Proposed Swiss law could boost London as a financial centre
Switzerland’s reputation as a financial centre could be damaged by a proposed domestic law whereby Swiss banks will be forced to deal only with tax compliant money, according to Geneva-based Maurice Ephrati, managing partner and co-founder of independent wealth advisor Bedrock.
The turbulent financial crisis since 2008 has led US and European countries to create an unprecedented level of public debt. In order to save their financial system, these regions are now looking for ways to reduce their deficits, one of which is collecting more taxes and putting in place policies and actions to fight against tax evasion both at private and corporate level.
Over the past few years, Swiss banks have come under pressure from the United States tax authorities who suspect some of them of helping wealthy US clients to evade their tax obligations. The US has created the Foreign Account Tax Compliance Act (“FATCA”) that aims at identifying US persons who hold assets offshore and to impose a 30% withholding tax on withholdable payments from the US, unless financial institutions enter into an agreement with the IRS to disclose these US investors.
Last week, French presidential candidates from all parties proposed measures to tax their citizens on a worldwide basis, providing they had left the country for tax purposes. Some countries, such as France, are not only going after their own citizens but also other countries. Over the last few years, vast campaigns have been launched to intensify pressure against some countries believed to have too favourable tax treatments to foreign companies or foreign residents.
It is clearly under this sort of pressure and in this peculiar environment that the Swiss government has been drafting a new law that should be issued in September to force Swiss banks to only deal with tax compliant money. Working with non-tax compliant money is currently not a criminal offence in Switzerland.
At Bedrock, we are of the opinion that this new law will be a game changer for the Swiss banking industry. It will create a large opportunity for the UK, and London in particular, to reaffirm itself as the leading European financial centre, especially within the asset management and wealth management spaces where Switzerland was once a large competitor.