Swiss bow to pressure and relax bank secrecy

Switzerland is to water down its bank secrecy laws, it said on Friday, after a week in which offshore banking centres from Liechtenstein to Singapore have bowed to international pressure to help tackle tax evasion.

Austria and Luxembourg said on Friday they would make it easier for foreign governments to pursue tax evaders, a day after Andorra and Liechtenstein announced similar steps.

Jersey and the Isle of Man have moved to improve transparency in the last week, as has Singapore, one of Asia's leading offshore wealth management centres. Hong Kong took similar action last month.

Hans Rudolf Merz, Switzerland’s finance minister, stressed the core of the country's bank secrecy laws would not change, meaning customers’ accounts would remain confidential in all but exceptional cases, such as criminal investigations. But he said Bern would abolish the strict distinction between tax fraud, a crime in Swiss law, and tax evasion, a civil offence.

The move should make it easier for foreign authorities to get co-operation from Swiss counterparts, who have until now helped only with demonstrable tax fraud.

Mr Merz, head of state this year under Switzerland’s rotating presidency, agreed Bern had caved in to outside pressure. “It is so,” he said in an interview.

Germany launched a clampdown on undeclared accounts in Liechtenstein last year, widely seen as a prelude to action against Switzerland.

Separately, the US has targeted UBS, Switzerland’s biggest bank. The G20 group of industrialised and developing nations is preparing to highlight allegedly unfair tax practices at its April summit.

Mr Merz said threats to create a blacklist of “tax havens” were being used to intimidate countries with bank secrecy.

He accepted that countries were entitled to focus more on tax evasion amid spiralling budget deficits, but warned that a “tax haven” was coming to be defined as anyone with levies lower than one’s own.

Mr Merz said he hoped Switzerland’s steps to accept tax transparency standards set by the Organisation for Economic Co-operation and Development would now allow smaller countries to be treated more fairly.

“We want all these procedures in future to be regulated under the rules of law and OECD accepted practices,” he said.

He accepted the need for more co-operation but said Switzerland would resist automatic tax information exchanges with other countries, a measure sought by several European leaders. The Swiss see it as an infringement on individual liberty.

He said although some clients might withdraw funds, greater transparency would not hurt Switzerland as a financial centre since it gave such good service.

“The qualities of reliability, predictability and good service that Switzerland can offer are well known and won’t change,” he said.

“There will be some outflows, but I don’t expect serious consequences, given Switzerland's acknowledged attributes.”