Switzerland agreed on Monday to work towards helping tax assets that British citizens have stashed in secret Swiss accounts and to introduce a withholding tax on new deposits while preserving bank secrecy. At a meeting in London, Swiss Finance Minister Hans-Rudolf Merz and his British counterpart George Osborne agreed to begin negotiations to improve co-operation on tax issues, the Swiss government said in a statement.
The talks are due to start in early 2011 and will cover the issue of regularising untaxed existing assets as well as levying withholding tax on future investment income. They will also broach Swiss demands for improved market access for its banks in Britain. With tax havens coming under fire in recent years, Switzerland has succumbed to pressure to soften its traditions of banking privacy, agreeing to adhere to international standards on helping other countries chase tax evaders.
But it has managed to fend off calls to automatically exchange account information with other countries in favour of a withholding tax that helps preserve the secrecy that has helped it build up a $2 trillion offshore wealth management industry. In parallel talks, Germany has also agreed in principle to Switzerland introducing a withholding tax on Germans' assets and to finding a retroactive solution for billions of euros of untaxed money without providing account holders' details.
Patrick Odier, chairman of the Swiss Bankers Association, told Reuters the deals could be a blueprint for others. "It may very well be the case that some other countries may be interested and attracted to what now seems to be an agreeable solution for at least two major countries in Europe," he said.
Merz told reporters in London that Switzerland was still negotiating the rate of withholding tax payable and that it would vary from country to country. He added Switzerland aimed for the rate to be as close as possible to rates payable in foreign depositors' home countries and said there would also be a levy on existing holdings based on how long they had been held in Switzerland.
Merz and German counterpart Wolfgang Schaeuble will sign a declaration on Thursday that the two countries are now ready to agree details of their deal. The two countries will also sign a revised double taxation agreement which adheres to the Organisation for Economic Co-operation and Development's (OECD) tax standards.