Austria and Switzerland sign deal protecting bank secrecy

April 20th, 2012

Switzerland has just signed a ‘Rubik’ deal with Austria which protects banks secrecy in return for an anonymous tax being returned to Austria. This is similar to the ruinous Rubik deals made with Britain and Germany. This deal, which must be ratified by both countries’ parliaments, makes public a covert Swiss-Austrian alliance to block EU cooperation against tax dodgers and prevent automatic exchange of tax information between European governments.

The European Commission objected to aspects of the Rubik deals which interfere with the European Savings Tax Directive (EUSD) and other EU treaties. The EUSD demands automatic exchange of tax information for certain types of income. Despite covering only a small fraction of types of income and investment, this law led European governments to share information on nearly €13 billion of their citizens income, in 2005 alone, that might not otherwise have been taxed.

Not only is Rubik a beggar thy neighbor policy, it is also immoral, short sighted and self defeating for Switzerland’s counterparties. Without information about the sources there is no way of verifying that the amount of tax anonymously returned is correct or fair.  The deal will include a one off anonymous payment on existing deposits, allowing tax evaders to go unpunished. By 2013 when the deal is in force, many tax dodgers will have already moved their assets onto other havens or hidden their identities behind shell companies and trusts.

Other countries are likely to follow Britain, Germany and Austria. Switzerland continues to push the USA to sign this poisonous pact. Greece is still in negotiations for a similar deal, bizarre when you consider that tax dodging has brought the country to its knees.

Equally these deals will not end disputes over hidden assets between Switzerland and countries it has close ties with, demonstrated by a raft of controversies in the last week.

  • France launches judicial investigation into UBS: It appears that the bank have been flagrantly advertising some accounts as a way of dodging French taxes. A Paris court has ordered an investigation of UBS alleging the bank has been keeping two separate books to hide this activity from the authorities.
  •  Swiss Bank employee names revealed to the US: Swiss court has now agreed to share the names of Swiss Bank employees suspected of facilitating tax evasion by US citizens.
  • Britain receives disk with names of thousands of potential evaders: The disk was sent to Britain by French authorities it contains information on HSBC clients in Geneva and will lead to hundreds of prosecutions and thousands more will be asked to voluntarily explain themselves or face prosecution. The disk was stolen by a bank employee and provided to French authorities who have an agreement to share tax information with the UK. This shows the value of such cooperation where simply working together can save millions. Rubik deals prevent signatories from actively seeking such leaked information, but according to the UK not from utilizing data provided for free by others. The Swiss argue that Rubik signatories should not use such information at all but this interpretation is still contested. One single such disk allowed German authorities to recoup €500 million in tax and penalties without jeopardizing any future income for themselves or their neighbours.

A transparent and multilateral solution will end these disputes and ensure wealthy citizens pay what they owe, therefore parliamentarians in Austria, Switzerland, Greece, the USA, Germany and the UK should oppose these deals.

Written by Alex Marriage

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