GENEVA (Reuters) - There will be no mass exodus of clients from Switzerland’s banks due to deals with several European countries over untaxed assets stashed in secret accounts and a pledge to turn away tax evaders in future, the industry association’s head told Reuters.
“The chances are much of that money will stay one way or another to be managed professionally in Switzerland,” Patrick Odier, chairman of the Swiss Bankers Association and managing partner of private bank Lombard Odier, said in an interview.
In the wake of the financial crisis, Switzerland has come under heavy global pressure to weaken its tradition of strict bank secrecy to help cash-strapped governments hunt tax dodgers who have hidden their assets in vaults in Zurich and Geneva.
“Regrettably, you always find someone who doesn’t want to pay his taxes who will go to an island or I don’t know where ... but the number of alternatives has been considerably reduced by the financial difficulties of many countries since the crisis,” Odier said.
“Secondly, the regulation internationally has developed so that what we’re living through today in Switzerland is hopefully going to be the international standard. So, no, we don’t see flows of money going out,” he added.
In deals struck this year with Germany, Britain and Austria - and under negotiation with Italy - Switzerland has managed to defend client privacy in return for levying punitive back taxes and on those accounts and a withholding tax on future earnings.
Some bankers say the agreements and a promise to only manage taxed assets in future could lead to big client withdrawals and job losses for the $2 trillion Swiss offshore wealth management industry as the country loses its competitive tax advantage.
Odier admitted there was fierce competition among financial centers, but said many clients still favored Switzerland due to its culture of privacy, professionalism and the security and stability granted by the traditional safe haven.
“We want to be known and develop because we’re good, not because we have illegitimate advantages,” Odier said.
Odier said most clients wanted to clean up undeclared assets - often passed down a family - so they could use the money.
He appealed to German politicians to back the tax deal, which still has to be ratified by parliaments in both countries, saying Switzerland would never accept calls from some opposition Social Democrats for an automatic exchange of bank information.
”The pragmatic solution is worth 10 theoretical solutions that will never happen because Switzerland and its banks will not accept the automatic exchange of information,’ he said.
Odier rejected a Swiss government proposal to force bank clients to make a declaration of tax compliance in future, proposing instead a new code of conduct for bankers to turn away clients they suspect of tax evasion, along the lines of one used to clamp down on money laundering.
“It is the client who is responsible to fulfill his tax obligations. We strongly believe that bankers should not take over the responsibility of the tax administration, ensuring that money is tax compliant. No country in the world has asked its bankers to do it,” he said.
Meanwhile, Odier said he was hopeful Switzerland would reach a deal this year to settle a U.S. investigation into 11 banks - including Credit Suisse and Julius Baer - suspected of aiding wealthy Americans to evade taxes.
Switzerland is trying to get the investigations dropped in return for the payment of likely hefty fines and the transfer of U.S. client names. It is also seeking a deal to shield the remainder of its 300 or so banks from U.S. prosecution.
Editing by Mark Potter