Nick Shaxson ■ Switzerland wants to cherry-pick “partner” countries on transparency
Updated, Oct 10, with additional analysis from the Swiss “Q and A“:
Switzerland has grudgingly made some important concessions on secrecy in recent years – although we’ve always been at pains to stess that it has happened an inch at a time, and usually bilaterally. Typically, this means making concessions to one country alone – most importantly, the United States, or to the European Union. Each time, it’s been in response to intense pressure. Generally, Swiss bankers have remained at the feeding trough of dirty money from developing countries, since they don’t have the political or economic clout to hurt them back in retaliation for their help-a-plunderer role.
At the same time, of course, Switzerland has been engaged in that theatre of probity, the tax haven staple: ‘we’re all clean now, we don’t do dirty money, and we are a transparent, cooperative and well regulated financial centre.’ And at the same time, it’s been an aggressive player in trying to resist, challenge and unpick international initiatives on transparency. Here’s just one example.
The latest guidance from the Swiss Federal Department of Finance is yet another example of how Switzerland’s government continues to fight against transparency.
For those who don’t know, there has been a big, concerted push in the last three years or so on transparency, towards an approach that TJN has long advocated: automatic information exchange, on a multilateral or even global basis. The European Union has been tightening up its Savings Tax Directive and other mechanisms, directly affecting over 40 countries; the United States has been pushing out its Foreign Account Tax Compliance Act (FATCA), and most recently the OECD has weighed in with the more geographically comprehensive and useful Common Reporting Standards.
These, by the way, are supposed to be global standards, which Switzerland has (of course!) said it “warmly welcomes.” But, once again, we see the evidence that it wants to cherry pick those bits it can accept, and reject those it doesn’t want. See the latest:
“Negotiations on the automatic exchange of information will be initiated with further selected countries. In an initial phase, consideration will be given to countries with which there are close economic and political ties and which, if appropriate, provide their taxpayers with sufficient scope for regularisation.
The introduction of the automatic exchange of information with foreign countries will be conducted by means of agreements with partner countries. Moreover, implementing legislation will be required in national law. This is currently being prepared by the Federal Department of Finance and will be submitted to parliament together with the negotiated agreements. The existing legislative framework excludes the automatic exchange of information.”
Now there is a whole load of baggage to unpack.
Consider, first, that bit in bold. This looks like a recipe for cherry-picking countries to be transparent (and let’s not forget, this is Swiss-style transparency, which is only a pale shadow of the real McCoy). Their cherry-picking is presumably going to be based on a balance between how much heat Switzerland is getting from that particular country or bloc, on the one hand, versus how much dirty money their bankers are handling and profiting from. Their bankers probably have that balance laid out on a spreadsheet somewhere.
Update: the accompanying Q and A adds to that sentence in bold:
“and which are considered to be important and promising in terms of their market potential for Switzerland’s financial industry.”
Exactly. And they stress that agreements are to be ‘bilateral’ – which, as it happens, is the kind of agreement that gives Switzerland maximum leverage: it’s easier to pick off financial foes one by one.
And while we’re at it, what are “close economic and political ties”? Imagine a small poor African country, whose oligarchs have ten billion dollars’ worth of wealth stashed in Zurich and Geneva. That’s a whole lot for that country – but rather piffling for Swiss bankers. No close economic ties there, so the Swiss bankers can keep facilitating the looting.
Update from Q and A: they add
“The primary focus is on the EU and its member states, as well as the United States.”
In other words, the parts of the world that have been giving Switzerland plenty of heat.
If the OECD and Global Forum tolerates and even endorses Switzerland’s efforts to cherry-pick its partners for automatic information exchange, then is this the final nail in the coffin of the widely trumpeted “end of bank secrecy?” As we’ve noted before, the OECD does like to trumpet this.
We don’t have the energy to skewer them, one by one. We’ll merely note, to finish, the section that says Swiss laws “exclude the automatic exchange of information.”
We respect the sovereign right of countries like Switzerland to set their own laws, of course, particularly for a democracy as deep-rooted as Switzerland’s. On the other hand, we would respect the sovereign right of foreign countries, whose own tax and criminal justice systems are undermined by Switzerland’s, to take extremely aggressive and punitive countermeasures, and to come together in global alliances to exclude Switzerland from international fora, trading arrangements, or anything else.
Whatever it takes to make the Swiss criminal bankers’ pips squeak.
Indonesia launches investigation following ‘Macao Money Machine’ report
October 2021 Spanish language podcast, Justicia ImPositiva: Los Pandora Papers, el Bitcoin en El Salvador y crisis de la inmobiliaria en China #64
Pandora Papers shows transparency failure is an accountability failure
Tax Justice Network Portuguese podcast #29: Fim à tributação que penaliza os mais pobres
Isle of Man banking data leak reveals how sharing data can identify offshore strategies and improve beneficial ownership
Isle of Man banking leak: Analysing banking data to reveal offshore strategies
29 September 2021