Swiss tax evasion ruling

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A court in Switzerland ruled today that a Swiss financial regulator broke secrecy laws by ordering the bank UBS to release client information to U-S tax authorities. Anchor Jeb Sharp finds out more from Beat Kappeler, an economist and weekly contributor to the daily “Le Temps” in Geneva.

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JEB SHARP: A court in Switzerland issued a ruling today that American officials might find interesting.  The court said it was illegal to release confidential bank account information to tax investigators in the United States.  The ruling said the Swiss financial regulator broke the law last year by giving US officials account information relating to customers of the Swiss bank UBS.  The regulator may appeal that ruling, though. Beat Kappeler, is an economist and a weekly contributor to the daily Le Temps in Geneva.  Beat, what’s the gist of the legal decision and what’s the reaction there?

BEAT KAPPELER:  The legal decision takes back a decision by the financial regulator in February to give 255 names to the American authorities.  There was much pressure and now the court says this was a breach of the Swiss law at that time and it reinstates, in a certain sense, the traditional Swiss banking secrecy.

SHARP:  Is there a particular piece of Swiss law that it violates?

KAPPELER:  Yeah, it is the law about banking secrecy.  The famous banking secrecy was absolute and very, very strict.  In the meantime, this banking secrecy of Switzerland has been brought into the fold of tax agreements.  Switzerland has signed such an agreement with the United States, with countries of the European Union.  Switzerland now gives information about tax fraud by foreigners with deposits in Switzerland, if the foreign authorities give names and circumstances and credible suspicions.  At the time in February, it was much more strict.  The law forbad, with heavy sanctions, to give information abroad.

SHARP: And how many names have been given to the US government?

KAPPELER:  At the time, 255 names seem to have been given.  In the meantime, only a few of them have been condemned by the American courts, but it is not clear that every one of those 255 was a fraudster.  But the names were given.  The names are now in the hands of the American authorities.  Now, as the court says, it is illegal to do such transfers.  The Swiss conception of banking secrecy has been reinforced, and that’s why the private bankers are jubilating.

SHARP:  And is there resentment in Europe about the role of the American government in pressuring Swiss regulators in the first place?

KAPPELER:  Not Europe, but in Switzerland.  Swiss people think that our small state has been bullied and mobbed by the United States, by the European Union and by the German finance minister at that time.  The resentment is quite strong.  On the other hand, of course, within Switzerland, there are the usual cleavages.  The Socialists, Communists, and so on, are against banking secrecy, are for a full disclosure of everybody at any time.  And more central parties of course insist that this discretion and banking secrecy is not only a banking technique or a tax technique, but it belongs to the spirit of Switzerland.  Taxes are low and taxes are legitimate.  They are voted by people and set into the constitution.

SHARP:  And by contrast, people outside Switzerland tend to roll their eyes when you mention Swiss banks, as if there’s something almost automatically nefarious.

KAPPELER:  You have to differentiate I think the ordinary people and people who take advantage of the Swiss banking system.  But the big editorialists, the politicians,  and so on, the glitterati, all those people of course have a very high moral standard, and accuse sometimes [INDISCERNIBLE] not behaving as everybody behaves.

SHARP:  Beat,  whichever way this goes, do you think this is a watershed in Swiss banking?  Do you think the banking system will never be quite the same again?

KAPPELER:  No, I don’t think, because the Swiss banking system was not essentially constructed on tax evasion or tax fraud.  That is the first point.  The second point is that many other factors are behind the Swiss banking place.  Take the sovereign currency, which is still not a euro, and is a strong currency with low taxation.  I think there are much, much more other factors than just this one.  And remember, that the decision of the court reinforces the position of the banks, not to give just every account, just to give every name to foreign authorities.  It’s a confirmation of the traditional Swiss banking secrecy.

SHARP:  Beat Kappeler is an economist and a weekly contributor to the daily Le Temps in Geneva.  Thanks so much.

KAPPELER:  Thank you.

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