Switzerland has been known for a long time as a tax haven, and banking privacy has always been a priority. It´s no secret that many illicit fund flows did eventually end up in Swiss banks, away from international treaties or laws that could put them in danger or that could put its owners in an awkward situation. The fact that the government didn´t make the banks disclose any information about assets to any international organization made this place ideal for the wealthy and private people of the world, where no explanations were ever needed. However, things are changing now.
Last week Switzerland reached a tax agreement with the United States, ending its status as a tax haven country. As a part of the deal, the Swiss government is expected to disclose information about its American clients and crack down on any Swiss bank that helped wealthy Americans "hide money" from U.S. tax authorities. What is this really about? The U.S. government is nearly bankrupt, printing dollars and pushing the country into financial oblivion, with record amounts of national debt. So, the Obama administration is looking for new ways to pay the bills, taking from those who have.
The new policy pretends to help international organizations fight against illicit crime, terrorism, corruption and money laundering, all part of today´s biggest problems around the world. Many other countries considered as tax havens will be taking steps to avoid being bullied by the IRS and forced to comply with the U.S. demands. In fact, complying with the U.S. demands is such a burden, that in Switzerland, banks no longer want U.S. citizens' money. They're no longer welcome.
The Swiss government has directed banks and other financial intermediaries to comply with enhanced requirements in order to prevent the inflow of untaxed assets. Taxes are the base of a government budget, the means in which politicians say social progress occurs. But for big wealthy companies, taxes are a huge expense that prevent growth, and limited the amount of hiring and expansion possible. Individuals who pay more tax, have less money to spend in the markets and economy. Most economists now agree that higher taxes are counterproductive to economic growth and ultimately leads to lower government revenue, but it seems governments are slow to learn this lesson.
International due diligence services are essential to help individuals and companies expand and protect their capital in the global marketplace, and to properly navigate through all the domestic and international laws that face international investors in today's high tax world. When you expand or invest abroad, don't think about taxes alone, but safely evaluate all the risks.
© 2013 S. Birch
© 2013 S. Birch