Compliance

Switzerland, US Seek To Strike Tax Transparency Deal In 2017 - Report

Josh O' Neill, Reporter, January 5, 2017

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The Alpine state is reportedly pushing to update a tax deal with the US as the country moves beyond bank secrecy.

Swiss authorities are seeking to update a tax deal with the US this year to permit the automatic, two-way exchange of information about bank accounts between the two countries, according to the Financial Times.

The move illustrates the scale of the transformation of bank secrecy underway in Switzerland, once renowned for facilitating tax evasion. In a series of recent high-profile cases, numerous Swiss banks - such as Credit Suisse and UBS - have had to collectively pay billions of dollars in US fines to settle disputes over secret Swiss bank accounts.

Switzerland is seeking to end the country's reputation as a haven for illicit money and in recent years has signed a string of agreements with other countries on the automatic exchange of information. 

Implementing globally-agreed standards was “very important for the reputation, competitiveness and integrity of our financial centre - and it is also a factor creating legal certainty,” Fabrice Filliez, deputy head of tax at the Swiss international finance department, reportedly told the Financial Times. 

Switzerland is the world's largest hub for cross-border private client wealth management. Although US authorities can already obtain information automatically about Swiss bank accounts under the US Foreign Account Tax Compliance Act of 2010, Filliez reportedly wants to follow other European countries in agreeing arrangements that would permit reciprocal exchange of information. As a result, such agreements would also allow Swiss authorities access to information on whether Swiss tax had been evaded on money stored in US bank accounts.

Filliez reportedly described the negotiations with the US as “technical” rather than political. If a deal were struck in 2017, legislation would have to be approved in the Swiss parliament the following year before the exchange of information could start. 

Scores of Swiss financial institutions have signed non-prosecution agreements and paid fines under a US Department of Justice programme, agreed in 2013, under which institutions were given the option to say if they were or were not at risk of having breached US tax laws. Separately, a new global regime of information sharing, known as the Common Reporting Standard, is now in force, although by a supreme irony, the US is not a signatory to it. The CRS has far wider scope than the US FATCA Act.

The US treatment of Switzerland for the latter's alleged sin of secret bank accounts is controversial; some figures in industry and academia have argued the US position, given the relatively low levels of transparency around Delaware-domiciled wealth structures, is hypocritical. 

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