As a planned tax repatriation deal between Switzerland and Germany is likely to be blocked by left-wing opposition in Berlin, Swiss banks are now taking the only option available: forcing foreign tax evaders to come clean. Under the proposed agreement, German tax evaders with Swiss bank accounts could anonymously settle their bills with their tax authorities.
Switzerland has successfully concluded similar deals with Britain and Austria, and talks are ongoing with Italy. However, Swiss banks are not overly concerned about the likely failure of the bill in the German parliament (which could happen by the end of 2012) as they have already started employing their new strategy: "German clients with dirty money are being pushed to turn themselves in to German authorities," a banking expert said. Major banks - UBS and Credit Suisse - as well as the smaller regional banks have stressed in recent weeks that they no longer accept untaxed foreign assets.
It is not hard for the banks to convince their clients of the new policy, as many Germans finally want to come clean, said German tax attorney Sebastian Engler. "Most of our clients realise that the times when you could hide money in Europe are over," he told the Swiss newspaper Tages-Anzeiger. Switzerland has promised to inform Germany, Austria and Britain to which countries clients are transferring their Swiss-based money in reaction to the three tax treaties.
"Many of our clients are over 65 years old. They want to bring their inheritance in order and they don't want their heirs to be burdened with criminal problems," he added. German tax evaders will actually profit if the staunch opposition by Social Democrats and the Greens kills the bilateral deal. If they report themselves to their tax authorities, they will have to pay between 10 and 15 per cent of the hidden assets. Under the tax agreement, the rate would have been between 21 and 41 per cent. The new approach by the banks is based on the Swiss governments "clean money strategy," which was announced several years ago but has not been fully implemented.
The policy to handle only clean money was developed in reaction to pressure from the United States. Threatened with lawsuits against Swiss banks that allegedly helped US tax evaders, the Swiss government agreed this year to loosen its banking secrecy rules and has provided more banking data to US tax authorities. Wegelin, Switzerland's oldest bank, felt so threatened by US prosecutors early this year that it split off its non-US business into a new entity in order to evade charges.
Although Swiss banks stated that they are no longer dealing with shady assets, their business may suffer in the medium term. Foreign clients could, combined, withdraw up to 200 billion Swiss francs (215 billion dollars) of untaxed money from Swiss accounts until 2016, the German consultancy zeb/rolfes.schierenbeck.associates said in September. Swiss banks managed some 590 billion francs of private foreign wealth last year, according to data issued by the Swiss Bankers Association. Despite these drawbacks, Swiss banks seem committed to their clean money policy. When reporters of the German daily Handelsblatt recently posed as tax evaders seeking to invest in neighbouring Switzerland, all seven banks they contacted rejected them.