Switzerland Seen Backing Down on Supporting Tax Haven USA

Originally published at Tax Justice Network

In July we wrote a blog entitled Luxembourg backing down on supporting tax haven USA. Now it’s Switzerland’s turn.

This concerns the OECD’s Common Reporting Standard (CRS,) a global scheme to share banking information. The United States isn’t a participating jurisdiction: it has its own FATCA project, which as we’ve remarked before, is good at ferreting out US taxpayers overseas, but provides relative little information in the other direction to help other countries enforce their own tax laws. Making the United States a giant tax and secrecy haven.

For a while, Luxembourg and Switzerland had been insisting that Tax Haven USA is a participating jurisdiction. In a nutshell, their financial industries wanted this because the CRS says that you are supposed to ‘look through’ certain investment entities and report their beneficial owners, if that entity is not in a ‘participating jurisdiction’ in the CRS. If the USA gets classified as a ‘participating jurisdiction’ then those Swiss financial players can chuck their tax-evading stuff into U.S. investment entities and the ‘look-through’ to the beneficial owners won’t happen.

Recently, the influential conservative Neue Zürcher Zeitung said that

“The US will now be excluded from the Swiss definition of [a participating jurisdiction] as Swiss television reported, and as the federal government confirmed.” 

This follows a challenge in the Swiss parliament to this effect.

Not only that, but it’s just been shown to us that the CRS itself makes it clear that countries have to reassess whether participation in the CRS is genuine. The CRS handbook says on p20:

“This effectively presumes commitments will be delivered upon and suspends the application of the look through provision for Investment Entities . .  Reporting Financial Institutions would not be required to apply the due diligence procedure . .  This of course should be revisited in the event commitments are not delivered on. A jurisdiction adopting this approach should make a statement that its list of Participating Jurisdictions will be re-assessed and updated no later than 1 July 2017, based on whether the listed Participating Jurisdictions have actually delivered on their commitment. A removal of a jurisdiction from the list of Participating Jurisdictions would then trigger an obligation on Reporting Financial Institutions to apply the due diligence procedures. . .”

In black and white. Not only is Switzerland seemingly planning to row back on its subversive pro-tax haven USA stance – it seems it has no choice. And in any case, it was always curious for a country whose financial secrecy sector has been so effectively targeted by the U.S. Department of Justice to then go out and support the cause of Tax Haven USA – particularly when the US-Swiss relationship is governed by an unusually restrictive “Model 2” arrangement which is especially skewed against Switzerland receiving any useful information from the U.S.

This appears to be progress. Having pointed all this stuff out ourselves, we hope we’ve been influential in shaping the debates in Switzerland.

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  1. Oregoncharles

    Wait a minute – you mean the legendary Swiss banks don’t actually control the government in their own country?

    How could this be? What is Switzerland doing right?

  2. TheCatSaid

    If Switzerland determines that the USA is not complying with CRS, then Switzerland will not be obliged to share information with the USA about possible tax-dodgers, is that right?

    Will Switzerland’s decision impact other EU or OECD countries?

    In Ireland if you want to open a bank account there are questions to be answered about whether or not you are a “US person”. If so, more details must be supplied, presumably to be shared with US officials. No other country has this right to ask or receive this kind of information from an Irish bank. I don’t expect the various states in the US will suddenly start sharing their information openly (Delaware and Nevada spring to mind).

  3. OpenThePodBayDoorsHAL

    What happens when the world’s pre-eminent power becomes a wholesale purveyor of hypocrisy across the length and breadth of their national and international behavior?
    The “We’ll-Do-Whatever-The-F*ck-We-Please-And-You’ll-Submit” (WDWTFWPAYS) doctrine can cut both ways. So we’ll move from something loosely referred to as “civilization” to “every man for himself”.

    1. RBHoughton

      It really does seem is if the neocon infection in Washington DC just make up the rules as they go along.

  4. makedoanmend

    I wonder if this is really a simple morality tale played by mummers. Is the United States really the big ogre? Slay the ogre and all will be fine? hmmm

    Sure, the US is a “super power” (i.e. imperial power) and its banished its Carthage (the USSR), and its throwing its weight around. Boy, is it throwing its imperial supersizedsandwiched weight around.

    And Switzerland, “don’t tell and we won’t ask” (nudge, nudge, wink, wink, ha ha ha), is hardly a paragon and exemplar of international banking and tax-dodging transparency. Its provenance is full of sweet cheesy holes.

    Or are we just viewing nation states trying to claw back some control from fronting-corporations and the semi-transparent oligarchs behind them? Are the actual vital resources necessary for any state being “privatised” (encorporated) to such a degree that even the petty politicians know the state can fail and let loose the dogs of despair and destruction? And isn’t the US a nation state?

    Isn’t it time jane & joe sixpack saw the very un-naked kings and queens swanning around in their tax-dodging and griftswindling, diamond-studded attire and denuded them?

    I’m sure misoginy-Don and email-Hill will be debating this very topic – it’s gotta be a hot button …

    When Cthulhu’s evil is all around it is easy to be spellbound and overwhelmed.

    One wonders if finding a simple, clarifying question that promises some insight and asking it repeatedly of everyone and yourself might help. Persist. Cloaked in humour, might it even defeat lesser evil? might lead to more clarifying questions and the askers becoming a part of the answer(s)?

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