New Delhi: At a time when it is under global pressure, including from India, on black money menace, the Swiss government has rejected the popular initiative to allow strict privacy in financial matters.
The decision also comes at a time when Switzerland is slowly shedding the veil of its famed banking secrecy practices amid global efforts being stepped to curb flow of illicit funds in the financial system.
Emphasising that the consequences for the fight against money laundering and the financing of terrorism depend on how the initiative is interpreted, the Swiss Federal Council on August 26 said it was rejecting it.
"The initiative interferes significantly in tax and prosecution procedures and, as a result, would endanger the accurate levying of federal, cantonal and communal taxes. "In addition, the initiative could have a negative impact on the fight against money laundering and terrorist financing," the Council said.
In a statement, the Council said it is "recommending that the popular initiative 'Yes to the protection of privacy' be rejected" and approved the corresponding dispatch for the attention of Parliament. Switzerland, long known as a place with unbreakable banking secrecy, has come under intense global pressure, including from India, amid worldwide efforts to crack down on illicit fund flows.
The Council said that protection of privacy against illegal state intervention is an important principle in the rule of law. "It enjoys constitutional status today in Switzerland and is fleshed out in legislation. There are necessary limits to the protection of privacy in tax law," it noted. According to the statement, in order for income and wealth taxes to be correctly levied, taxpayers must disclose their income and asset situation to the tax authorities.
"However, privacy continues to be protected as the authorities are bound by tax secrecy and the information received may not be shared, aside from legally defined exceptions," it said. "The privacy of tax-compliant persons is sufficiently protected thanks to tax secrecy and would therefore not be affected by the initiative.
"However, if a person refuses to cooperate and thereby violates the relationship of trust between citizen and state, the tax authorities should continue to be able to obtain information from third parties," the Council said. The 'Yes to the protection of privacy' was submitted on September 25, 2014 and came into existence with 117,531 valid signatures.
As per the initiators, protection, in particular of financial privacy, should be enshrined in the Constitution by virtue of the initiative. Acceptance of the initiative would result in a significant restriction of the current investigative measures, the Council said.
"The initiative covers domestic taxes only. It would thus have no impact on administrative assistance in tax matters and the exchange of information in favour of foreign partner countries. "However, depending on interpretation, Switzerland's options to obtain corresponding information from abroad could be restricted," it added. The Council stressed that consequences for the fight against money laundering and the financing of terrorism depend on how the initiative is interpreted.
"If the restricted obligations of third parties to provide information were also to apply to the Anti-Money Laundering Act, the initiative would have a significant impact on this area as a result. "Moreover, the exchange of information between the Swiss and foreign reporting offices combating money laundering and the financing of terrorism could be compromised. All of the above would have a negative impact on Switzerland's compliance with international standards," the statement said.
Noting that the initiative calls for third parties to be allowed to give information to the authorities only under very restrictive conditions, the Council said such information on taxpayers should only be available within the scope of criminal proceedings and only in cases in which a court confirms the suspicion of a serious tax offence.
"As a result, tax authorities would only be able to obtain information from third parties in very exceptional cases. "If taxpayers violate their duty to co-operate, it would no longer be possible for the authorities to obtain information from employers or from insurance companies. Accurate levying of taxes would no longer be guaranteed," the statement said.
There is currently an obligation for banks to provide information in criminal proceedings concerning indirect taxes and in the context of special tax investigations by the Federal Tax Administration (FTA) involving serious tax offences.
