On January 24th the Organization for Economic Cooperation and Development released the latest annual Economic Survey of Switzerland, containing a summary of the country’s current economic position and recommendations for future fiscal policies.

According to the authors of the report, Switzerland has experienced healthy and balanced economic growth in the last few years, despite seeing a strong appreciation of the Swiss franc. The report suggested several measures to ensure that the country continues to see sustainable and balanced economic expansion.

Amongst the suggestions, the OECD pointed to several tax measures that would be beneficial to Switzerland, and recommended the government to look at rebalancing the current tax system to shift tax burdens away from personal incomes to consumption taxes. The government should also consider raising the Value Added Tax (VAT) rate, and expanding the system to cover more transaction and items. VAT should also be levied on financial services, to equalize the tax treatment of the financial sector.

The central government and local governments in Switzerland also need to investigate the feasibility of lowering personal income taxes. The OECD report suggested that central government should remove the restrictions its places on local authorities in setting real estate taxes. The newly raised revenues from real estate taxes could be used to substitute the revenues lost by cutting personal income tax rates. As an additional benefit, taxing real estate should be less harmful to economic activity than taxing incomes, and would generate a steadier income for local governments across Switzerland.

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On December 18th the international mass media revealed that 11 Swiss banks were presented with the deal on December 16th, which will see US authorities drop their investigations into the bank’s practices, if the institutions agree by December 20th to divulge details on their US based clients and operation.

Swiss banks which agree to the deal will need to provide US tax authorities with full administrative assistance in their investigations into US taxpayers using Swiss bank accounts to hide their assets. The banks will also need to deliver information on correspondences between the bank and its US clients, including all notes on the client and available transcripts from meetings and telephone conversations, and details of correspondences with third parties regarding the clients’ affairs. Each bank will also have to submit their in-house documents regarding their business models and practices used to deal with US clients.

The names of the staff members who worked directly with US clients will also be provided to investigators, but the individuals will all be protected from prosecution for their involvement in helping US taxpayers avoid their US tax obligations.

The banks will also be required to pay a fine to US authorities, but the extent of the levy has not yet been revealed.

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On October 25th the international anti – tax evasion group the Tax Justice Network (TJN) published a new report condemning the recently signed tax agreement between Switzerland and the UK. According to the TJN, the new agreement will not lead to any significant reductions in tax evasion, and could even help some taxpayers to better hide their illicit tax schemes.

The TJN claims that it has identified 10 glaring loopholes in the already signed tax agreement between Switzerland and the UK. These oversights will seriously undermine the legitimacy of the deal, and will ultimately prove to be of little, if any, benefit to the UK.

Under the agreement, UK taxpayers who hold Swiss bank accounts will be face a onetime tax of up to 34 percent of the value of their bank account, followed by an annual tax of 48 percent on all future incomes.

According to the report, taxpayers wishing to circumvent the new rules could simply transfer their assets to a foundation, discretionary trust, or a company with commercial activities, all of which are not covered under the agreement in respect to future incomes. Further, bank accounts held at branches of Swiss banks outside of Switzerland are also not subject to the agreement. Account holders could also simply declare their deposits as “non-capital” incomes such as wages or directors’ fees.

The HMRC initially estimated that the new agreement could result in tax collections of up to GBP 7 billion. However, the TJN says that once bank account holders make use of the available loopholes the tax revenues will only be approximately 10 percent of the first forecasts.

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In a statement made by representatives of Credit Suisse on September 19th in Dusseldorf, the bank announced that a solution has been reached to the ongoing animosity with German tax authorities. The disputes centered on accusations that Credit Suisse staff knowingly aided German taxpayers in evading their tax obligations in Germany through the use of Credit Suisse bank accounts.

The deal will see Credit Suisse pay EUR 150 million to German tax authorities to end their investigations. German authorities have agreed that they will also stop investigations and prosecution of individual employees of Credit Suisse. As part of the agreement, the bank will not make any admission of responsibility for tax evasion by German taxpayers who used Credit Suisse accounts to hide their funds.

According to the bank’s statement, the deal with German tax authorities avoids a complex and prolonged legal dispute, and provides customers and investors with assurances of legal certainty.

Credit Suisse has been under investigation by German authorizes since last year, when tax officials launched a probe into 1100 Credit Suisse clients who were suspected by German authorities in tax evasion. The bank is currently facing the prospects of investigations for similar charges by tax authorities of the USA.

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The president of the Swiss Bankers Association Patrick Odier has revealed that Swiss and UK tax authorities are only a few weeks away from concluding negotiations over a new cooperative tax deal.

Under proposals raised in the negotiations, Swiss banks would be responsible for applying a flat rate withholding tax on gains made on capitals and savings on bank accounts held by UK nationals. The tax would be charged at a rate set to match the UK’s domestic tax obligations. In order to maintain Switzerland’s vaunted bank confidentiality rules, Swiss banks will transfer the full amount of the tax payment without disclosing the identity of their UK clients.

News of the agreement’s progress comes hot on the heels of the recent announcement that German and Swiss tax authorities have already completed negotiations on their tax agreement, which will make Swiss banks responsible for collecting appropriate tax payments from their clients in the future.

The progress made in the tax deal is thought to be a positive signal for other European nations. In particular, France and Italy have both previously displayed great interest in reaching a similar productive tax agreement with Switzerland.

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