In an unusual legal move, the U.S. government has successfully demanded information on wealthy Americans who allegedly used the confidentiality of the Swiss government to avoid taxes. Switzerland has traditionally been a favorable economic environment for both wealthy individuals and foreign corporations.
The Internal Revenue Service filed a lawsuit against UBS bank in February 2009, seeking data on more than 50,000 UBS accounts. Last August, UBS agreed to provide information on 4,450 of those accounts. The deadline of one year just expired, and it appears that the Swiss Federal Tax Administration is handing over the information.
The U.S. government is likely to withdraw its “John Doe summons” — requesting information on subjects whose names are unknown, but whose alleged crimes are known — this fall. The ultimate effect of this case, however, is not yet known.
The Swiss Advantage
Life in Switzerland is peaceful and stable. So, for the most part, is its economy. This contributes to its attractiveness to outside corporations. Indeed, foreign corporations produce 10 percent of the country’s gross domestic product.
Switzerland has a history of friendliness toward corporations, especially foreign ones. The advantages the country offers to businesses include lower taxes and a tight-lipped approach to banking. This reputation has changed somewhat, however, with the deal the Swiss government arranged with the U.S. government to reveal the details of 4,450 accounts.
On the other hand, by giving the U.S. what it asked for, Switzerland has likely avoided the continuation of the lawsuit. With this controversy coming to a close, it is possible that business will resume as usual.
The Swiss government understands what is at stake if American and European businesses stop viewing Switzerland as a favorable venue. In 2007 and 2008, over 500 companies moved to Switzerland each year. This number has slowed due to the sluggish economy, but Switzerland is still seen by many as welcoming, especially compared to the European Union.
The Swiss government has handed over information on 2,000 accounts. The U.S. government expects the other 2,450 files in the fall. Given the recent changes in Switzerland’s approach to banking privacy, American corporate investors must thoroughly research their options before proceeding.
If you or your business is considering moving assets to Switzerland, speak with an attorney who is well versed in international business law. Set out a wise strategy now, rather that reacting to changes you should have anticipated.