent tax credit for corporate research and development.

The big change Obama will introduce is concerning laws which currently let companies park foreign-earned profits abroad, and defer tax until these funds are repatriated. The system, known as “deferral”, lends a lifeline to many large companies. As a result Obama is likely to face extreme resistance from corporate lobbyists and executives if he wants to pass this legislation, despite widespread popular support for the measures which are seen as taxing the “fatcats” who started the financial crisis.

BUt Obama argues that the current system penalises US companies that stay in America.

“It’s a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York,” the president said.

He says he is attempting to “level the playing field” with these measures, arguing that in reality many use the laws to kite money into offshore tax havens like the Cayman Islands, Bermuda and the British Virgin Islands.

This is unlikely to persuade company directors and executives however, who see the moves as yet further intrusive attempts at tax collection in difficult times.

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