IN FULL HEGEMONIC EXUBERANCE
Alas, as the following articles published these last few days in Switzerland indicate, it has been another very sad and depressing week for Americans living in Switzerland .
Now this nasty behavior of the U.S. Government seems to be becoming viral and starting to blow back onto Swiss citizens living abroad too.
One can only wonder how much worse this all has to become before there will finally be a flicker of hope and some very long awaited adult supervision to try to dampen down such truly ugly behavior by Uncle Sam that is starting to tear apart the economies of more and more countries all over the world.
Would that someone could find a cure for the intense animosity the U.S. Government seems to ever more forcefully want to manifest toward its own citizens who have dared to move abroad to live and try to work. How come so many high level people in Washington still remain so adamantly convinced that the only reason someone wants to live abroad is to avoid paying U.S. taxes??
Any suggestions for curing this madness?? Or is it perhaps already far too late??
Andy Sundberg, Overseas American Academy, Geneva, Switzerland
SWISS EXPATS CAUGHT
IN MIDDLE OF US TAX CONFLICT
The population of the USA is more than forty times the size of the population of Switzerland .
But nearly 76,000 Swiss expats live in the United States , which is
double the number of U.S. expats living in Switzerland .
By Isabelle Eichenberger, swissinfo.ch, 16 February 2012. Translated from French by Scott Capper.
Switzerland’s banks no longer want American clients but now Swiss citizens living in the United States are finding it hard to keep accounts back home.
Rules and regulations have become more complicated, and fees have gone up as financial institutions pass on the extra costs to their customers.
Swiss expatriates are increasingly irritated by their dealings with banks in their homeland and are venting their frustrations online.
“I have been living in the United States for the past four years and at the end of last year, the Zurich cantonal bank told me all my accounts were being shut down,” said one expat in a forum on swisscommunity.org, the platform for the Swiss abroad. “Now what? How will my clients pay me now?”
“I can no longer make payments via internet. And opening an account with a US or a Swiss bank is next to impossible,” pointed out another. “You have to fill out pages and pages of paperwork and it’s too expensive because you have to pay for every single transaction.”
Another expat in Argentina complained of being discriminated against:
“ US pressure has led to restrictions for all customers of Swiss banks living abroad, for political and economic reasons.”
Expatriates are seeing their banking options shrink and are becoming more and more frustrated, according to Martin Naville , chief executive of the Swiss-American Chamber of Commerce.
“It’s scandalous and I understand why the issue is so emotional,” he told swissinfo.ch.
Naville points out that bank accounts for assets are different to current accounts used by clients who have family or an apartment, mortgage or club subscription in Switzerland , for example.
“A current account is useless if you want to avoid tax,” he added. “By closing these accounts, banks are penalising innocent clients and being overly cautious.”
For the Organisation of the Swiss Abroad (OSA), rising bank fees are also a problem.
“We are receiving more and more complaints from people who cannot find somewhere to deposit their money at reasonable conditions,” said Sarah Mastatuoni, head of the OSA legal service.
The first difficulties appeared when UBS was forced to close its offshore activities in the US . Tensions increased earlier this month when Switzerland ’s oldest private bank, Wegelin, was indicted by the US Justice Department for aiding tax fraud.
Raiffeisen, a retail bank mostly active in Switzerland , recently announced the closure of all accounts belonging to US residents.
Alain Girardin, head of Raiffaisen’s operations for French-speaking Switzerland , said that out of
“3.5 million clients, 0.01 per cent were based in the US and had close personal ties to Switzerland .”
One rule for all
According to the Swiss Bankers Association, administrative requirements have significantly increased for expatriates. Since the 2001 terrorist attacks, new regulations concerning terrorism, foreign dictatorships and money laundering have been introduced, multiplying the paperwork needed for each account.
The ongoing tax conflict has added to the problems.
“Administrative requirements have increased in all countries that have declared war on tax fraud and are trying to recover money everywhere it has been stashed. Public opinion has changed, and the person who commits fraud is no longer a hero, but a criminal like any other,” said SBA spokeswoman Rebecca Garcia.
“It’s a real problem for the Swiss living in the US , but there is nothing we can do. After four months residence, they are considered like ordinary US citizens.”
No quick fix
The Swiss government has alerted the American authorities to the problem, but there is little it can do to change matters.
“The decision to keep a client remains with the bank. The administrative requirements to stay clear of trouble with the US tax services cost so much that many institutions prefer not to take someone’s deposit,” said finance ministry spokesman Roland Meier.
The one alternative open to expats is Swiss Post’s PostFinance payment service, but it also has the same requirements and fees as a bank.
“Clients must be able to prove they have paid any taxes due on the funds they want to transfer,” explained PostFinance spokesman Alex Josty. Although he declined to provide figures, Josty said there had not been a notable increase of Swiss customers living in the US .
For Naville, there are no easy solutions.
