Media hail tax deal with Germany

Opinions are divided who benefits most from the tax deal Reuters

The Swiss press welcomed on Thursday a tax agreement initialled by Germany and Switzerland, ending a long-running dispute between the two countries.

But if the deal is seen as a step forward by the media, questions remain as to whether it would survive political change in Berlin and the effects it will have on the Swiss banking industry.

The Neue Zürcher Zeitung (NZZ) called the accord a “big step forward”, even if concessions are made – referring to the SFr2 billion (€1.9 billion) down payment Switzerland will make to Germany.

Geneva’s Le Temps welcomed the deal, “if only because it brings down the curtain on a bad Western.”

Picking up the same theme, Fribourg’s La Liberté said “the Swiss Indians and the German cowboys have smoked the peace pipe to celebrate this accord between Switzerland and its main trade partner”.

Germany’s former finance minister, Peer Steinbrück, angered the Swiss early in the dispute after he compared outside pressure to force Switzerland into reforming its banking secrecy laws to Native Americans living in fear of the United States cavalry.

Banking secrecy intact

The media also highlighted the fact that Switzerland has done reasonably well with the deal, with the core of banking secrecy still intact.

For the NZZ, the biggest advantage for Switzerland “is that it succeeded in protecting the interests of the clients to a unexpectedly high degree”, although client confidentiality came at a price – the down payment.

“The fact that old problems could be solved without giving up privacy is of paramount importance to the Swiss finance industry,” it added.

But Bern’s Bund and Zurich’s Tages Anzeiger pointed out in a common editorial that Switzerland could not demand more after defending tax evasion in such an unethical fashion for so many years.

Germany was also a winner, they added, with the withholding tax effectively meaning “Switzerland’s banks will be working for the German tax authorities” – saving them huge sums of money and time.

The St Galler Tagblatt expressed its surprise at this fact, and that “not even the most conservative politicians are making a proper fuss about it.”

Faithful clients?

Whether Germans will remain faithful to their Swiss bankers is still an open question. While the Bund and Tages Anzeiger believe many clients will stay put simply to spread their risks or hide their assets from others, others are not so sure.

For the Zurich tabloid Blick, “many clients will probably withdraw their money and move it to the nearest tax haven”, a sentiment echoed by the Liberté and Bern’s Berner Zeitung, which both warn some banks could face serious problems.

“This type of accord will not help employment. The Swiss financial sector remains far too big today”, added La Liberté.

For the Blick, the onus is now on the Swiss financial industry. “If tax evasion is no longer part of our banks’ core business, then they will have to prove for the first time why they really are better,” it said.

Political effects

The jury is still out on the longer-term effects of the deal. Le Temps warned that “a change of government in Germany could lead to a change of attitude”.

The St Galler Tagblatt was more optimistic, although it was quick to add that Switzerland had only won a battle.

“Other EU states will be lining up to conclude similar agreements,” it said. “The debt crisis and empty coffers will encourage foreign tax authorities to take advantage of Switzerland’s healthy economic situation.”

For the NZZ, the Swiss banking industry will be hoping that a withholding tax solution will become the norm for other similar agreements.

But a major question mark remains about the ongoing tax dispute with the United States and other nations.

For the Tribune de Genève, the upcoming US presidential election will most likely put any chance of a deal on the backburner, while France remains hostile to the withholding tax and Italy cannot seem to decide which path it wants to follow.

Tax attacks

Banking secrecy was enshrined in Swiss law in 1934.

France and Germany launched an attack on Switzerland in October 2008 for allegedly helping foreign tax evaders hide their assets.

The country has been under continuous attack over the issue ever since.

The OECD placed Switzerland on a “grey list” of uncooperative tax havens in April 2009. The Swiss were removed in September after renegotiating more than 12 double taxation treaties, but they have refused to automatically transfer information to tax investigators without proof of wrong-doing.

Several countries, including Italy, France, Britain and the US, launched tax amnesties in 2009 in an effort to repatriate assets from tax cheats.

The most damaging tax evasion case involved the activities of UBS bank in the US. In February 2009, UBS was fined $780 million after admitting helping US citizens dodge taxes. It also handed over data of 285 account holders.

In September 2010, the Swiss government agreed to transfer the details of 4,450 UBS clients to the US – in effect violating Swiss banking secrecy to prevent a ruinous court case for UBS.

(With input from Urs Geiser)