In 2010, the USA made a substantial contribution to the global de-offshorization efforts. Namely, it passed the Foreign Account Tax Compliance Act (FATCA) that obliged the banks in all foreign countries to report to the IRS about all accounts held by American citizens and green card holders. Uncle Sam taxes his citizens no matter where they make money – in America or abroad – and he doesn’t want to be ignorant of any income that he can tax. He wants every cent of the tax money that is due to him.
It is no wonder that countries often referred to as ‘tax havens’ submitted to the big and powerful USA. After all, they are only tiny island states struggling for survival. Their armed forces are nothing to speak of. In fact, some small countries have no armed forces at all! What can be a bit more surprising, however, is the fact that many large states also agreed to play by the US rules and share the sort of information with the IRS that used to be thought of as confidential previously. The USA is a strong military power and besides, its economic sanctions can also be highly efficient. No country wants to mess with the United States.
Here is a story that shows how well the USA can make others toe the line (even though the line has been drawn by the USA itself). In 2005, Bradly Birkenfeld disclosed the fact that some Americans did not comply with the FATCA and did not report their incomes to the IRS. He demonstrated the schemes that allowed some American clients of UBS and a few other Swiss banks to evade taxes. He was able to do so by publishing some corporate documents. It followed from the documents that the Swiss banks had regularly violated the FATCA requirements and concealed the information of their American account holders. The IRS started investigations and it turned out that Uncle Sam had received a few hundred million less in taxes that he should have received. What were the sanctions? A fine of 780 million dollars for the Swiss banks. As for Birkenfeld, he spent 16 or 17 months in prison (he had also participated in the fraudulent schemes) but then he received a reward of 104 million dollars for helping the IRS collect more in taxes.
As a result of negotiations (and these were not very friendly), the Swiss authorities agreed to disclose the information about more than 50 thousand American bank account holders to the fiscal authorities of the USA. This event marked the end of banking privacy in Switzerland – not more, not less. Confidentiality of banking information that the Swiss adhered to since medieval times is now gone. Different experts express contrary opinions on the matter. Some of them say that Swiss banks have lost an important competitive advantage and the overall image of the country has been hurt. Others argue, however, that the previously existing rules and procedures played into the hands of gangsters and racketeers.
Reasons for banking in Switzerland
On the other hand, if you are a law-abiding person and a responsible taxpayer, the fact that you cannot open a ‘secret’ bank account in Switzerland should not be of any concern to you. After all, your banking information is going to be available only to the fiscal bodies and no other third parties such as your relatives or competitors, for example. With the matter of confidentiality set aside, Swiss banks offer some tremendous advantages to their clients. Some of these advantages are not to be found anywhere else. Below we list five reasons why you should give the possibility of opening a bank account in Switzerland some serious consideration.
- The first reason toopen an account with a Swiss bank is the high level of the deposit security. Swiss banks have earned a reputation of strongholds as far as the security of the deposits is concerned. You don’t even have to insure your bank deposit in Switzerland even though all deposits are insured for 100,000 Swiss francs by default in accordance with the Swiss legislation. A Swiss bank cannot obtain a banking license unless it insures the deposits.
- The second reasonis the political stability in Switzerland. The stability is guaranteed by the political neutrality of the country. Switzerland is a member neither of the EU nor of NATO (and the national currency is not the euro either). This fact allows Swiss banks to treat clients from all countries equally. It’s difficult to apply pressure to Switzerland even though the USA managed to do it as we have shown above. The political neutrality of Switzerland tells favorably on its banking sector too. This is one of the most important factors that make investing in a Swiss bank so safe. The Swiss legislation regulating the banking services is arguably the most advanced such legislation in the world. You would probably be surprised to learn that Switzerland has not been at war with any other country for centuries. The country declared its neutrality in 1515 and since 1815, all European countries have acknowledged the neutral status of Switzerland.
- The third reason toopen a Swiss bank account is the unbelievably high level of the service quality that the banks in the country offer. Switzerland has been a global banking center since the 16th century and so the service formulas have been refined for a long time. Swiss bank officers are true professionals who can manage your account and help you perform various financial operations very efficiently. In Switzerland, you can make and receive various types of payments in a timely manner.
- The fourth reason for banking in Switzerland is the opportunity to open multicurrency accounts there. You can use your Swiss bank account for keeping the money and making payment in different national currencies. This is a precious opportunity for those who are engaged in international business operations.
- The fifth reason to apply for banking services in Switzerland is the possibility to open non-resident bank accounts both for private individuals and for legal entities. Not all Swiss banks take foreign clients onboard but some of them do. You are probably aware of the fact that banking legislations are toughening in many countries and setting up non-resident bank accounts is becoming more and more difficult. Anyway, opening a bank account in a jurisdiction as reputable as Switzerland is still possible.