Swiss-Greek tax deal dismissed as fig leaf

The Greek government is grappling with anti-austerity riots and tough debt-reduction talks with eurozone partners Keystone

A proposed deal to force Greek citizens to pay taxes on their undeclared Swiss banking assets has been slammed by the European Commission and tax campaigners.

Greek officials are due in Bern next week to begin negotiations on a treaty that would mirror recent pacts made by Switzerland with Germany and Britain to impose withholding taxes on hidden accounts.

The head of the European Union’s Greece task force, Horst Reichenbach, has endorsed the planned deal, saying it would boost the debt-stricken Greek economy with billions of missing euros.

The Greek parliament passed further austerity measures on Thursday amid a 48-hour general strike and a mass protest by around 100,000 workers.

At the same time, EU leaders were meeting in Paris in an effort to patch up differences over the latest Greek bail-out plan, ahead of a Brussels summit at the weekend.

“Fantasy” figures

According to some estimates, Greek assets in Swiss banks amount to €200 billion (SFr246 billion) – much of it undeclared.  Swiss Finance Minister Eveline Widmer-Schlumpf is one of several figures to have dismissed this figure as wildly exaggerated.

Journalist Nicholas Shaxson, who has written a book on tax havens, has described the proposed deal and the assets mentioned as a “public relations exercise” for a Greek government struggling to contain social unrest.

“These figures are a total fantasy,” the Zurich-based Shaxson told swissinfo.ch. “It is incredible that Greek assets would be double the size of those from Britain, considering the number of Britons in Switzerland.”

In 2009, Swiss brokerage firm Helvea estimated the total amount of Greek assets in Switzerland at SFr24.2 billion (€19.7 billion), with all but SFr200 million being undeclared.

Earlier this year, Greece said that its citizens had taken at least €34 billion out of the country since 2010. The reason for these withdrawals was more likely fears about the state of Greek banks than for tax evasion purposes, according to observers.

EC objections

The European Commission has urged Greece to rethink the Swiss deal, fearing the consequences of yet another member state breaking away from the EU’s collective attempts to force Switzerland to lift its veil of banking secrecy.

Endorsing Greece’s proposed tax treaty with Switzerland is “not our position”, David Boubil, spokesman for EU tax commissioner Algirdas Semeta, told the Tages-Anzeiger newspaper. “There are also other EU states in a weak bargaining position, but we as a Commission defend the interests of all of our members.”

The EU has been applying pressure on Switzerland to accept a system of automatic information exchange in cases of suspected tax evasion.

 Switzerland’s resistance was boosted this year by Germany and Britain breaking away to negotiate their own deals that preserve the anonymity of Swiss banking clients.

“After decades of Swiss banking secrecy, we were starting to see some signs that it could be breached,” Shaxson told swissinfo.ch. “But this prospect looks a bit more distant now that individual countries have started negotiating their own treaties.”

Swiss would win

Shaxson is far from convinced that the German and British deals – or a Greek equivalent – would net the amount of tax income that the respective countries expect. A weaker EU withholding tax system has turned in disappointing revenues since its implementation in 2005.

Many Swiss accounts are also shrouded in layers of opaque structures, often located in a multitude of other countries, making it hard even for the depositary banks to identify the source or beneficiaries of assets, according to Shaxson.

Peter V Kunz, an international tax expert from Bern University, also believes a Greek tax treaty would be a “good deal for Switzerland”.

“It is clear that the EU would have more power if it negotiates a tax deal with Switzerland for all of its members,” he told swissinfo.ch. “It does not like it that Switzerland is taking countries away from its side of the bargaining table.”

Kunz also doubts that an individual tax deal would bring much benefit to Greece as the debt-laden country needs to find revenues much faster than such a treaty could hope to provide.

“Even if the treaty can be brought into effect by 2013 at the earliest, it would still take a couple more years for the income to be gathered and start flowing to Greece,” he said.

To underline the urgency of Greece’s situation, the austerity measures passed on Thursday were an essential requirement for the country to receive the latest €8 billion tranche from the EU’s bail-out scheme.

Greek tragedy

The Greek economy has been wobbling since the financial crisis of 2008 that soon exposed the country’s shaky foundations. 

Greece’s problems are widely seen to have been caused by poor governance and a grossly inefficient taxation system, complemented by false accounting that appeared to show the country’s finances in better shape than they really were.

  

Unable to pay off its debts, Greece reluctantly turned to other European Union member states for help.

  

In the spring of 2010, the EU agreed on a €110 billion (SFr133 billion) rescue package to bail Greece out. A further €109 billion was granted in July 2011. 

The bail-outs take the form of EU backed bonds, that Greek debt holders would exchange for their current bonds. The terms of the new bonds are less favourable, forcing investors to share some of the pain of bailing Greece out.  

Greece has been forced to implement an austerity programme in exchange for the bail-out. These included cutbacks in state spending, tax increases and privatising state-owned entities. 

To guarantee the next €8 billion tranche of the EU loan, the Greek parliament approved on Thursday an extra €7.1 billion round of spending cuts and tax increases. Workers staged a 48-hour strike and mass protest outside of the parliament building.

  

Despite the austerity measures, Greece has continuously failed to meet EU imposed targets on debt reduction, leading many economists to fear the country could be declared bankrupt by the end of the year.