Politicians in disarray over banking secrecy

There is speculation that Finance Minister Merz (left) and Foreign Minister Calmy-Rey do not see eye to eye on banking secrecy Keystone

The threat that Germany may use stolen Swiss bank data has prompted considerable confusion among the main political parties over the future of banking secrecy.

Speculation is most rife about whether the government will give in to pressure from European Union countries and agree to the automatic exchange of bank customer details.

“The question is whether there could be different variants of an automatic exchange of information,” said Finance Minister Hans-Rudolf Merz after a cabinet meeting earlier this week.

His hints triggered a series of conflicting statements from the main political parties, laying open divisions even within the parties.

The centre-right Radical Party, traditionally close to the business community, has scheduled an internal debate in the wake of dissenting statements by prominent members.

But the Radicals still stand by their policy paper which backs banking secrecy and the protection of the private sphere of bank clients, as a party spokesman said.

Alarmed by calls from among their own ranks to scrap the controversial distinction between tax fraud and tax evasion, the centre-right Christian Democratic leadership gave a strong signal to maintain banking secrecy.

“Banking secrecy in Switzerland has to stay. We won’t let other countries tell us what we should do,” said party president Christoph Darbellay in a statement.

Last March Switzerland agreed to adopt the rules of the Organisation for Economic Co-operation and Development (OECD) to lift banking secrecy for foreign clients suspected of tax evasion and not just in the case of fraud.

To this effect the government backed proposals for amended double-taxation agreements with more than 15 countries to be approved by parliament.

Left and right

Both the centre-left Social Democrats and the rightwing People’s Party have criticised what they consider a “weak government which lacks a clear strategy for Switzerland’s financial centre”.

“Politicians have caved in as soon as there is a little bit of pressure from outside,” People’s Party strongman Christoph Blocher was quoted as saying in the Mittelland newspaper.

In a similar vein, Christian Levrat, president of the Social Democratic Party, describes the situation as chaotic.

“What we see now is an outright debacle, no strategies for the future,” he told the Basler Zeitung.

Levrat says his party, which has been campaigning for the end of banking secrecy for decades, does not feel like celebrating victory under these circumstances.

Solutions from the centre

He says the Social Democrats are “open” to an automatic exchange of information, but he prefers a more thorough solution which prevents illegal money reaching Switzerland in the first place.

Blocher, for his part, says his party would challenge any attempt to lift banking secrecy to a nationwide vote.

Georg Lutz, political scientist at Lausanne University, says it is no surprise that the Christian Democrats and the Radicals have more difficulty than other parties in speaking with one voice.

“It is traditionally up to the centre-right to find sustainable solutions. The Social Democrats are known for their anti-banking-secrecy stance and the People’s Party represent populist policies,” Lutz said.

The confusion among the parties also proves that they have at least as much trouble finding a common stance as the government does, he adds.

Government

Disagreement over Switzerland’s course also appears to be the case among the seven-member cabinet.

In response to a question by a journalist, Foreign Minister Micheline Calmy-Rey said she could somewhat understand the position of the German government.

“I would seriously consider such an offer [to buy bank data ] if I were finance minister. In this position you always look for money and you don’t like tax dodgers.”

Calmy-Rey also criticised the cabinet for perceived U-turns on banking policy.

Her statements fly in the face of the official government stance reiterated by Finance Minister Merz and seen by observers as a breach of collegiality – the principle that cabinet ministers toe the official government line. Merz said earlier this week that the use of stolen banking data strained relations between states.

More confusion was added after the prestigious Neue Zürcher Zeitung on Friday reported that Defence Minister Ueli Maurer – in defiance of his own People’s Party – had come out in favour of an automatic exchange of banking information with other countries, effectively putting an end to banking secrecy – 76 years after it was enshrined in law.

However, Economics Minister Doris Leuthard, who holds the rotating post of Swiss president this year, denied any rift in the cabinet.

“There has not been any breach of collegiality. And there are no differences in the government about decisions taken by the government and about the strategy,” she told a news conference on Friday.

Urs Geiser, swissinfo.ch

Tax attacks

Switzerland has been under continuous attack in the past 12 months for helping foreign tax evaders hide their assets. The global crusade coincided with the devastation of the financial crisis leaving large holes in the budgets of many countries.

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

A former German finance minister referred last summer to the Swiss as Indians running away from the cavalry. His Italian counterpart said that he wanted to “bleed dry” the financial sector in the Italian-speaking part of Switzerland.

Several countries, including Italy, France, Britain and the US, launched tax amnesties last year in an effort to repatriate assets from tax cheats. These are forecast to damage the Swiss offshore banking industry.

Switzerland was particularly annoyed at the aggressive Italian amnesty that saw surveillance and tailing of cross border suspects going into Switzerland. The Swiss suspended talks on the new double taxation treaty in protest.

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

In September, 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.

Also last year a former employee of HSBC private bank in Geneva ran away with sensitive client data that he handed over to the French authorities.

And last month an unnamed informant offered to sell the German authorities the data of about 1,500 possible tax evaders with bank accounts in Switzerland.