Switzerland: Bent but Not Broken
How Obama – Like Napoleon –
might Actually Be Helping
By Bob Bauman
The Swiss Finance Ministry
announced on Friday (June 19) that it had agreed to a
new tax treaty with the United States, a step that the
Swiss sincerely hope will ease major pressure on their
banking industry, and help in maintaining the country's
reputation as the world's leading offshore financial
own opinion is that the Swiss, under real economic
threats, did what they had to do in order to protect
their interests – in the short run. In the long run,
these leftist, anti-freedom pressures will continue.
Hopefully, at some point the Swiss will draw a line that
dare not be crossed.
After all, a tax hungry
U.S. administration that will double-cross a faithful
ally such as the Swiss; the same administration that
shamelessly perpetrates a global smear campaign and
threatens unprecedented economic sanctions – all to
force a change in Swiss privacy laws and get more
taxes…such an administration simply cannot be
OECD Article 26
The details of the new tax
agreement will be made public when signed by both
countries. It is expected to follow the outlines of Article
26 of the model tax information exchange treaty of
the Organization for Co-operation and Development
(OECD), the leftist group that has been the chief
promoters of anti-tax haven blacklists on behalf of
their G-20 government paymasters.
But the procedural path to
tax treaty approval by the Swiss may be rocky.
Council and Parliament must approve the agreement. It
will also need the backing of the Swiss cantons and it
could be petitioned to a national referendum. The
conservative Swiss Peoples Party, the leading party in
recent parliamentary elections, may oppose the
Tax Evasion Added
If the agreement is
approved, Switzerland will cooperate with the U.S.
Internal Revenue Service in investigating suspected
cases of tax evasion by Americans with Swiss accounts.
Under an earlier existing agreement with the U.S.,
Switzerland only cooperated in cases of "tax fraud,"
since foreign tax evasion is not a crime there.
Although Swiss banking
secrecy is legendary, (those "numbered accounts"), that
secrecy never has been the most important reason for
Switzerland's standing as the leading offshore financial
Of far greater
significance has been the country’s political, financial
and economic stability and strength. Many of the world’s
leading companies and hundreds of thousands of non-Swiss
persons chose to bank with the Swiss because they trust
them and know their reputation.
This latest move comes
after the Swiss government pledged in March to relax
their statutory banking secrecy and re-negotiate double
taxation agreements they have with 70 countries.
And they came only after
what can politely be called "international
Under pressure, threats
and an anti-Swiss media propaganda barrage, orchestrated
by the OECD and the high tax G-20 countries, the Swiss
yielded in order to avoid blacklisting and unspecified
Pot and Kettle
Under the new agreement
Swiss officials made clear that individual tax details
would only be exchanged with the U.S. "in individual
cases where a specific and justified request has been
made". The government said it would only respond to
"concrete and justified" requests for personal banking
data. In other words, no IRS "fishing expeditions" will
But that is the
In an ironic case of the
pot calling the kettle black, the notorious U.S. income
tax evader, U.S. Treasury secretary, Timothy F.
Geithner, crowed, "This treaty will increase
our ability to enforce our tax law and will help bring
an end to an era of offshore accounts and investments
being used for tax evasion."
Unfortunately for the
Swiss, the Obama administration is presently pressing a
massive fishing expedition, demanding the giant Swiss
hand over the names of 52,000 American clients the
IRS suspects (without offering any individual proof) of
A federal judge in Miami
has scheduled hearings from July 13-15 on the IRS effort
to get the 52,000 account holder names. The Swiss
government has responded that that UBS turning over the
names would violate Swiss law. It also pointed out that
the existing U.S.-Swiss tax treaty provides a means to
obtain the names of any individuals about which evidence
of tax fraud can be shown.
In a good faith effort to
end the dispute, UBS already paid $780 million in fines
and restitution to settle accusations that it helped
American customers evade taxes. The day after the
payment, the Obama Justice Department filed the suit
seeking the names.
My Swiss sources tell me
that parliamentary approval of the new tax agreement
could be denied if no political solution is found to the
UBS court case. It is clear that Swiss law and the
current tax treaty are in direct conflict with what the
IRS lawsuit demands.
Tax Hungry Obama
It’s obvious that
President Obama, ravenous for taxes to
finance his socialist-leaning agenda, is allowing the
IRS to ignore the law and the current U.S. – Swiss tax
The IRS doesn’t want to go
through messy "due process," actually having to prove
individual cases. They would rather grab 52,000 names
and scare those who might be tax evaders to take
advantage of a tax amnesty the IRS has offered for those
who failed to report their UBS and other offshore
The larger question is
what all this means to the future of Swiss banking – and
how it will affect the nation’s well earned reputation
for offering the very best financial services, including
privacy guaranteed by law.
My answer is that none of
this should disparage, nor does it change, the
attractive attributes that the professional work of
Swiss banking has established over centuries. The change
is that the government will cooperate in cases of
alleged tax evasion by a non-Swiss with a Swiss account,
if a prima face case can be shown by the
In all other respects,
under the law a Swiss court still will have to authorize
any release of an account holder’s information to others
– an irate spouse, a business claim, a lawsuit or a
dispute over an estate.
Don’t They Wish
The Chicken Little
approach (promoted by many anti-Swiss
competitors/detractors) is to claim that "the sky is
falling" -- that this is the end to strict banking
secrecy that has been enshrined in law – ergo, the end
of Switzerland as that hated major offshore financial
The Confederation of
Switzerland and it people are survivors, and rich ones
at that. This is a reputable nation that manages over
US$4 trillion in cash and assets for people all over the
world, and has done so successfully for centuries.
Napoleon and Obama
The U.S./OECD assault on
Switzerland’s sovereignty, in principle, may be the
worst foreign violation since 1798, when the French
overran the country, leading to Napoleon’s forced
creation of what became modern Switzerland.
Despite World Wars I and
II, for 250 years, as European empires rose and fell,
Switzerland’s official neutrality and determination to
defend its sovereignty have made it an unusual island of
Napoleon did the Swiss the
favor of unifying the nation. Obama and the tax
marauders at the OECD may have done the same for the
future of determined Swiss self-defense.
I happen to believe that
Switzerland has the strength to withstand future
unreasonable and radical demands to compromise when they
are in the right. It remains the world's leading
But then, who foresaw the
day when an American administration would say "to Hell"
with international law and allow the IRS to engage in
economic terrorism against an ally?