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By Caroline Copley
February 22, 2012 2:21 PM EST
Switzerland announced plans on Wednesday to force its secretive banks to do more to make sure foreign clients' money is taxed in an attempt to shake off its image as a haven for untaxed funds as it seeks to end a damaging U.S. tax probe.
Finance Minister Eveline Widmer-Schlumpf told a news conference the government would draw up requirements by September to enhance due diligence requirements for banks when accepting assets as well as introducing a demand for foreign clients to declare they have met their tax obligations.
"We're convinced that it's best for clients to keep privacy but also acknowledge countries' legitimate claims on taxing citizens. With this strategy we can fulfil both needs," she said.
A global crackdown on tax evasion by cash-strapped governments in recent years has chipped away Switzerland's cherished tradition of banking secrecy, which had helped it build up a $2 trillion (1.28 trillion pound) offshore wealth management industry.
Under pressure in particular from U.S. and German tax investigations, Switzerland has already taken steps to make sure its bank clients pay their home country taxes, including plans to levy a withholding tax on foreign assets and more co-operation with authorities pursuing alleged tax dodgers.
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Widmer-Schlumpf is walking a tightrope between satisfying left-wing politicians who want a tougher clampdown on banks and avoiding further howls from the right which has staunchly defended strict bank secrecy laws.
Widmer-Schlumpf said she hoped Wednesday's announcement would help the passage next week through parliament of a crucial proposal that would allow the government to meet U.S. demands for bank client data as it tries to settle a damaging dispute.
The Social Democrats (SP), whose support Widmer-Schlumpf will need in next week's vote, said the cabinet's plans were a step in the right direction.
"The SP welcomes the cabinet's willingness to give in. Against this background, the party will suggest ... accepting the double taxation agreement with the United States," it party said in a statement.
Switzerland has been lobbying for a year to end investigations by U.S. tax authorities into 11 banks, including Credit Suisse
At the news conference, Michael Ambuehl, state secretary for the finance ministry, declined to comment on how negotiations with Washington were progressing.
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In a sign the U.S. Department of Justice is losing patience, earlier this month it indicted Switzerland's oldest bank, Wegelin, on charges that it helped wealthy Americans to evade taxes on at least $1.2 billion hidden in offshore bank accounts.
This tightening of the noose has rattled bankers, already jittery about travelling abroad for fear of being arrested.
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