04 October 2011

Financial Secrecy Index 2011: Focus on Switzerland

Swiss banking is historically based on two main foundations: secrecy, and political stability.

With total banking assets recently estimated at 820 per cent of Swiss GDP (compared to ‘just’ 460 per cent in the UK), banking looms larger in Switzerland as a share of the economy than in almost any other country. Given this dominance, with UBS and Credit Suisse accounting for about half of all Swiss banking assets, it is hardly surprising that the Swiss state is significantly ‘captured’ by the financial sector. However, although the Swiss state generally defends the interests of Swiss banks and bank secrecy, many Swiss – though probably a minority – oppose it.

In the face of tremendous international pressure in the past six or seven years to relax its strict bank secrecy laws, Switzerland has adopted a ‘circle the wagons’ mentality, making incremental concessions here and there (often in exchange for reciprocal concessions), but generally fighting at every step. For decades Switzerland has used clever divide-and rule (and other) strategies to fox successfully its international foes and advocates of transparency. In general terms, Switzerland has recently made some (limited) concessions to near neighbours in Europe and to powerful countries like the United States, while largely rebuffing efforts for greater transparency by weaker, smaller and developing countries. This strategy of ‘white’ money for neighbours, and ‘black money’ for others, is what Swiss campaigner Andreas Missbach calls the “Zebra” strategy.

Along with secret Swiss banking comes a stridently anti-tax and anti-government world view, quite prevalent in Swiss banking circles, which sees criminal tax evasion as a ‘legitimate’ way of rejecting and thwarting democratic government and society itself, in the name of individual freedom. Konrad Hummler, then head of the Swiss private bankers’ association, encapsulated this in 2009 when he lashed out against France, Germany and Italy as ‘illegitimate states’ and defended criminal tax evasion by their wealthiest citizens as a ‘legitimate’ defence against ‘excessive’ tax.

Despite some limited penetration of its fabled bank secrecy in recent years, and widespread fanfare about how ‘transparent’ Switzerland has become, this is mostly window-dressing. Swiss bank secrecy remains largely intact and secret Swiss banking remains in robust health. While Switzerland boasts of having identified and blocked in early 2011 huge sums originating from Egypt, Libya and Tunisia, the truth is that the money has gotten there without questions being asked. In addition, at this stage there is no way of knowing if the wealth that has been blocked so far represents a quarter, a tenth, a thousandth of the total assets stolen from these countries over the last 40 years.

Secrecy, the cornerstone of Swiss private banking for decades, even centuries, is complemented by a wide array of other services provided by the Swiss financial centre: investment banking, wealth management, insurance and reinsurance, corporate tax avoidance structures, and plenty more. KPMG calls it the ‘perfect headquarter location for international companies’ because of its tax laws, political stability, quality of life, educated workforce, extensive network of tax treaties, and strategic position in Europe. Its corporate tax laws, which saw over 250 mostly European and US companies shift headquarters to Switzerland in 2003-9, have also generated considerable antagonism overseas.

Press release

© Tax Justice Network