By: Bikal Dhungel
Switzerland has a long history of
unique banking system that goes back to the eve of World War II. A friendly
country that is neutral in world affairs, Switzerland is successful in
maintaining its sovereignty from the worldly events. It is not the member of
European Union or the OECD (Organization of Economic Cooperation and
Development) and until 2002, not even the member of United Nations. Being the
member of EU would have pushed it into the pool of countries where Switzerland
would lose the sovereignty that it maintained in the last 80 years.
Banking is an important part of this
sovereignty which has a history in it. After the expulsion of Jews in Germany
by Adolf Hitler, those with vast fortunes could keep their wealth in
Switzerland without letting known to any third party about the amount. By this
way, the Swiss banking system played a good role in saving the fortunes of
minorities prior to World War II. But this is not the only reason behind the establishment of Swiss Banking.
But what is so mysterious about the
Swiss banking? Why normalizing this system is in top agenda? In fact, similar
to its northern neighbors, Switzerland has three types of Accounts, Current
accounts, Saving accounts and Numbered accounts. The third one, Numbered accounts
is the one which is most controversial. Clients are given an ID number instead
of names, which makes it impossible to know how much money somebody has and
whom it exactly belongs to. Having an account however doesn’t directly mean
that it is for tax avoidance. Majority of the 8 million Swiss people have bank
accounts in at least one of the banks or financial institutions. They are not
tax evaders. They are just a normal citizen like everyone else.
A potent force behind the billions of deposits
in the Swiss accounts, if not trillions, is in fact not the confidential system
of Switzerland, rather its political stability, its neutrality and the faith in
its currency Swiss Francs. Switzerland remained neutral during World War II, it
has no military presence in foreign soil, it is not the member of any foreign
military alliances like the NATO and Swiss Francs is one of the most stable
currencies in the world.
The international transaction is
pegged into US dollars but in the recent time, it was also subjected to the
fear of inflation. This resulted in the discussion of switching to Euro, a
common currency of 17 countries of European Union. This was also entangled with
difficulties proven by the Greek crisis as well as the crisis we are facing
today in southern Europe. But in Swiss francs, investors and depositors have
trust because it has proven its stability in the past. Thus depositors from the
whole world prefer Switzerland as one of the safest places to put their money. These
are the potent forces that attract people towards the Alps, not only the
secrecy of depositors in Swiss banking system.
Additionally, the confidentiality is
also guaranteed by law. Article 47 of
the federal law guarantee the security of the depositor by explicitly
mentioning that those who give the account details to any external party can be
sent to prison for up to 3 years or will be imposed a penalty of 250,000 Swiss
Francs. So, the bank employees remain faithful fearing the consequences.
However, it is true that time and
again many sources reveal the millions deposited by dictators, politicians, and
business men in Switzerland. These amounts are often made by illegal means. But
in many cases, the Swiss authorities have even frozen the deposits. The
deposits of former dictator of Libya, Muammar Gaddafi had been frozen by the Swiss
canton, which has the sole right to give information to a third party in a
certain condition. The deposits of Hosni Mubarak’s son had been frozen. The
authorities are playing their part to disclose the secrets about suspicious
bank accounts. Hence, blaming Switzerland as a country that gives amnesty to
dictators and corrupts is baseless and absurd.
The deciding question of our time
should also go; if revealing the secret of Swiss banking system also solve the
problem that are encountered by it. In case of the abolition of this system, the
depositors will simply take their money out to other tax heavens like Cayman
Islands, Singapore, Lichtenstein, Andorra or Hong Kong. Hence, it will just
push the problem further. This gives Switzerland an incentive not to change its
banking policy. And why should Switzerland do this if a big portion of its
national income is generated by banking sector? This is same like proposing to
impose tax on financial transactions that the British will never support. The
UK has a big financial industry; hence it would block any policy that backs the
tax on transactions aimed to curb speculation. Similarly, the Germans would
never accept a tax in Bockwurst, a traditional food in Germany. So, demanding
only Switzerland to give up its Banking System while letting others to take the
fruit of their advantages in other sectors which are not adorable for the rest
of the world at the same time is similarly unfair.
Either Switzerland will give up its
whole Banking secrecy for the sake of international cooperation is a big
question as roughly 7% of Swiss GDP is generated by banking sector. Still, this
policy is slowly moving towards a transparent banking system.
Recently, Switzerland negotiated
with German government and agreed to give information about those who evade tax
in Germany and deposit the money in Switzerland after the German authorities
received information about such people. The agreement also included that their
fortunes will be taxed as high as 41% in Germany.
A similar agreements was signed
between the Obama Administration and Swiss government few years ago when
American money, allegedly evading tax were thought to be deposited in
Switzerland. However, fearing the economic consequences with the United States,
Switzerland decided to agree on the demands made by Obama administration that
it will help to find out American tax evaders seeking asylum in Swiss banks.
Today’s world is more globalized
than ever. This also makes the movement of people and even businesses easier. Hence,
there is a high mobility of people internationally. This also has negative
sides. A national decision making in the
issues like disclosing the banking secrecy, introducing financial transaction
tax etc would have no effect nationally. It should be done in international
level. Sweden imposed the tax in financial transactions and the result was, all
the investors moved to London. More powerful international bodies should
step-in to bring policies that will be ratified by nation-states in order to
solve the problems we are facing in financial industry, international politics
and environment. It is hardly possible to have a common tax policy in the whole
world with uniform rate but it is possible to reveal how the depositors made
the money and what we can do from it. This time, such deposits could be taxed
and the fund could be used to fight global problems like poverty, climate
change and illiteracy. A similar policy was proposed by NGOs who claimed that
along with such deposits in tax heavens, also the discoveries of natural
resources in offshore areas that does not belong to any country is subjected to
be deposited in Global Fund to fight global problems. Unfortunately, some
countries rallied with Warships to bury their flags in these regions to claim
the territories. This idea however is fantastic. This shows a humanist way to
deal with worldly problems being ethical citizens.
There are enough funds available to
solve the problem we face today. They are only in the wrong hands or are not
divided fairly. Vivid examples could be seen in the tax heavens where trillions
of wealth is deposited. Sooner or later these islands should accept the
solidarity with the remaining world. Switzerland, despite having a long history
of Bank secrecy, is slowly revealing its secrets and disclosing the information
about such accounts. Agreements with Germany and the United States are two
examples. Other tax heavens should follow the suit and finally give the
information about tax evaders to the global community and play their part to
solving the global problems.
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