Is Switzerland still attractive to foreigners? - Banking secret (Part Four of Four)
Switzerland’s banking secrecy laws recently made headlines around the world. Swiss and foreign banks alike that operate in Switzerland have a legal obligation to keep customer data confidential (a law introduced in 1934 to protect German savings from Nazi prosecutions). This law does not however apply to criminals and no protection is offered. Swiss legislation distinguishes between ‘tax evasion’ where a fine is issued if tax declarations are not made or only partly completed and ‘tax fraud’ (criminal activities identical to forgery or false declarations). In the first instance, banks were not obligated to render legal assistance, whereas they always had and still have the obligation for ‘duty of disclosure’ and legal assistance in the latter case. This legislation is appropriate for Switzerland and relevant research has consistently shown that Swiss citizens are better at paying their taxes, than citizens of other European countries. The reasons for this being that citizens are content with how their country is being governed and that tax revenue is used appropriately. Of course, foreigners benefit as well when investing their money in Switzerland. Recent numbers of the Swiss Bankers’ Association in 2009 indicate that 56.5% of private wealth managed in Switzerland, comes from abroad and 43.5% from within Switzerland. Revenue earned from wealth management corresponds with approximately one third of banks total revenue, while two thirds is being generated by other banking activities. Banking contributes approximately 11% to Swiss GDP. Governments of the US and some EU countries have been concerned that a considerable amount of their citizens’ are hiding money to avoid paying domestic tax in their home countries. Consequently, considerable pressure has been applied to Switzerland in an effort to force changes to legislation. On the 13 March 2009, the Swiss Federal Council announced that banks will be obliged to provide legal assistance even in the case of tax evasion. Similar events have been reported from other like offshore banking countries such as Singapore, Luxembourg and Liechtenstein. The Swiss Federal Council did not manage well the communication of this to either its citizens nor to the international public, and felt the backlash of public anger for being forced to give in to foreign demands. The global media reported the ‘fall of Swiss banking secret’. The media however did not report the facts correctly, that being that banks must continue to keep customer date confidential and that if not being prosecuted, no information will be given to a third party. People investing their money in Switzerland, will not see many changes.
There are two ways to beat the attraction of a neighbouring country, you either trip them up or you choose to make your own country more attractive. As long as the other countries continue to ignore the latter – Let’s go to Switzerland!
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Posted By: 
Ueli F. Schnorf
Switzerland’s low taxation system makes it very attractive in Europe. Both the fiscal proportion (part of tax revenues plus social security contributions of GDP) as well as the ratio of public spending (part of public expenditures of GDP) is the lowest in Europe. Moderate rates of income tax (marginal tax rate for most Cantons is less than 40% and kicks in at very high income only), wealth tax is relatively low (about 0.5% per year) and capital gains tax and inheritance tax have been abolished in most regions. Taxes are divided between federal tax (about 20%), cantonal tax (about 40%) and communal tax (about 40%). Cantons and communities compete to have the lowest tax rates, resulting in tax being only half in ‘tax conscious’ regions. Swiss citizens and foreigners who move to Switzerland benefit from this competition if they choose to live in a region with lower tax rates.
