Amid much fanfare, a new Swiss law entered into force on August 1, 2014 making it easier for other countries to extract information on tax dodgers. The revised Tax Administrative Assistance Act (TAAA) now permits Swiss banks to respond to a wider range of administrative assistance requests concerning their foreign clients.
Anyone hoping that Switzerland’s law change will automatically lead to the alpine state accepting the notorious stolen HSBC data is mistaken. Group requests in particular will be allowed, as long as they are not based on stolen information.
A requesting country has to demonstrate that any information it wants from Switzerland has ‘foreseeable relevance’ to a criminal investigation into tax dodgers, according to article 26 of Organisation for Economic Co-operation and Development’s Model Tax Convention, of which Switzerland is a signatory.
The TAAC revisions actually change the following:
- It is now possible for countries to make group requests on Switzerland. This could speed up the paperwork process considerably where there is evidence of multiple tax dodgers at a particular bank. and
- It significantly waters down a Swiss law that requires account holders to be informed in advance that their data will be handed over to a third party. This greatly reduces the chance of tax dodgers simply withdrawing their assets and vanishing before they can be prosecuted.
Switzerland did not change its laws for no reason, but was responding to criticism from the Global Forum on Transparency and Exchange of Information for Tax Purposes, a body set up to monitor the crackdown on tax evasion on behalf of the OECD and the G20.
The TAAC revisions should actually be put into the context of a whole series of reforms that Switzerland has been implementing in the last few years. These include:
- Erasing the legal distinction between tax evasion and fraud,
- Loosening the standards of identifying suspected tax cheats and
- Renegotiating dozens of double taxation agreements.
The only real solution, for advocacy groups like Tax Justice Network, is to devise a multilateral system for automatically exchanging tax information. Here too, Switzerland has been making encouraging noises. In October last year, the alpine state signed the OECD/Council of Europe Convention on Mutual Administrative Assistance in Tax Matters, which could allow for the automatic exchange of tax information in certain circumstances.
In May of this year, Switzerland went one stage further by expressly agreeing to take part in automatic information exchange provided that the recently-negotiated global standard governing the system is rubber stamped by all major financial centres. The TAAC revisions that came into force in Switzerland on August 1, 2014, lay the final foundation stones for the possible adoption of automatic information exchange by Switzerland.
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