No More Dodging Taxes with Offshore Swiss Accounts?

On October 15th, Switzerland signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and became the 58th country to do so.

The Convention was developed by the Council of Europe and the OECD in 1988 and amended in 2009. It was designed to develop cooperation among international tax authorities in order to combat tax avoidance and evasion. This cooperation varies from exchanging information to recovery of foreign tax claims. At the same time, the Convention has rules that will protect a taxpayers’ right. This includes the requirement to comply with domestic laws to protect confidentiality and also with the domestic law of the supplying Party.

Although it still needs to be ratified by the Swiss legislature, it shows that Switzerland is going in the right direction in efforts to solve the tax evasion issue. Stefan Flukiger, Switzerland’s Ambassador to the OECD, stated:“The signing of the Convention confirms Switzerland’s commitment to the global fight against tax fraud and tax evasion with a view to safeguarding the integrity and reputation of the country’s financial center.”

The Swiss banks were always famous for hiding assets for people trying to avoid what they owe back in their own country. I do not doubt the United States Government will be pleased since they top the list of countries losing to tax evasion. Tax evasion has cost the U.S. Government over $3 trillion over the past decade. However, one could argue the only reason the U.S. tops this list is because of the size of their economy. Either way, it is a significant amount of money!

I’m sure these wealthy individuals have other tricks up their sleeves. This signing seems like a warning to these tax evaders to get their money out. Therefore, before Switzerland ratifies this Convention, these individuals will likely have their money transferred to a new tax haven. Nevertheless, one could hope that the signing of this Convention by the Swiss Government will lead to other countries following their lead.

Sources:

Convention on Mutual Administrative Assistance in Tax Matters

Switzerland Becomes a Party of the Convention

Demos’ U.S. Tax Evasion Statistic

The Boston Globe

Photograph:

Key Benefits Photo

 

2 comments

  1. I think it is great for the Swiss to make regulation commitments with regards to their internationally famous banking systems. How many times have you heard a cinematic villain or criminal state that they want the ransom money or hostage funds deposited into a Swiss bank account? There is a reason for this. While character villains aren’t as common as tax evaders in our modern world, the concept is the same. We must not forget the historical significance of the regulation commitment made by the Swiss. Switzerland is a country that has claimed to be politically neutral in various conflicts, in fact, this neutrality successfully kept Switzerland out of World War 2. However, this sense of European isolationism bred a nuanced neutrality which permitted Swiss bankers to look the other way when questionable funds were deposited into their accounts. This commitment to regulation signifies a complete reversal of the status quo and hopefully will yield great results for certain countries that are affected the most by tax evaders. While I hope this will yield great results and revenue for affected countries, I think those who are committed to finding ways to avoid paying taxes will always be able to find a way to do so. Hopefully the programs instituted by these countries will be able to be administered competently.

  2. I agree with Justin and his comment above. Swiss bank accounts are portrayed in movies as the haven for mobsters and crooks. The ratification of this Convention will be very significant because the once so called haven will be closed for many. I can see many people who hold Swiss accounts moving their assets elsewhere but this will hopefully be the start of a trend. By Switzerland adopting this convention, and hopefully other countries to follow, will restore the integrity and reputation of its financial centers. Tax evaders will have a hard time finding places to store their assets in order to evade taxes.

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