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.