“There are some banks that provide a limited and specific service for students or workers who only spend two or three years in the US ,” he said.
Another option could be to use the address of a close friend or relative in Switzerland to open an account and ask them to manage it, but doing this could land those involved in legal hot water, noted Naville.
AMBASSADOR BELIEVES WORST
MAY BE OVER IN TAX ROW
Ambassador Beyer believes the US-Swiss tax dispute
reached rock bottom with the Wegelin debacle.
By Jessica Dacey, swissinfo.ch, 14 February 2012.
The United States’ probe into tax cheats hiding assets in Swiss banks has reached its “low point”, according to America ’s ambassador to Bern .
After the criminal indictment of Switzerland ’s oldest bank, Wegelin, and its decision to sell off most of its business, the only way is up, Ambassador Donald Beyer tells swissinfo.ch.
Beyer says the tax dispute has easily been his biggest challenge in his two and a half years on the job in Switzerland – and would continue to be his “number one priority”.
He notes that, “like the canary in the coal mine”, Switzerland was the first country to raise issues about the fall-out of the Foreign Account Tax Compliance Act (Fatca).
That coupled with Swiss bank’s rejection of some US citizens as clients, saw around 100 Americans in Switzerland give up their US citizenship in the past year. Meanwhile, over 11,000 Swiss applied for the US Green Card Lottery.
swissinfo.ch: The US tax probe has been dominating the Swiss-US relationship of late. Won’t these relations become more delicate as investigations continue into various Swiss banks?
“My sense is that we’ve already hit the low point, with the Wegelin indictment and the Wegelin decision to spin off most of its assets to Raiffeisen. The other banks seem eager to participate and to cooperate. In the newspapers recently you saw both Credit Suisse and Julius Bär eager to say we want to come forward and help in any way we can. My sense is that a few of the banks involved would turn over the data if they were allowed to under Swiss law. So far they don’t feel that they are allowed to and are awaiting a resolution between the two governments.”
“We talk to [Swiss] State Secretary Michael Ambühl regularly and I talk to the Internal Revenue Service and Justice Department regularly. All these processes move much slower than we would like but they all seem to be moving forward.”
swissinfo.ch: Do the Swiss understand the US perspective on the tax probe and what kind of opportunities have you had to explain Washington ’s position to the Swiss authorities?
“I am not sure whether the average Swiss citizen understands it completely because these are difficult issues. But I certainly think that the government, the ministers, they understand it very, very well. And they’ve been very constructive in trying to come to a good solution. There is tension. But the thing that we keep trying to emphasise is this is not an attack on Swiss banks, that this is an attempt to hold a couple thousand Americans who cheated on their taxes in the United States accountable for paying their taxes.”
swissinfo.ch: What do you say to all those honest American taxpayers who have close ties with Switzerland but are under suspicion because of their Swiss bank accounts or are being shunned by Swiss banks due to their US citizenship. Some of whom are even giving up their passports as a result of this and the Fatca…
“We need to differentiate. On the one hand there certainly are American expats here who have had trouble getting Swiss bank accounts. Just as there are Swiss in the United States who have had trouble keeping their Swiss bank accounts. And our advice has been to be patient and persistent. Patient because there is no law or regulation in Switzerland or the United States forcing the banks to make these decisions. Individual banks are making their own business decisions, such as ‘I don’t want to do business with an American client’. And they do that because they have fear, uncertainty, and they don’t know whether IRS investigations could somehow put them at risk.”
“There were enormous concerns around the world initially [about Fatca]. The Swiss get credit for being the very first – the canary in the coal mine – to pay attention to the possible unintended consequences. I have a number of times fed back to the State Department specific concerns raised by Swiss bankers and members of Swiss government about Fatca. And the good news is the US government is taking it seriously.”
“While I can’t say that there is no connection between Fatca and the citizenship renunciations, there’s a different but important way to look at this. Last year there were 1,708 citizenship renunciations worldwide. There were 100 plus here in Switzerland . Most are folks who were born in the US but have lived in Switzerland all their life and intend to live in Switzerland for the rest of their life, and they didn’t want to put up with Fatca or the responsibility to file taxes or anything else.”
“What’s really interesting is that in the fiscal year 2012 we had 11,539 Swiss apply for the Green Card Lottery. We had 100-something give up their citizenship. That’s a 110:1 ratio.”
swissinfo.ch: How much is the strong franc and the tax dispute hurting US businesses and trade with Switzerland ? According to investment promotion agencies for Zurich , Geneva and Bern , American companies are putting investment plans on hold until the tax situation is resolved…
“I haven’t heard that, but I haven’t heard the contrary either. Things are still pretty good. The strong Swiss franc always has an impact. But we still get an awful lot of American tourists. Conversely we had 470,000 Swiss tourists to the US last year, which is a 23 per cent increase over the year before.”
