ZURICH, March 13 Switzerland, Austria and
Luxembourg all sought ways on Friday to fend off a global
crackdown on tax evasion by making concessions on bank secrecy.
All three have been under increasing pressure to open up by
cash-strapped governments eager to claw back tax money during
the financial crisis.
Here are five key facts about bank secrecy in Switzerland,
whose banks have attracted an estimated $2 trillion of wealth
from foreign clients, attracted at least in part by its strict
- Sharing information about bank client data is a criminal
offence in Switzerland. Banks are forbidden from handing over
bank client data directly to foreign authorities even if
requested to do so. Switzerland's protection of banking secrecy
goes back to 1934 when it passed a law imposing heavy penalties,
up to and including prison sentences, for breaches of banking
TAX FRAUD/TAX EVASION:
- Unlike most other countries in the world, Swiss law
distinguishes between tax fraud and tax evasion. Tax fraud is a
criminal offence that involves actively forging documents to
hide income from the tax man. Tax evasion, which is defined as
not fully declaring one's income to the Swiss tax authorities,
is an administrative offence, punishable with a fine as the law
accepts that citizens can sometimes innocently forget data or
make mistakes when filing their tax returns.
Tax evasion is distinct from tax avoidance, which is the
legal exploitation of tax loopholes to minimise tax payments.
TAX INFORMATION SHARING
- Switzerland can share tax information under a so-called
administrative process enshrined in tax treaties signed with the
United States and other countries. Up until now, it has mainly
shared information on tax fraud.
Banks supply information requested by foreign governments
pursuing criminal investigations of individuals, but this does
not automatically extend to tax matters.
Swiss law requires the other jurisdiction demanding the
information to come forward with a detailed claim about a
precise individual. Berne does not offer cooperation in the case
of blanket requests for data.
THE UBS TAX FRAUD CASE
- UBS UBSN.VX(UBS.N), Switzerland's largest bank, became
the target of a U.S. investigation alleging the bank had helped
thousands of Americans to hide money from its tax authorities in
Swiss bank accounts. In a landmark settlement, UBS agreed to pay
a $780 million fine in February. Berne also agreed to the
transfer to the U.S. of a few hundred UBS client names even
before a Swiss court had ruled on whether tax fraud had been
EU SAVINGS DIRECTIVE
- Switzerland allows European Union account holders to keep
their affairs secret by paying withholding tax on the interest
of savings from their income instead.
Switzerland shares the bulk of the revenues collected in
this way with relevant EU governments without revealing the
identity of the EU bank account holders. The matter is regulated
by the so-called EU savings tax directive.
(Compiled by Lisa Jucca; editing by Guy Dresser)