The year 2017 is an important one for the Swiss banking sector. As of January 1st, the country’s financial institutions are now obligated to share banking information. This new regulation effectively ends Switzerland’s reputation as a tax haven. The collection of data begins this year, and information will be shared with other countries come 2018.
No More Swiss Bank Secrecy
Switzerland has been a global financial hub for several decades now. Unfortunately, the country has also acquired a bad reputation over its bank secrecy, as financial institutions were not obligated to share banking information with other countries. But thanks to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, that situation has come to change.
To be specific, Switzerland only shared information with countries it had a deal with to prevent double taxation. A very awkward structure that allowed for the creation of shell companies and tax evasion. However, the Swiss government acknowledged something had to change back in 2014, when they signed this convention. In 2015, the deal was approved by the Swiss parliament.
Although this new “treaty” is designed to reduce tax evasion and money laundering through Swiss banks, some of the roadblocks are still present. If an account holder is suspected of tax evasion, but the information to back up this claim is “stolen”, the country will not cooperate with the investigation. This is somewhat understandable, albeit it can make specific investigations all the more difficult.
Countries who have signed agreements with Switzerland will no longer need to request data on their citizens’ bank accounts in the country. All of these details will be shared with other parties once a year. However, it will not be made public, and the information can only be used for tax collection efforts and no other criminal investigations.
It is important to keep in mind this new treaty will still pose challenges for developing and poor countries looking to obtain this information. Since most of those regions do not meet the resources to fulfill the conditions for an automatic information exchange, they will have a hard time getting any response from the banks whatsoever. Richer European countries, as well as Australia, Japan, and Canada, will be able to reap the benefits from this automated process.
In the end, the new treaty is a positive development, even though its effect will be minimal. Tax evasion through a Swiss bank account will become a lot harder for European residents, whereas it may become even easier for people living in developing regions. A step in the right direction, but the execution of this information sharing agreement goes to show a lot of work still has to be done.
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