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Swiss should ‘suspend’ tax data transfer to abusive countries

Switzerland should not automatically transmit tax data to countries that abuse new treaties in order to coerce their citizens, the Swiss banking lobby group said on Thursday.

Commenting on plans to extend tax data transfer to 43 further countries such as China, Russia and Saudi Arabia, the Swiss Bankers Association (SBA) said treaties should be suspended if malpractice is detected.

SBA CEO Claude-Alain Margelisch demanded strict controls to ensure that countries receiving data on their citizens from Swiss banks used it for tax purposes only. “It is important that this control be undertaken very carefully on a practical, case-by-case basis according to clear criteria, and that the exchange of information be suspended if there is reason to suspect improper application,” he said in a speech in Zurich.

His comments went further than the recent recommendations of a key parliamentary economics committee, which looked into the issue earlier this week. The committee also wants the treaties to clarify how data can used and to beef up supervision of countries with questionable democratic credentials.

It also wants to ban tax exchange treaties with countries that do not also have similar deals with countries that directly compete with the Swiss financial sector, such as Britain.

Later this month, parliament will debate whether to extend automatic tax exchange to the next tranche of 43 countries. Switzerland already has 38 treaties in place with advanced economies, with data exchange taking place at the start of next year. The government has already given its seal of approval to more than doubling this network to meet international demands for tax transparency.

Unreasonable obstacle

Not all the 43 countries inked in for treaties, which also include India, Hong Kong and Singapore, appear so contentious. But some politicians have a problem with the likes of Indonesia, Brazil and Colombia. The rightwing Swiss People’s Party earlier this year demanded a veto on data transfer to countries that fall foul of Transparency International’s Corruption Perceptions Index.

The SBA’s demands are likely to displease anti-tax evasion campaigners, such as Tax Justice Network (TJN), which has accused Switzerland of trying to wriggle out of its obligations to automatically exchange data via the back door.

“It could mean throwing up obstacles for countries seeking to receive data on their citizens’ holdings in Swiss bank accounts. It could also mean that some countries are excluded from exchanging information altogether,” read a recent TJN blog post.

But Margelisch denied this charge. “I would like to emphasise that Switzerland cannot get around the implementation of this international standard,” he said on Thursday. “Requesting that the process now be halted is unrealistic and would expose Switzerland to unnecessary criticism. But there should be a number of security mechanisms in place that protect customers and their information.”

Swiss Bankers Day message

At its annual Bankers Day event, the SBA urged the Swiss government to bare its teeth to defend Switzerland’s financial sector from external pressures.

In addition to defending the financial sector from the possible adverse effects of tax transfer treaties, the SBA also called on the government to stand up to the European Union over the future access of Swiss banks to the eurozone.

Switzerland is in the process of updating its banking and consumer protection legislation to match EU regulatory advances. But it is not yet clear whether the EU will accept the Swiss changes as compatible with Swiss law.

SBA chairman Herber Scheidt, called on the government to “throw our weight assertively and firmly” during negotiations with the EU. “This includes making a further tranche of cohesion policy funding contingent on the recognition of applicable Swiss laws as equivalent by the EU,” he stated on Thursday.