Friday, November 23, 2018
The Swiss Government is to press ahead with its plans to implement the recommendations made by the OECD's Global Forum on Transparency and Exchange of Information for Tax Purposes, despite domestic opposition.
On November 21, the Federal Council adopted the dispatch on a bill that provides for the conversion of bearer shares into registered shares and introduces a sanction system for breaches of the duty to report beneficial ownership.
The OECD's Global Forum conducts peer reviews of member countries in two phases. Phase 1 covers the legal and regulatory framework of the country concerned. Phase 2, to which Switzerland was admitted in 2015, assesses the efficiency of the exchange of information in practice. In 2016, the Global Forum rated Switzerland "largely compliant" with international standards for tax transparency and the exchange of information.
Under the proposals, the issue of bearer shares would only be permitted if the company has equity securities listed on a stock exchange or if the shares are structured as intermediated securities. A breach of the duty to report beneficial ownership or to maintain the share register and list of beneficial owners will be a punishable offence.
The bill also contains provisions on the exchange of information. It sets out requirements on the confidentiality of administrative assistance requests and on the capacity to be a party to and to take legal action pertaining to parties about whom information is requested in administrative assistance proceedings. In addition, the legislation clarifies the procedures for dealing with administrative assistance requests that are based on stolen data.
A consultation on the proposals was held earlier this year. The Federal Council said that although the cantons were generally in favor, a range of negative views were expressed by other participants.
The Federal Council however intends to push ahead with the main elements of the proposal – the conversion of bearer shares into registered shares and the sanction system for breaches of duty – because they are "indispensable for implementing the Global Forum's recommendations." It explained that if these steps are not taken, Switzerland will receive an insufficient overall rating in the next peer review, which is due to begin at the end of the year.
The Council warned that a negative review would "not only damage Switzerland's reputation considerably, Switzerland would also run the risk of other states placing it on a list of non-cooperative jurisdictions."
The Federal Department of Finance will now publish instructions on the conversion of bearer shares into registered shares and on structuring them as intermediated securities. Parliament will discuss the proposals in spring 2019.