UK and Swiss Deal Pushes Information Exchange Date Closer to ‘Tipping Point’

The debate around information exchange in Switzerland remains very much in focus for both multinational companies and governments across the globe, according to industry experts. In particular, the country’s compliance with OECD principles continues to be a point of contention, with various parties – each with their own agenda – offering differing views on the best course of action. For many, the spectre of the UBS debacle in 2009 remains a constant reminder of the implications that information exchange holds for financial services companies.

Stephan Pfenninger, Swiss member of Taxand’s global real estate tax team, said: “Many remain hopeful that the withholding tax negotiations, such as those completed yesterday with the UK and recently with Germany, will provide a solution to the transparency issue and alleviate, at least for now, the pressure on banking secrecy.

“Unsurprisingly, the maintenance of information secrecy is a priority for the Swiss banking industry and the Swiss federal government has always declared that automatic information exchange is ‘non-negotiable’, although there are a growing number of parties questioning if it is worth defending it at all means and cost. In the meantime, governments in the UK and Germany are happy to ease the pressure on disclosure, so long as they receive a boost to struggling tax revenues; the UK is expected to benefit over £5 billion from yesterday’s agreement.

Other industry sectors, and in particular multinationals, are in support of more advantageous double tax treaties – covering zero withholding on cross-border interest, dividends and licence income – above offering more transparency and automatic information exchange, according to Pfenninger.

“The current investigation into Credit Suisse by the US authorities again brings secrecy issues to the forefront. Moreover individual Cantonal tax authorities are focusing on pushing the Swiss parliament to finalise the newly drafted law on information exchange including the right to access information made available to the requesting foreign State, which should help increase Swiss tax revenues,” he added. “These additional pressures may cause a tipping point whereby the Swiss government is forced to reconsider the country’s dependence on financial services and consider steps that facilitate a greater balance of sectors across the economy.”

He concluded: “Amidst these multiple conflicting interests, multinationals must consider the potential tax implications of a reformed tax system for their business, particularly given that another sudden burst of pressure from the US may result in a period of rapid change. However, Switzerland will continue to defend its independence and banking secrecy to remain a highly competitive tax player.”


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