Swiss banks shelter behind EU tax deal
German Finance Minister wants to close loopholes
Switzerland is resisting attempts to ensnare it in the widening European tax evasion investigation, using a deal with the European Union to support its position.
Despite competition from centres in Asia, Switzerland is by far the biggest offshore financial centre in the world. Swiss banks hold Sfr5.3 trillion (€3.4 trillion) in offshore bank accounts, according to data published by the Swiss National Bank.
The fact that a large number of these accounts are held by German nationals is unsettling top officials in Berlin. German Finance Minister Peer Steinbrück is leading calls to extend the scope of the EU savings directive and has asked other European countries to lend their support.
His efforts are gaining momentum. Last week the European Commission agreed to draw up proposals to widen the scope of legislation on tax evasion, and close a loophole under which trusts and some other savings escape the controls on cash accounts.
Steinbrück said closing these loopholes would help Germany recoup much of the estimated €30bn ($46bn) lost from tax evasion a year - much of which ends up in Swiss bank accounts.
But Switzerland has no intention of moving from its current agreement with Brussels on the savings tax directive, according to associations representing Swiss banks.
A spokesman for the Swiss Bankers Association said: "The EU savings directive was signed by Switzerland and the EU in 2004 and discussions for a revision could, according to the contract, not begin before 2013."
The association's stance is backed by Swiss public opinion, which loathes what it sees as German bullying. Michel Dérobert, secretary-general of the Swiss Private Bankers Association in Geneva, said: "When it comes to pressure from Germany, the Swiss public will always side with their banks.
"Switzerland is a sovereign state and is not about to be told what to do, especially by Germany."
Swiss private bankers are also angry about Germany's bellicose stance on tax. Speaking at his bank's results presentation last month, Sarasin chief executive Joachim Straehle said Germany should pay more attention to its tax rates at home rather than trying to track down tax evaders in other countries.
Pierre Mirabaud, chairman of the Swiss Bankers Association and senior partner at the Geneva-based private bank Mirabaud, took anti-German sentiment a step further last month when he compared the activities of Germany's BND intelligence agency in a nationwide crackdown on tax evaders as reminiscent of the Gestapo, the Nazi secret police.
Mirabaud has since apologised for his remarks, but the incident demonstrated the strength of the anti-German sentiment in Switzerland.
Possibly aware of rising tensions, Germany has yet to single out the Swiss financial sector, or individual banks. Analysts say Switzerland's offshore financial sector will face greater scrutiny, regardless of what the country's banks and financial associations are saying.
Philip Marcovici, a partner in the Zurich office of law firm Baker & McKenzie, said: "This is not an issue involving just Germany and the other offshore centres in Europe. It is a global trend towards greater transparency in the tax affairs of the rich.
"This involves offshore centres across the world such as Singapore, Hong Kong and even Latin American money residing in offshore accounts in the US."
Marcovici said all parties involved in the dispute should come together to negotiate the issues. "Germany needs to realise that part of the culture of secrecy in offshore centres like Switzerland is to do with historical factors like the second world war that it was responsible for.
"Equally, the banks need to realise that the days of banking secrecy are numbered as globalisation increases the need for transparency."
Switzerland and the savings directive
After protracted negotiations, the European Union and Switzerland signed an agreement in October 2004, which allowed clients of Swiss banks to choose between the exchange of information and a withholding tax amounting initially to 15% on interest payments.
The withholding tax would gradually be ratcheted up, to 20% from the July 1, 2008, and finally to 35% on July 1, 2011.
In the first six months the savings directive was effective in Switzerland, from July 1 2005 to the end of the year, Swiss banks collected Sfr160m, of which Sfr120m was transferred back to EU member states, according to the Swiss Bankers Association. The rest remained in Switzerland.
This amount rose to Sfr537m in 2006 - the latest figures available - of which Sfr403m was distributed to EU member states.
Under the agreement, the sacred cow of Swiss banking secrecy is maintained. The Swiss government stands by its view that "banking secrecy is not negotiable".
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