French Tax Evasion Targets Swiss Banking

Some observers have been predicting an avalanche of probes and litigation aimed at the Swiss banking system following the success of a United States tax evasion investigation against UBS.

France confirmed at the weekend that it has obtained a list of 3,000 suspected tax cheats that have allegedly hidden up to €3 billion (SFr4.55 billion) in Swiss banks.

Canadian tax officials are also poised to meet executives from UBS in a bid to uncover Canadian wealth illegally hidden at the banking giant.

UBS was at the centre of a US tax evasion investigation that resulted in the bank handing over client information and paying a hefty fine to avoid going before the federal law courts. The Swiss government was forced to intervene to work out a deal in July to hand over the confidential data of 4,450 UBS clients.

However, it remains unclear whether the French and Canadian probes represent as big a threat to Swiss banking as the US investigation that forced major concessions from Switzerland.

Surprised and perplexed

French budget minister Eric Woerth told the media at the weekend that the list of 3,000 suspect accounts had been partially declared voluntarily by two Swiss banks.

The Swiss Bankers Association said it was surprised and perplexed by the statement that followed hard on the heels of a new double taxation treaty being agreed by the two countries.

"It is inconceivable that a Swiss bank located in Switzerland would unilaterally hand over a list of the names of its French clients to the French authorities without the authorisation of the relevant Swiss authorities and without a request for administrative or judicial assistance being made through the proper official channels," spokesman James Nason told swissinfo.ch.

"In view of the pending ratification of the revised double taxation agreement the minister's statements - assuming they have been correctly reported - strike us as being rather counterproductive."

Suspected grandstanding

Woerth demanded that banks cooperate with the authorities and that tax cheats come clean, but he did not elaborate on how the list could be used to flush out evaders.

Stewart Hamilton, professor of finance and accounting at Lausanne's IMD business school, wondered whether the French were indulging in some "grandstanding" only days before a scheduled meeting of ministers and bank officials.

"I'm not sure if the French are on a fishing expedition or have sufficient evidence that crimes have been committed," he told swissinfo.ch.

Switzerland was forced earlier this year to commit to better cooperation with foreign tax jurisdictions with the renegotiation of double taxation treaties.

However, such agreements still require countries to provide proof of tax evasion before Switzerland is obliged to hand over details of accounts.

Canada has threatened to use the courts to force cooperation out of UBS, but one minister admitted that the number of tax cheats was unknown.

Strong system

The United States was successful in its prosecution of UBS largely because it had obtained solid evidence from whistleblower Bradley Birkenfeld that bank employees had actively helped tax evaders.

Canada appears to lack such a weapon to use against Swiss banks.

Stewart Hamilton believes Switzerland is strong enough to repel such attacks thanks to the excellent standing of its banking system, despite the battering its image has taken recently.

"Switzerland has a strong track record in asset management that makes it an attractive place for wealthy people to invest their money. I suspect that the proportion of people using banks for tax evasion is not that high," he told swissinfo.ch. "The world needs Swiss banks."