U.S. and E.U.
Pressure Spell End of Swiss Bank Secrecy
"The surrendering of client-data to American
tax authorities last week was the starting shot - the infamous beginning of the
end. ... Bank secrecy is most likely to
fall by the wayside - whether we like it or not."
First
it was just rhetoric, but then pressure grew. Now the bulwark of Swiss bank secrecy
is substantially crumbling, and it's likely only a matter of time before it's a
thing of the past.
The
surrendering of client-data to American tax authorities last week was the starting
shot - the infamous beginning of the end. On the weekend came the next blow: At
the E.U.-summit in Berlin, it was announced that in order to rebuild confidence
in the markets, Europe is planning to impose complete control over all
financial markets, products and players.
[Editor's Note: On
Wednesday [Feb. 25], UBS, Switzerland's largest bank, paid $780 million in
fines and agreed to hand over details to the IRS of 250-300 customers to avert
criminal proceedings relating to a tax evasion investigation. ].
This
will involve a hard line toward all who prove "uncooperative - whether it
be tax havens or territories where shady deals are made - and to develop a system
of sanctions," as German Chancellor Angela Merkel put it. She failed to
mention a bullwhip, but the almost abstract nature of her announcement made it even
more threatening than the hammer-like rhetoric of her finance minister, Peer
Steinbrück.
In
contrast to Steinbrück's outburst, Merkel indicated a long-term strategy obviously
agreed to with other E.U. member states, bent on implementing new rules and strategies
on the international capital markets. It may be that such words will find willing
American ears at the next G-20 meeting in London on April 2.
The
current crisis is catalyzing a dramatically accelerated reaction against tax
havens. First, because at the moment, astronomical sums of taxpayer money are being
used to provide emergency funding, and so every euro or dollar that finance secretaries
lose to tax dodgers and fraud hurts that much more. But more important is the fact
that many of these tax dodgers, refugees, as well as the banks involved, are
considered beneficiaries or even contributing factors to the crises - or at
least are depicted as such.
It
was only a matter of time before someone cried "scapegoat!" Even if
the United States has turned from being a production-oriented economy into one
of consumption-by-debt which is at the center of today's economic hurricane, at
least some of the blame must be aimed elsewhere. And there's no denying that
again and again, off-shore financial centers have emerged where the shadiest
deals are made, in which the most toxic assets were put into circulation to
attract funds that supposedly didn't exist - the profits from which were
skimmed off and deposited safely away from tax authorities.
Posted by WORLDMEETS.US
In
this regard, it is a fact that the global financial system can no longer cope with
local rules, laws and regulations. As part of this globalization of regulation,
it will only be a matter of time before Switzerland, too, buckles under. While
in this country the talk is of "blackmail," other nations see it
merely as a matter of enforcing the law. If our nation puts pressure on nations
and institutions that aid lawbreakers, then this seems only fair.
To
hope that Swiss quibbling between tax-evasion and tax-fraud will find willing
ears in other countries is wishful thinking in the extreme. [Editor's Note: UBS' American clients that have been exposed are suspected of tax fraud, which involves lying to the government and is illegal in both countries. But tax evasion, where you merely "fail" to report your assets or income, isn't a crime in Switzerland. And under a bilateral agreement, only conduct that is criminal in both countries can prompt Swiss banks to turn over information on their customers]. Plans to use bank secrecy as some kind of bargaining chip in talks with
the E.U. may already be obsolete: Once coordinated international pressure builds,
any such pledge would quickly loose its value. It may well be that the Swiss have
already overplayed their hand.
Like every crisis,
this one will bring dramatic upheavel. Bank secrecy is most likely to fall by
the wayside - whether we like it or not. It would be wise to adjust ourselves
to the collapse and prepare for what will come.
