NYT Op-Ed Article on Swiss Banking

[Number Six]

Pierre Bessard has an op-ed article today in the New York Times. He makes the following statement:
"The Swiss peculiarity of considering tax evasion as a mere administrative offense has a long history. We think governments exist to serve us not the other way around...Bank secrecy was introduced in 1934, most notably to protect the identities and assets of Jews in Nazi Germany...Corruption, expropriation, crime and the persecution of various minorities remain risks in most of the world. For people theatened by such risks, financial privacy can protect their legitimate property."

The distinction between tax fraud and tax evasion or avoidance is probably minimal in most tax-payer's thinking. Why would citizens move their money beyond the jurisdiction of the U.S.?

[Judge Roy Bean]

... Why would citizens move their money beyond the jurisdiction of the U.S. unless they had a lot of dirty money they wanted to hide ?

Because they can, and have. Participation in the really elite schemes requires the proper contacts, influence and resources.

But guess what, it's not necessarily "dirty" money. The funds the alleged perpetrators are trying to protect could easily have been honestly acquired. They simply practice a time-honored tradition among the privileged - getting the best advice and seeking confidentiality.

But it seems getting the best advice and taking advantage of it might have longer-term consequences. Being wealthy might have consequences.

http://www.reuters.com/article/business ... 5820090817

The real story is that a sovereign nation (such as what Switzerland used to be) is not invulnerable when it comes to the taxation machine of the US.

Philosophically, this is absurd.

We are somehow willing to let countries like Myanmar, Somalia, Iran, North Korea, etc., etc., do as they please but when it comes to money, a country with a legitimately established business culture and history is now being coerced by a bankrupt government with a hopelessly flawed taxation regime into throwing away their rightfully established private place in the world of financial affairs.

The most illustrative part of all of this will be hidden from us; the truly wealthy will simply adjust. The rest of us will just keep paying.

[Joe Dirt]

The quote above.... "caught in a lie and being big douches about it".... unassailable.

By Christopher Noble, MarketWatch
SAN FRANCISCO (MarketWatch) -- The outside world crashed into my Swiss idyll in the summer of 1997.

It happened one morning during my summer vacation, which I was spending in my mother's hometown in Switzerland, a village on the shores of Lake Leman just down the road from Geneva.

A new confrontation today over bank secrecy at UBS Ag /quotes/comstock/13*!ubs/quotes/nls/ubs (UBS 15.26, +0.05, +0.32%) has reminded me of that day in 1997. Over a coffee and croissant, I told my uncle that I thought U.S. Sen. Alphonse D'Amato was right to castigate Switzerland for hoarding Jewish gold plundered by the Nazis. I believed that D'Amato -- a man whose policy positions I usually disdained -- was justified in shining some much-needed light on a shadowy and shameful period of Swiss history. See related story on the renewed scrutiny of banking secrecy.

My uncle, a naturalized Swiss citizen, reacted as though I had struck him. He flinched, sat back and took a long drag on his cigarette. His face closed up and he turned away from me.

And he didn't speak to me for more than three months.

His reaction wasn't unusual for that summer in Switzerland, when the country was convulsed by the Nazi gold story and generations were set against one another in bitter disagreement over the Swiss role in providing cash to fund Hitler's war machine.

What happened to Switzerland that summer was a milestone in the erosion of the myth of Swiss identity nurtured by many of its citizens.

That myth starts with William Tell, who 700 or so years ago shot an apple off his son's head with a crossbow and later turned the weapon on the Austrian occupier who had forced him to put his son's life at risk. Tell's actions, so the story goes, inspired the rebellion that led to the formation of the Swiss Confederation, the world's oldest democracy. Tell's persona, the scrappy rebel who later died trying to save a child from drowning, is still an emotional touchstone for many Swiss including -- for a long time -- myself.

I was proud of Switzerland's citizen army -- the model for the Israeli Defense Force -- which I believed had stood up to the Nazis. I loved seeing Omega time pieces in the foreground on TV as every world and Olympic record was broken. I admired Switzerland's businesslike efficiency. The trains and buses have always run on time. The country was -- and still is -- clean and quiet. I thought it was mysterious and cool that I, too, one day, might have a numbered bank account.

In 1997 all that fell away. Looking back, I realize the myth erosion actually started earlier, back in 1986 when the Swiss gave in to international pressure and froze the assets of Philippine President Ferdinand Marcos. I remember my mother wryly observing that if even Switzerland was acting against Marcos, it must mean that he really was doomed.

