BERN: The automatic exchange of tax information (AIE) between countries is generally seen as an effective way of cracking down on tax cheats. But what if a country uses the data to politically oppress its citizens? It’s a burning issue facing Swiss lawmakers. This week, Swiss parliament will begin a debate on whether to extend tax data exchange treaties to a second batch of countries and tax havens. Switzerland already has 38 deals in place, including with European Union members. But the latest clutch of 41 deals, which need to be ratified by parliament, contains states with dubious democratic credentials, such as China, Russia and Saudi Arabia. Civil rights groups and Swiss banks are hoping to sway political decisions from the sidelines. On one side of the argument are fears that Switzerland is trying to wriggle out of its anti-tax evasion obligations via the back door. On the other side, there is alarm that data harvested from bank clients may be abused.
Some politicians are concerned that by sharing data with them, Switzerland could be feeding “corrupt” states with the information they need to attack political enemies. The rightwing Swiss People’s Party has demanded that deals be made only with countries that reach a minimum score on Transparency International’s Corruption Perceptions Index. The People’s Party went so far as to issue red flags against Argentina, India, Brazil, Russia, Saudi Arabia, China, the United Arab Emirates, South Africa, Indonesia, Mexico and Colombia. Both the Swiss Bankers Association (SBA) and its private banking counterpart have also expressed alarm. SBA CEO Claude-Alain Margelisch wants strict policing of the treaties. B“It is important that this control be undertaken very carefully on a practical, case-by-case basis according to clear criteria, and that the exchange of information be suspended if there is reason to suspect improper application,” he said earlier this month.
Meanwhile, NGOs, such as Tax Justice Network (TJN) and Public Eye, are adamant that Switzerland should go ahead with all the treaties – and then move on to other countries. For a start, Switzerland has signed up to the automatic exchange of tax data process engineered by the Organisation for Economic Development and Cooperation (OECD).
The Swiss government has negotiated all the deals currently on the table and recommends that parliament give its approval. To back out now, argue the NGOs, would send a signal that Switzerland is not serious about tackling tax evasion and cannot keep its promises. Olivier Longchamp of Public Eye recognises that there are legitimate concerns about the governance of some countries, such as Russia. “But it would be wrong for Switzerland to unilaterally decide against signing treaties because other countries don’t meet Swiss standards,” he said. Policing the proper implementation of treaties should be left to the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes, Longchamp argues. The Global Forum, comprised of representatives from OECD member states including Switzerland, has already laid the groundwork by assessing whether countries have the required laws and infrastructure to automatically exchange tax data.
