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Switzerland should be on tax haven blacklist

Published on 22/10/2008

22 October 2008

PARIS – Germany pushed Tuesday to include Switzerland on an international blacklist of countries which encourage tax fraud, teaming up with France to lobby for a global effort to clamp down on tax havens.

France and Germany are using the global financial crisis to reenergise efforts to regulate tax havens, accused by critics of providing shelter for banks to conceal losses, for hedge funds to avoid regulation, and of creating other loopholes which damage countries’ finances.

France, Germany and 15 other countries, at a meeting Tuesday in Paris, asked the Organisation for Economic Cooperation and Development to compile a new expanded blacklist of offenders.

German Finance Minister Peer Steinbruck said Switzerland, which has long resisted EU efforts to stamp out banking secrecy, should be on the new list. The OECD promised to complete the list by mid-2009, after which Berlin will host a conference to decide on how to deal with the listed countries.

"Switzerland offers conditions that prompt German taxpayers to evade taxes," said Steinbruck. "Switzerland belongs on the blacklist."

He also proposed retaliatory measures, such as increasing German surveillance of financial institutions with subsidiaries in tax havens.

Switzerland, along with Luxembourg and Austria, declined to attend Tuesday’s meeting, said the host, French Budget Minister Eric Woerth.

Echoing earlier comments from French President Nicolas Sarkozy, Woerth said: "We can’t tolerate any more that the image of the international financial system is ridden with pockets of opacity, excessive secrecy or the absence of regulation."

But divisions within Europe on banking secrecy have frustrated efforts to stamp out tax fraud.

Germany has been pushing for new European Union rules to make it harder for people with large savings to avoid taxes ever since embarrassing revelations emerged earlier this year that current loopholes allowed top German businessmen to hide millions of euros from tax authorities.

Luxembourg and Austria, which have strict banking secrecy laws similar to those in non-EU members Switzerland and Liechtenstein, have been hesitant to adopt EU tax rules for fear of losing lucrative banking business.

Ireland, to the contrary, was praised after it raised nearly EUR 1 billion in missing tax revenue and made public the names and addresses of tax offenders.

In 2000, the OECD, a 30-country economic forum, established a list of 40 tax havens. It later convinced most of them to start exchanging information and become more transparent. Only Andorra, Liechtenstein and Monaco refused.

Transparency International, a global anti-corruption network, says tax havens around the world host more than 400 banks, two thirds of the world’s 2000 hedge funds, and around two million front companies which deal in around USD 10 trillion in financial assets.

[AP / Expatica]