But it was that summer after D'Amato held the Swiss psyche to the fire that the mythology was shattered for me. It had become clear that the Swiss were complicit while the Nazis used the country's banks to launder money plundered from conquered nations and Holocaust victims.

Numbered bank accounts helped the Swiss and other nations ignore a catastrophic injustice. And running the trains on time can hide a scary conformism in Switzerland just as easily as it did in Nazi Germany, Vichy France or Mussolini's Italy.

Today, the latest piece of the myth under threat is Switzerland's vaunted banking secrecy. Codified by a 1934 law but dating back hundreds of years, the system has been a key reason the Swiss banking industry has grown into an international behemoth even though the country has fewer residents than New York City.

The European Union and other countries have protested Switzerland's bank-secrecy practices for years, the U.S. has investigations of international tax dodges under way and the Group of 20 nations plans to focus on tax avoidance at an upcoming meeting. Switzerland has successfully fended off most actions of this kind in the past.

But because it comes from inside the country, the recent move by Swiss market regulators and banking giant UBS to give U.S. authorities confidential details of about 250 clients suspected of tax evasion may be one of the first significant cracks in the system. The controversy in Switzerland sparked by the deal with Washington suggests some Swiss also see the agreement as a major threat.

Secret Swiss accountsKevin Conway, a tax partner in London, discusses how the IRS fight with UBS could change the rules for disclosing information about secret Swiss bank accounts.
But each time Switzerland has confronted a demon from its history, it has enhanced its maturity, confidence and international standing. It's time for Switzerland to face up to the reality that bank secrecy can be -- and often is -- abused. It is not too much to ask of Swiss banks that they find a way to protect the privacy of account holders without allowing themselves to be turned into havens for tax cheats, murderous tyrants and other abusers.

Getting there will be controversial, but some steps have been taken. To combat fraud, the Swiss authorities are already able to work with foreign tax authorities to root out crimes. The Swiss have also agreed to withhold tax on interest earned in some accounts and turn the money over to foreign governments without disclosing the name of the account holder. It's not perfect. There are ways to get around the tax and EU members don't all agree that bank secrecy should be further eroded.

Also looming is U.S. legislation, introduced last year and co-sponsored by then-Sen. Barack Obama, which contains measures against tax havens, including Switzerland.

However, ultimately, the Swiss themselves will have to enact meaningful change to the secrecy system. Such change is likely to protect the banking industry, which makes up about 15% of the country's gross domestic product, while also reaffirming many of the bedrock reasons for banking secrecy.

The Swiss have a choice. They can, as they initially did in 1996 when D'Amato assaulted their national pride, circle the wagons and try to keep the world at arm's length. Or they can embrace what is likely inevitable change and take control of the process.

Maybe the Swiss can look to another historical figure as they grapple with the issue.

In 1859, Swiss businessman Henri Dunant arrived at Solferino, in present-day Italy, a day after the battle there that killed and wounded tens of thousands. He was so shocked by the butchery that, after he organized the town's residents to give what care they could, he returned to Switzerland and led the founding of the International Committee of the Red Cross less than five years later. His ideas laid the foundation for the Geneva Conventions, and he was awarded the first Nobel Peace Prize.

The Swiss national mythology is, like that of most peoples, a many-sided thing. Let's hope the country that brought us the Red Cross, modern democracy and the cuckoo clock can appeal to its better nature as it tackles this latest attack on its self-image.

Christopher Noble is a MarketWatch assistant managing editor in San Francisco.

[Chrisfs]

http://money.cnn.com/2009/08/19/news/co ... 2009081912

IRS gets keys to Swiss Bank accounts

[Number Six]

It looks like this crisis is being resolved thoroughly, according to the Lynnley Browning article today in the NYT.

There are many legal options on asset havens and legal trusts that shield the wealthy from frivolous claims and lawsuits. Edmund Pankau, in his book, "Hide Your Assets and Disappear", gives a number of cases where the asset holder had good reason to go outside US jurisdiction from greedy gold-diggers, grasping relatives or bureaucratic corruption. There are fear-mongering newsletter writers and authors who have inspired unnecessary tax avoidance schemes. As usual, the amount of effort and money spent in convoluted asset shielding, usually exacts a much greater toll in time and mental energy than the money saved. I hope every one of the secret account holders in foreign banks will resolve the issue quickly and as cheaply as possible without going through any of the suffering that a few unlucky account holders have experienced so far.