We all know Switzerland is famous for 3 things: Its cheese, its chocolates and black money. While you might understand what makes the first two so popular, here’s why the last one made the cut:
1. Because the Swiss know how to keep a secret…
This isn’t just any policy, but an integral part of the Swiss banking culture instilled in 1791 at the Great Council of Geneva. And from then on little by little they expanded their commitment to privacy to such an extent that in 1943 the Swiss Government passed the Banking Act. This Act made exposing information of customers to anyone but the customer, a felony punishable by imprisonment. Now, privacy in these banks would not just be respected ethically but also lawfully.
2. …however ‘dark’ they are
Evading taxes through Swiss banks is pretty easy because they don’t ask for the source of your income and under no circumstances do they share your account information with others (thanks to their Banking Secrecy Act). This makes their banks a haven for those profiteering from black money and illegal transactions. No wonder many foreign nationals open Swiss bank accounts since they’re guaranteed the most stringent bank-client confidentiality protections in the world. In exchange of these services the Swiss government charges a low lump-sum amount after which the client’s tax burdens are considered as ‘settled’.
3. They also know not to tax you
The above ‘illegal’ tax evasion is often confused with ‘tax avoidance’ which is legal. Tax avoidance means setting up companies in countries like Switzerland to take advantage of their low or no tax rates. But people have found loopholes around this as well. Many form shell companies (companies that have no active business operations or are a front to conduct shady business) here to benefit from these tax systems.
4. And lastly they don’t judge you for who you are
Swiss banks do not only cater to popular pop stars, tax evaders but apparently even to arms dealers, dictators and despots. In a recent information leak of HSBC’s Swiss banking arm, an interesting variety of names were revealed. These included former as well as current Indian politicians, Hollywood stars, Russian billionaires, Middle Eastern royalty etc.
But Swiss bank’s secrets are gradually being compromised because of agitating countries like the U.S.A and India….
In response to the global financial crisis of 2008, Swiss banks gave into pressure from the United States and the European Union by signing the Foreign Account Tax Compliance Act with the U.S. and a similar agreement with the EU. As per these agreements, Swiss banks are obligated to reveal information about U.S. and EU account holders with their respective countries. And in response to the Indian Prime Minister’s crackdown on black money, they signed a deal with India to ease privacy on Indian accounts held with Swiss Banks. This was long seen coming amidst international pressure on Switzerland to share banking information on tax evaders, shady dealers, and people connected to human rights violations. But Switzerland is just one nation whose secrecy days are over. What about the other tax havens like the Cayman Islands, Mauritius, and Bermuda? Who’s going to stop them?