Jeffrey M. Verdon Law Group, LLP
Ph: 949-988-0939

Switzerland Takes Significant Step to Crack Down on Tax Evasion

Dear Friends, Colleagues, and Clients,

Switzerland has never viewed tax evasion as an act that would breach its inviolate banking secrecy laws. Oh, have times changed.

On Wednesday, July 6, 2011, the Swiss government officially adopted the Organization for Economic Cooperation and Development's ("OECD") standards regarding banking secrecy. Subject to certain conditions, Switzerland must now turn over information to foreign authorities investigating claims of tax evasion allegedly accomplished through the use of Swiss accounts.

In the past, Switzerland was often regarded as a tax haven for wealthy individuals hoping to avoid the higher taxes imposed by their countries of citizenship. While these individuals may have engaged in the activity of holding assets in Swiss accounts and failing to report the income gained from those assets to their home countries, to the Swiss, this was not a Swiss offense and therefore, they didn't care. In 1998, the OECD began an initiative directed against tax havens, ultimately focusing on the problem of tax evasion by individuals and the need for cooperation between tax havens and the foreign authorities investigating such claims.

Having now adopted the OECD's standards, Switzerland will introduce its own Tax Administrative Assistance Act, outlining the nation's guidelines governing this information exchange. Because Switzerland's cooperation with foreign authorities will be implemented pursuant to its own national law, banking secrecy may not be completely compromised. For instance, the Act provides that the Swiss government will not provide assistance to foreign authorities if the request is based on information obtained by acts that would be punishable under Swiss law. Moreover, Switzerland will only share information if the requesting foreign authority has provided credible evidence demonstrating the commission of an actionable tax offense - the Swiss will not accommodate inquiries in the form of fishing expeditions.

Only time will tell whether Switzerland's most recent efforts to reduce incidents of foreign tax evasion to placate the demands of the U.S. and the OECD's standards will likewise eradicate the country's perceived reputation as a forum for dubious conduct and illegal affairs. We will continue to monitor the situation and report any substantive developments.

Jeffrey M. Verdon Law Group, LLC

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