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  1. Wealth
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June 1, 2009

Tax Special: The View from Switzerland

By Spear's

Spear’s consulted someone with a ringside seat for their view of the Swiss tax situation

I t is important to clarify that there is no formal ‘change in Swiss banking secrecy’. This would require an amendment of the Federal Act regulating such duty for employees of the banking industry.

  The big change pertains to the intention as expressed by the Swiss government to accept the OECD standards on exchange of information in their newly-to-be-negotiated double tax treaties.

While the public was concerned about the fact that the Swiss government responded so quickly and obediently to the political pressure, the financial industry was mostly in agreement with this decision.

Some people certainly argue that this is a form of economic warfare. Some of the main drivers in these organisations have or just had elections, and need additional funds. Switzerland in this context may be regarded as an easy target to take a part of the private client business if it is not politically protected.

There is certainly anger against UBS but probably more for causing problems for Switzerland’s economy with its investment and management style. A big part of the financial failure seems driven by greed and over-staffed mid- and upper-management (many living in an academic, business-school world without any experience with clients themselves).

By acting fast [in releasing clients’ names], and even partly acknowledging that this was in order not to be delayed by legal action against it, UBS acted around the legal system of the Swiss but also of the clients who trust the Swiss legal environment.

I believe that Swiss private banking will persist and that a major part of private wealth will still be managed out of Switzerland in five to ten years. This is due to the fact that many high-net-worth individuals value the traditional advantages of Swiss banking such as high service quality, sustainability of the Swiss political and economic environment, the technical education of its staff, and even the discreet and confidential handling of personal information (now not related to any tax issue). 

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This will only be possible, though, if the Swiss banking community (as well as its government) learns from this crisis. It will be of paramount importance that the banks change their attitude and focus on their traditional values rather than copying management and business styles and models imported from other cultures while trying aggressively to exploit all possibilities given by the Swiss legal environment in order to get more ‘assets under management’ and ‘revenue on assets’.

The Swiss government has to realise that one needs partners, and to anticipate that in a more hostile economic and political environment, with their action (or lack of it), they influence Switzerland’s reputation, on which many local industries depend.

Thomas Baranzelli, Experta AG, Basle

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