Leaders of the G-20 have now declared that “the era of banking
secrecy is over,” and have threatened to take action against
“non-cooperative jurisdictions, including tax havens.” No one should
include Switzerland among these, for the Swiss government has already
offered to improve international cooperation by adopting the OECD’s
standard on international administrative assistance on tax issues.
To appreciate the implications of this, it is important to know the
background. Swiss banks are obliged by law to extend a very high degree
of bank-client confidentiality to all their clients, both Swiss and
foreign. Any banker who reveals details of his clients’ affairs to
unauthorized third parties is committing a criminal offense in
But this bank-client confidentiality has never been 100% absolute,
and Swiss legislation makes absolutely clear what it protects and what
it does not protect. It poses, for example, no obstacle whatsoever to a
One characteristic of Swiss law is that it distinguishes between tax
evasion and tax fraud. Submitting an incomplete tax return, for
example, would be tax evasion and is handled through administrative
measures, including severe fines if necessary.
So, despite some foreign media reports, tax evasion is not legal in
Switzerland; it merely is not a criminal offence. Anyone found to be
illegally evading their tax obligations in Switzerland faces severe
Tax fraud, on the other hand, involves forging documents and thus
much more criminality. Tax fraud is a criminal offense in Switzerland.
The international implication is that Switzerland has traditionally
offered international assistance in criminal tax cases that have
elements of fraud, but not of evasion. By agreeing to adopt the
standard on the exchange of information set out in Article 26 of the
OECD’s Model Tax Convention, Switzerland will now extend administrative
assistance to cover all tax offenses, including tax evasion.
States that implemented Article 26 agree to exchange information
upon request, but not to the automatic disclosure of information. This
means that the country seeking information must produce a substantiated
request, naming the taxable person and the specific bank in question or
describing them in sufficient detail. So-called “fishing expeditions” –
indiscriminate trawling through bank accounts – remain out of bounds.
The privacy of clients not under suspicion will thus continue to be
protected by Swiss bank-client confidentiality. Citizens in a democracy
would never allow their government to have an automatic right of forced
entry into their homes on the off-chance of finding stolen goods, so
why should the state have an automatic right of forced entry into bank
accounts on the off-chance of finding a few tax evaders or criminals?
Once Switzerland makes a commitment to do something, it does it
thoroughly, efficiently, and on time. The implementation of the
agreement with the European Union on the taxation of savings is a good
example of this.
I am confident that the same reliability will be demonstrated in
Switzerland’s commitment to take on the OECD standard, which will be
incorporated into future bilateral double-taxation agreements.
Following this commitment, improper criticism of Switzerland and its
legal system, and also various threats to put Switzerland on a
so-called “black list,” should end.
But I have not quite finished with the OECD. The OECD is a
multinational grouping of 30 countries established nearly a
half-century ago, with Switzerland a member. It is not an international
organization, and it has no legal authority to speak for the world or
to establish rules, norms, or standards for any state except its own
members – that China is not a member demonstrates clearly the limits of
its reach. The OECD’s founding convention calls on it to assist sound
economic expansion and to contribute to growth in world trade on a
multilateral, non-discriminatory basis.
Switzerland’s recent treatment by the OECD, however, has been
disgraceful. The secret drafting of a black list behind a member’s back
is unacceptable and, in my view, seriously damages the OECD’s
Incidentally, I think it would be far more revealing to draw up a
list of those states that have destroyed or damaged the relationship of
trust with their citizens to such an extent that they can only secure
their tax revenues by criminalizing tax evasion and trampling on
Accusations that Switzerland is a tax haven usually come from
countries that have a low level of taxpayer honesty. The Swiss state,
by contrast, has an excellent relationship with its taxpayers, and
there is a correspondingly high level of taxpayer honesty. The Swiss
people vote their own taxes, have a high degree of control over how tax
revenues are spent, and believe their tax system to be fair,
transparent, and comprehensible.
Critics should study the Swiss model with a view to improving things
in their own countries. The OECD itself has drawn attention to
Switzerland's Code of Conduct for Tax Authorities, Taxpayers and Tax Advisers
as an example of how to promote what it calls an “enhanced relationship between taxpayers and revenue bodies.
Of the world’s tax evaders, 99.99% do not have a bank account in
Switzerland, but Switzerland is an easy target. There is no political
risk involved; the Swiss have no powerful lobby in the United States or
the EU that they can mobilize; as the birthplace of private banking,
Switzerland has enormous symbolic value; as the world leader in private
banking, it triggers jealousies.
In these difficult economic times, Switzerland serves as a handy
scapegoat, enabling financially-challenged states to discharge their
frustrations and divert their citizens’ attention from shortcomings in
their own complicated and inefficient tax systems. Attacks on
Switzerland should be seen and analyzed from this perspective.
Pierre G. Mirabaud is Chairman of the Swiss Bankers Association.