Switzerland has pledged to share details of foreign bank accounts with other countries. This represents a major change in Swiss banking practice, and came as part of a joint declaration, the global standard on automatic information exchange, signed in Paris at the Organisation for Economic Co-operation and Development (OECD).
The global standard requires countries to collect and exchange information on bank accounts and the beneficial ownership of companies and other legal structures such as trusts.
Pressure for such a move increased last year. In the wake of the global financial crisis and a series of tax scandals, the G20 group of countries agreed in principle to impose sanctions on countries which refused to share information about foreign bank accounts. The global standard was developed by the OECD and endorsed by the G20.
With an estimated $2.2 trillion of offshore assets, Switzerland is the world’s largest offshore financial centre and for centuries has had a tradition of banking secrecy. So Switzerland’s accession to the global standard is important. In an official statement, the Swiss government said, “Switzerland supports the OECD ministers’ declaration concerning the development of a new automatic exchange of information standard in tax matters”.
Switzerland is one of at least 44 countries which have signed the agreement. As well as the G20 countries and other members of the OECD, offshore centres such as the Cayman Islands and Jersey have also joined.
The Swiss Bankers Association also endorsed the decision, although they were careful to underline the limited nature of the agreement. “The banks in Switzerland are willing to adopt the automatic exchange of information along with other financial centres”, the Association’s statement read, “provided that the exchanged information is only applied for tax purposes.”
European governments expect that billions of Euros will be repatriated following the signing of the global standard. Some governments are prepared to offer some sort of amnesty to help those who may have been avoiding paying tax to comply with the new rules. A model for this could be the disclosure facility the UK government agreed with Liechtenstein, under which offshore account holders were offered reduced penalties. By the end of 2013 this had brought in over £1bn in tax revenues.
