Thursday, 19 February 2009

UBS releases names - end of the road for Swiss banking secrecy?

According to Reuters there may be cracks developing in Swiss banking secrecy

UBS, the world's biggest bank to the rich, agreed late on Wednesday to pay a hefty $780 million fine and disclose the identity of some clients after U.S. investigators accused it of helping wealthy Americans to dodge taxes.

Some observers believed the deal opens cracks in the country's tough bank secrecy laws and could potentially undermine the $7-trillion global offshore banking industry.

President and Finance Minister Hans-Rudolf Merz defended the settlement said the principles of secrecy remained in place. He said UBS had had no choice but to settle the case to avoid criminal charges that could have threatened its existence and undermined Switzerland's economy.

"Bank secrecy will stay," Merz told a news conference.

"It became evident that if the American authorities would bring UBS to an indictment...the whole threat would have been falling also on our economy."

Switzerland does not consider tax evasion a crime, and Swiss law prohibits disclosure of client data or names unless the country's authorities believe the client has committed a serious crime such as money laundering or tax fraud.

The financial crisis is heaping added pressure on tax havens like Switzerland to stop helping the wealthy hide their money from the taxman as governments seek funds to pay for more spending.

Germany has said it wants Switzerland put on a tax haven blacklist and launched a probe last year into its nationals stashing assets in Liechtenstein.

Thousands of wealthy westerners avoid taxes by hiding assets in Switzerland and other offshore centers, and U.S. lawmakers say tax havens deprive Washington of $100 billion a year.

As suggested previously the Obama government seems to be ready to take on the issue of tax avoidance via havens such as Switzerland and parts of the Caribbean. This will create tensions in the relationship between the US and the UK which is probably the most favorably disposed jurisdiction in the G7 to maintaining the status quo for those who have an aversion to paying their fair share of tax.

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