Finance news

VIENNA–Switzerland, Austria and Luxembourg offered yesterday to relax strict bank secrecy in some tax evasion cases in a response to a global crackdown on tax havens that is rattling the offshore banking industry.

The three countries made the concessions ahead of a meeting starting yesterday of G20 finance ministers that was to discuss tax havens.

Similar moves were made by Andorra and Liechtenstein on Thursday.

All five were on a list handed to the G20 this week by the Organization for Economic Co-operation and Development (OECD), which deems bank secrecy rules as undesirable.

British Prime Minister Gordon Brown, who is chairing a G20 summit in April, welcomed the Swiss move and said he hoped this was the beginning of the end for tax havens. "The summit in London next month is an opportunity for global agreement on the further actions we need to take to clean up the global financial system," Brown said.

Switzerland will now co-operate in cases of suspected tax evasion, at least once double taxation agreements are renegotiated with other countries, which may take time. It also said it could seek an amnesty for existing clients.

Previously, the world’s biggest offshore banking centre would only co-operate with foreign authorities once outright tax fraud could be proved, which has recently hindered American access to client data of Switzerland’s biggest bank UBS in an ongoing tax probe.

Switzerland’s finance minister, Hans-Rudolf Merz, who also holds his country’s rotating presidency, said Switzerland is now co-operating because being put on a blacklist, and the possibility of sanctions, would have hurt the economy.

The OECD blacklist currently includes Liechtenstein, Andorra and Monaco, but France and Germany have been pushing for others, including Switzerland, to be added.

The tax debate is crucial for the wealth-management industry, which handles an estimated $7 trillion (U.S.) of assets out of offshore centres around the globe, of which about $2 trillion is held in Switzerland and about $1 trillion in Luxembourg.

Merz said it is hard to say whether yesterday’s moves would prompt an outflow of money, noting that other tax havens such as rising Asian rivals Singapore and Hong Kong have also adopted the OECD’s rules recently no credit check payday loans.

The European countries insist the move will not lead to "fishing expeditions" by other states for client data and say banking secrecy rules would be otherwise upheld.

"It is not an open-door policy," Merz said. "It is an easing of access to information in respect to tax crime."

Switzerland has accused the United States of being on a "fishing expedition" by pursuing a civil case against UBS to try to access details of 52,000 clients, even after the Swiss bank paid $780 million to avert related U.S. criminal charges.

In a separate statement yesterday, the Swiss government said it would instruct a U.S. law firm to defend the country’s position in the civil case against UBS.

The right-wing Swiss People’s Party said the government had betrayed citizens and bank customers with its concessions. "With today’s decision the government is sacrificing a centuries-old principle of protecting citizens," it said in a statement.

The moves by Austria and Luxembourg, both European Union members, may not be enough to satisfy fellow member states such as Germany, which has been vocal in the fight against tax havens since it obtained bank data of citizens suspected of parking money in Liechtenstein last year.

Luxembourg’s treasury and budget minister, Luc Frieden, said the OECD framework for case-by-case information exchange should be the only principles applied in the EU and the Commission gave a guarded welcome to Friday’s announcements.

A study for British charity Oxfam showed that developing countries miss out on tax receipts worth more than the billions of dollars they receive in foreign aid because their own nationals put cash in offshore tax havens.

They lose as much as $124 billion in taxes a year, more than their yearly $103 billion in foreign aid, the study showed.

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