Tax Evasion In Switzerland By The Swiss Is “Officially Silenced To Death”

The arm-wrestling between the US, Switzerland, and Swiss banks over funds that US citizens have stashed away in Swiss bank accounts has been going on for years to the point where the Swiss are now actually cracking down on US citizens, or at least aide them in circumnavigating the reporting requirements. In Germany, a similar fight has broken out, albeit with more consideration for the rich. Other governments, desperate for moolah, are also going after their own with funds in Switzerland. Turns out the Swiss themselves, long praised by their politicians for their tax compliance, do what others do: evade taxes—which is part of the human DNA. In Switzerland, however, it’s “officially silenced to death.”

Now Margret Kiener Nellen, Swiss National Council member, former President of the Finance Commission, and member of the center-left Social Democratic Party, has thrown down the gauntlet when she declared with some bravado, “The Federal Government, cantons, and municipalities are deprived annually of 18 billion.”

With bravado, because there aren’t any real numbers. And that’s part of the problem. To arrive at a number at all, she had to do her own calculations; neither the Federal Tax Administration (ESTV) nor the Finance Directors of the cantons have current estimates, laments Kiener Nellen. They purposefully don’t have them.

“The extent of tax fraud by the Swiss has no numbers,” declared ESTV boss Urs Ursprung before a parliamentary commission when some politicians wanted to find out. In June, however, Finance Minister Eveline Widmer-Schlumpf fired him for his involvement in a scandal over the acquisition of a data system.

So Kiener Nellen did her own math, as inadequate as that might appear. The basis was a 2006 study, “Tax Evasion in Switzerland,” by economists Lars P. Feld und Bruno S. Frey, that concluded that 23.5% of gross household income remained underground. She applied an annual tax rate of 20%, a “conservative” estimate, to the household income of 2009 as published by the Federal Statistics Agency. Hence her 18 billion Swiss francs.

Other countries aren’t that shy about studying the extent of tax evasion. In France, it costs the state €50 billion annually, according to an inquiry by a Senate commission. Another study estimated that €600 billion in French assets were hidden in tax havens. And so France is half-heartedly trying to get its hands on some of that dough.

Germany’s planned tax agreement with Switzerland would allow Germans to declare their hidden assets, pay taxes on them at a relatively low rate, and avoid prosecution. Recalcitrant tax evaders have six months to move their assets out of Switzerland, and thus beyond the scope of the agreement. The deal caused a ruckus in some corners due to its leniency.

Germany also acquired five CDs for €8.9 million. They contain, it is said, data of German clients at Swiss banks. The CDs became a casus belli in Switzerland and scared the bejesus out of tax evaders. Despite rumors that they didn’t actually exist, they allowed the government to collect €2.5 billion—a Google-esque return on investment—at least in part from people who turned themselves in. Fear is a strong motivator, along with greed. But it’s just a rounding error: €500 billion in German assets are estimated to be hidden in Swiss banks.

The Swiss bank secrecy laws were “designed for dictators” and the upper crust, “not for normal mortals,” a commenter pointed out. Workers “get paystubs, and every rappen is declared and taxed.”

Hence the unfairness of tax evasion. When Kiener Nellen demanded some answers in 2010, the Federal Council said that tax ethics in Switzerland had deteriorated significantly between 1988 and 1996, but because there have been no studies since then, it was unknown if the trend continued. Then the topic was pushed aside because “rich tax evaders are part of their voter base”—the reason why crackdowns in the US, Germany, and other countries took decades before they began to grow fangs. Politicians don’t want to step on the toes of rich donors voters.

But Kiener Nellen doesn’t mind stepping on toes, apparently. She is demanding new measures from the Federal Council and from the ESTV to fight tax evasion by the Swiss. “Tax fraud is theft from the people,” she said. Upon which a commenters replied, “The only theft from the people is executed by the state itself. Through overly high taxes without compensation.” Priceless.

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