Wednesday, June 19, 2013
The Swiss Federal Council has announced that it is prepared "to cooperate actively," under the auspices of the OECD, on the development of a global standard for the automatic exchange of information.
According to the Swiss Federal Department of Finance (FDF): "This is to ensure the tax compliance of foreign asset management clients, that satisfies the exacting requirements for compliance with the principle of speciality and data protection, guarantees reciprocity, and incorporates reliable rules for determining the beneficial owners of entities of all legal forms, including trusts and domiciliary companies."
Defending the decision, the FDF explains: "Switzerland's financial center has long since been confronted with a challenging international environment. The framework conditions for the Swiss cross-border asset management business have been changing ever more rapidly in recent years. This concerns primarily the issue of how to ensure foreign clients are tax-compliant. Moreover, market access, particularly to EU markets, could be increasingly jeopardized by various regulatory initiatives. This is why over the past few years Switzerland has been striving, with its financial market strategy, to develop strategies to overcome these specific challenges."
While insisting that the automatic exchange of information (AEI) has its weaknesses, as it interferes with the privacy of clients and has flaws with respect to efficiency, only partially addressing the objective of taxing all taxpayers, the FDF nevertheless points out that the OECD "is working on a new standard based on the AEI."
Consequently, it states that: "If such a standard materialises and if it is recognized and introduced by the G20 countries, OECD member countries and all major financial centers worldwide, the Federal Council will propose incorporating it into Swiss law in order to ensure that asset management clients whose tax domicile is abroad are tax-compliant."
The FDF nevertheless emphasizes that: "Wherever possible, standardised withholding tax agreements with the exchange of information upon request should continue to be concluded with interested states that do not introduce the global standard."
It adds: "Before the automatic exchange of information is introduced, an agreement is to be reached with each partner state for settling the past as regards existing untaxed assets, and market access is to be secured or improved for Swiss financial institutions."
It ends: "For future work concerning the further development Switzerland's financial market strategy, the Federal Council will appoint a broad-based group of experts. The FDF has been instructed to submit to the Federal Council a draft mandate and a proposal for the composition of the group of experts."