Swiss banks propose withholding taxes to fight tax cheats

Swiss banks propose withholding taxes to fight tax cheats

Geneva: Swiss bankers on Thursday proposed a withholding tax system for revenues generated on foreigner-owned assets, describing it as an “efficient alternative" to data exchange in combating tax evaders.

“The model would generate tax revenues while respecting the privacy of bank clients and it would represent an efficient alternative to a system of automatic information exchange," said Urs Roth, chief executive of the Swiss Bankers Association which has almost 360 members from the financial industry.

The proposed system is modelled after a deal between Switzerland and the European Union, in which taxes are withheld on interest payments and then transferred to EU member states.

Swiss bankers said the system could be widened to other countries outside the EU.

Under this model, revenues withheld on earnings would then be transmitted to the Swiss tax authorities to be passed on to the clients’ country of domicile.

However, the client’s identity would only be known to the paying agent and not to the authorities.

“Under this system, the foreign country would have a guarantee that all investment income ... received by their taxpayers via a Swiss paying agent would be subject to taxation," added Roth.

At the same time, once the taxes have been deducted, the bank client would have “automatically fulfilled his tax obligations with regard to this income."

Roth said bankers have already brought the proposal to the Swiss government, which has greeted it “with great interest."

Switzerland came under strong pressure in a global hunt for tax evaders, as critics say the strict banking secrecy rules here have helped to shield tax cheats.

Earlier this year, Switzerland caved in to international pressure and said it would offer more cooperation to foreign tax authorities.

The country’s biggest bank UBS also recently agreed to reveal the identities of some 4,450 American clients in a landmark out-of-court settlement of a US tax-evasion case that challenged Switzerland’s sacrosanct banking.