Switzerland to Hinder Tax Cheats


ZURICH—Switzerland said it will make it easier for foreign governments to hunt for tax cheats with Swiss bank accounts, amid continuing criticism that it still does too little to assist international tax authorities even after two years of pressure to ease bank secrecy.

The Swiss Finance Ministry said Tuesday that Switzerland will provide information on holders of bank accounts if foreign tax authorities provide the bank-account number or other information, such as a Social Security number or credit-card details.

Until now, the Swiss demanded other bank-account details, as well as the name and address of the individual—a requirement that goes beyond rules typical in other countries. The extra hurdles made it hard for foreign tax authorities to get enough information out of the Swiss to pursue tax cheats. The Swiss requirements were so tough that Bern received an average of only three such requests each year until 2009, despite Switzerland’s being the world’s largest offshore banking center.

“In the past, the Swiss had an extremely high threshold [for giving help in tax matters],” according to Milan Patel, head of the Zurich office of tax advisory firm Sharp Kemm P.A. “The perception was, ‘Why bother if we’re not going to get anything?’ ”

Switzerland made the change after it concluded it wouldn’t pass review by a tax forum organized under the umbrella of the Organization for Economic Cooperation and Development. The continuing review stems from the move in 2009 by the OECD to put Switzerland on a so-called gray list of tax havens because of its refusal to recognize tax evasion as a crime.

Tax fraud, or intentionally seeking to avoid taxes, was a crime in Switzerland, while tax evasion was not.

As a result, foreign governments had to prove a suspected tax cheat committed tax fraud, rather than tax evasion, to get help from the Swiss. In 2009, Switzerland dropped the distinction. But it demanded the exact name and address of the individual. Tax agencies often have bank-account information because they see movements of money, but don’t have the account holder’s name.

The Swiss hindered tax investigations in the case of misspelled names or inexact addresses. In some cases, they demanded the name of the so-called beneficial owner, or the individual behind a trust or an offshore entity who were the titular account holders.

Now the Swiss will help if a foreign country provides a reasonable amount of information to track down an account, although it will draw the line at so-called fishing expeditions, where a foreign government provides only scarce details in search of a tax cheat.

“We can’t be so formalistic” in the information we require,” said Urs Ursprung, director of the Swiss Federal Tax Administration in an interview. “But the requesting state has to give some back ground as to why they suspect a person.”

Jeffrey Owens, director of the Centre for Tax Policy and Administration at the OECD, said the change will likely affect a small number of cases, but will act as a deterrent to tax evaders seeking to open Swiss bank accounts. “This sends a strong signal that Switzerland is no longer in the business of facilitating offshore tax evasion,” he said in an interview.

The news comes as Switzerland continues to grapple with ways to satisfy foreign governments seeking to crack down on tax evaders in order to fill depleted public coffers. Last fall, Switzerland struck a landmark tax agreement in principle with the U.K. and Germany whereby the Swiss would collect a withholding tax on assets stashed by British and German investors in Swiss accounts, and send the money to London and Berlin. In return, the identity of the accounts would remain secret. Bern is still finalizing the details of these treaties.
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