“In 2010 Switzerland was the number one foreign direct investor in the US economy. Swiss business and investors put more in the US economy than any other country. 2011’s final statistics are going to be way up at the top. We now have well over 600 US companies with headquarters or operations here in Switzerland , a very vibrant community, and we have a number of states that are eager to come here in 2012 to do trade missions to Switzerland , because they see this as a great market.”
swissinfo.ch: What do you need to achieve before the end of your term here?
“Priority number one: resolve the banking issues. And I think everyone recognizes that these are essentially legacy issues, left over from old decisions, when you didn’t have treaties and laws and a consciousness in place that hopefully will never bring these issues to the fore again. We need to get over these legacy issues.”
“Number two would be developing the information sharing agreements that allow visa waivers to continue. There’s a big number of European countries that have already negotiated these including Austria which has just as strict privacy laws as Switzerland . The federal government gave a mandate to the Federal Police Office two or three weeks ago to work on this and negotiate this, so hopefully we’ll get that done.”
EUROPEAN FATCA DEAL
“THREAT TO SWISS SECRECY”
The US tax collector (Internal Revenue Service) always knocks more than once
By Matthew Allen and Scott Capper, swissinfo.ch, 13 February 2012.
A deal between the United States and major European countries could step up pressure on Swiss banking secrecy, according to an international tax campaigning group.
The five biggest European economies are negotiating a system to implement the US Foreign Account Tax Compliance Act (Fatca). Tax Justice Network (TJN) believes it could embolden the European Union into demanding a similar deal with Switzerland .
Britain, France , Germany , Italy and Spain appear set on ordering their banks to hand over details of accounts owned by US citizens containing more than $50,000 (SFr46,000). The governments would then pass data on to the US , alleviating costs for banks and pressure on client secrecy laws.
While still a long way from completion, such a Fatca implementation deal could encourage the EU to tear up existing tax contracts with Switzerland and insist on a European version of the tough US law, according to TJN director John Christensen.
“The Fatca proposals could well be adopted by other countries largely because they are exasperated by the lack of progress they are making [with Switzerland on tax evasion issues],” Christensen told swissinfo.ch.
Switzerland and the EU have been staging a running battle over tax evasion and banking secrecy for a number of years.
Loopholes in the 2005 savings directive, that requires Swiss banks to collect taxes on undisclosed accounts of EU nationals, have led to fewer funds being handed over than expected.
Switzerland has lifted some obstacles to giving out bank client data to other governments in recent years, but the EU continues to push for an automatic exchange of information, even if no cheating is suspected.
The Swiss authorities attempted to get around this demand by arranging separate deals with Britain and Germany last year, but these new withholding tax treaties are not yet rubber stamped and may never come into force.
Denmark made it clear on assuming the presidency of the EU at the start of this year that tax negotiations with Switzerland would be a priority for 2012.
“There is now very clear political pressure for European governments to adopt a similar approach to the US ,” Christensen told swissinfo.ch. “The Fatca route…would clearly have a much stronger revenue collecting effect [than existing EU-Swiss agreements].”
Better still for tax collectors, Fatca wields the very big stick of freezing non-compliant banks out of the US financial market. Christensen believes a similar threat in Europe would be the only way to force tax havens to amend their ways.
“If Swiss banks do not cooperate it would lead to them being blocked from key markets,” he said.
The threat of Fatca, passed in the US in 2010 and due to be phased in from 2014, has been enough to elicit strong protests from the Swiss financial sector and politicians.
“Given its significant international activity, particularly with the United States , Switzerland will be greatly affected by this legislation,” the Swiss finance ministry said in a statement.
“[The State Secretariat for International Financial Matters – SIF] made it clear to the US authorities during a number of different meetings that the implementation of Fatca had to take account of the concerns of the financial institutions that would be affected.”
UBS, Credit Suisse and other Swiss banks have already stopped offshore accounts in the US in anticipation of such stiff regulatory hurdles.
Martin Naville, chief executive of the Swiss-American chamber of commerce, believes the negotiations by the five European countries would eventually act as a template for Fatca compliance throughout the EU.
Naville agreed that this could lead to the EU toughening its stance with Switzerland . That could take the form of a demand for Fatca-style automatic exchange of information from Swiss banks channelled through the Swiss government.
Switzerland has no choice but to comply with Fatca and could not expect to get a better deal than the European powerhouse nations, he warned.
“Could Switzerland get special treatment and concessions from the US ? Certainly not,” Naville told swissinfo.ch.
But Naville, who last year said that Fatca could have “disastrous consequences” on both sides of the Atlantic , cautioned that it was too early to draw clear conclusions with European negotiations at such an early stage.
One positive effect of the negotiation process is that the big five European economies have already managed to force concessions out of the US . These include a reciprocal exchange of information from the US and a less onerous application of Fatca for certain institutions.
“The European negotiators would be able to clear up some of the strict, and rather strange, rules far better than Switzerland could do on its own,”Naville told swissinfo.ch.