Switzerland has become the latest country to relax strict banking secrecy laws in an effort to appease tax collectors in the US and several other countries. Many smaller countries have already caved into international pressure due to the economic pressure than can be applied to a small nation such as the Cayman Islands that relies heavily on US activity. However, countries like Switzerland and Singapore had always been viewed as too large to bully until recently.
With many countries taking huge economic hits due to the financial meltdown they are now especially keen on making sure their citizens aren’t hiding any monies owed to them.
The main concession for Switzerland seems to be relaxing the distinction that they had previously made between tax fraud which is considered a crime in Switzerland and tax evasion which is merely a civil offense. In theory, one could still hold a numbered Swiss bank account and hide its existance from US and other governments but it would be much easier for those governments to get orders to freeze or seize those accounts should the accounts be deemed to held by someone who was wanted for either tax evasion or tax fraud.
In the US, citizens are supposed to declare any foreign banking account with assets over $10,000. This has long been seen by many citizens with foreign interests as too invasive. The question that has always been posed is why the government needs to know about where you hold your funds and how much you’re holding if you have niether been accused of nor convicted of any sort of crime.
Since the disclosure is somewhat voluntary in that – in theory – if a US citizen never declared a foreign bank account it would be extremely difficult to know the location of the funds, many US citizens have chosen to take advantage of Switzerland’s banking secrecy laws in order to hold foreign bank accounts without reporting them to the US government.
Swiss banks became very popular with Americans who used Switzerland’s banking secrecy laws to hide thier ownership of foreign held accounts. Even if the holder had no intent of cheating the government the accounts were attractive for wealthy individuals looking to shelter some of their assets from any sort of civil court awards.
Now that Swiss banks can be forced to open up their books the risk has gone up for US citizens holding undeclared foreign bank accounts. Firstly, the account holders would be in violation of the reporting requirements so they either must now come clean or continue to violate US law. But secondly, now that the accounts have to be declared that information could be used in civil cases in order to target assets for seizure.
Perhaps it’s time for US citizens to question their government as to why the government needs to know where their citizens keep their money and how much of it they have if those monies have been obtained in completely legal ways and taxes have been rendered. If the goal of such measures is to prevent tax evasion and money laundering then there simply have to be less invasive ways of enforcement. These laws end up catching the wrong people in their net. A drug dealer who is avoiding taxes in the US certainly isn’t going to tell the government how much money he has held in foreign bank accounts and where those accounts are located which effectively deems the law as ineffective in accomplishing its stated purpose. Instead, the law unduly violates the privacy rights of individuals who either have a need to keep funds overseas or have chosen to do so as part of an asset protection plan.
photo credit: zzzack
The Switzerland, Others Cave to Banking Secrecy Pressure by Emergency Lifestyle, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
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