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Switzerland Eases Stance On Bank Secrecy
03-14-2009 10:38 am - Matthew Saltmarsh - NY Times
The Swiss government bowed to pressure on Friday and agreed to exchange information on suspected cases of tax evasion, but it maintained that its principle of banking secrecy was intact.

Austria and Luxembourg also announced steps intended to fend off a global crackdown on tax evasion by offering concessions before a meeting of leaders from the Group of 20 nations in London at the start of next month.

That followed announcements by the small tax havens of Andorra and Liechtenstein on Thursday that they would relax bank secrecy rules.

In a statement on Friday, the Swiss government said it would agreed to exchange information with other countries on a case-by-case basis where there were “specific and justified” requests.

Accordingly, the government withdrew its reservations to a standard by the Organization for Economic Cooperation and Development on international tax norms “and to enter into negotiations on revising double taxation agreements,” referring to the organization’s Model Tax Convention. The government added, however, that “banking secrecy is maintained.”

“The Federal Council acknowledges that the wish of the people of Switzerland for appropriate protection of personal privacy is still firmly entrenched,” the statement said. “For this reason, it fully endorses banking secrecy and resolutely rejects any form of automatic exchange of information.”

That message was reinforced by the Swiss Bankers Association, which said in a statement Friday that “the privacy of foreign clients not under suspicion will continue to be protected by Swiss bank-client confidentiality.”

It added, “An automatic exchange of information is excluded.”

In addition, it said it expected that Switzerland would no longer be threatened with being put on an international blacklist of non-cooperative nations.

The agreement is a victory of sorts for France, Germany and the United States, whose revenue services have been seeking to claim potentially billions of dollars and euros in unpaid taxes on money deposited by their citizens in offshore bank accounts.

This week, it emerged that the O.E.C.D. had added Austria, Hong Kong, Luxembourg, Singapore and Switzerland to a list of uncooperative tax havens, which already included Andorra, Liechtenstein and Monaco. The list was being prepared for the Group of 20 at the request of Germany and France.

In Vienna, the Austrian government said Friday that it would do more to share information with other countries on suspected tax offenders, although it would not otherwise lift its bank secrecy rules. Austria will drop its objections to the O.E.C.D.’s tax standards after the organization clarified that it expected cooperation with foreign tax authorities only if there was a justifiable case.

“I can say today that the Austrian bank secrecy law can stay as it is,” Austria’s finance minister, Josef Proll, was quoted as saying by Reuters. “However, we will start in bilateral tax agreements to ensure information is shared if there is the suspicion of tax offenses.”

The Luxembourg government agreed to “exchange information on request in specific cases and on the basis of concrete proof” for investigations by other tax authorities, Bloomberg News quoted the country’s budget minister, Luc Frieden, as saying Friday, a day after a meeting in Paris with the O.E.C.D. secretary general, Angel Gurría.

“Luxembourg’s banking secrecy is not incompatible with O.E.C.D. rules,” said Frieden, adding that Luxembourg would keep its bank secrecy rules “as an instrument of protection for people’s privacy.”

The Liechtenstein government said Thursday in a statement that it "accepts the O.E.C.D. standards on transparency and information exchange in tax matters and supports the international measures against noncompliance with tax laws.”

“Today’s declaration was very important in the run-up to the G-20 meeting, so that Liechtenstein’s strategy is recognized," Prime Minister Otmar Hasler told a news conference in Vaduz, the capital. Liechtenstein is a country of 35,000 people nestled in the Alps between Switzerland and Austria.

Pressure had been building on Liechtenstein since over a year ago when Germany used bank data purchased from a former employee of LGT, the bank of the country’s ruling family, to begin investigating some 900 people suspected of tax evasion.

In January, Klaus Zumwinkel, the former Deutsche Post chief executive, received a two-year suspended sentence and a fine in a related case. On Tuesday, the island of Jersey agreed to share information with London on individuals seeking to evade taxes, making Jersey the last British offshore tax haven to offer greater disclosure.

Countries further afield have also been making moves to comply with international norms. The Singapore Finance Ministry said late last week that it had endorsed O.E.C.D. tax standards. An O.E.C.D. official said that this week Hong Kong also appeared to be moving toward international norms. A Monegasque official said Thursday: “The current position of Monaco is to make no comment at all.”

LIBERTYNEWS: You can read this article by New York Times correspondent Matthew Saltmarsh, reporting from Paris, France, in context here:

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