Geneva Switzerland’s days as a safe haven for the world’s tax evaders are numbered.
Under pressure from the United States and other troubled economies, the Swiss government announced Friday that it will cooperate in international tax investigations, breaking with a long-standing tradition of protecting wealthy foreigners accused of hiding billions of dollars. Austria and Luxembourg also said they would help.
“Against the background of the financial crisis, international cooperation has grown stronger particularly against tax crimes,” Swiss President Hans-Rudolf Merz said.
But he insisted that the secrecy of Swiss banks would remain intact except when other countries provide compelling evidence of tax evasion.
The decision was a hard one for the Swiss, whose renowned discretion has long attracted famous foreigners as well as refugees from political or religious persecution.
Swiss banks hold an estimated $2 trillion of foreign money, and financial services add about 12 percent of GDP to the national economy. According to the Boston Consulting Group, those holdings amount to one-fourth of the world’s foreign-owned assets.
The famed “numbered accounts” that do not bear the owner’s name will still be available for clients willing to pay for added anonymity. But the government will now be able to demand account holders’ identities in cases of suspected wrongdoing and share that information with foreign authorities.
Switzerland’s move comes ahead of a meeting next month in which world powers will discuss stepping up their fight against tax cheats.
The greatest pressure has been on Switzerland, which has been embroiled in a dispute with the United States over wealthy Americans who have stashed money in its biggest bank, UBS AG.
Hoping to avoid being blacklisted as uncooperative tax havens, other countries have also announced plans to open their books to foreign tax inspectors.
Austria and Luxembourg said Friday that they would offer more help on tax investigations. Over the past month, leaders have made similar promises in Singapore, Liechtenstein, Bermuda, the British islands of Jersey and Guernsey, and tiny Andorra on the border between France and Spain.
For generations, the Swiss have guaranteed depositors that they and their assets would be protected from oppressive governments.
French Protestants poured in during the 1600s, at the same time that Geneva’s banks were funding Louis XIV’s wars to expand the borders of Catholic France. When the French Revolution came a century later, nobles and other refugees found a shelter in Switzerland for themselves and their property.
In World War II, Switzerland accepted numerous Jews and other persecuted minorities from Nazi Germany. After the war, refugees arrived from communist-controlled Europe. Hundreds of thousands of people from the former Yugoslavia lived in Switzerland during the Balkan Wars of the 1990s.
But criminals and dictators have also taken advantage of the secrecy rules. The Swiss have had to return to governments hundreds of millions of dollars deposited by the late Philippines President Ferdinand Marcos, Nigerian dictator Sani Abacha and others.
It is still unclear how the new commitment to fighting tax evasion will translate into practice.
Merz said the Swiss wanted “assistance to be restricted to individual cases to prevent fishing expeditions” in which prosecutors without evidence seek to uncover wrongdoing.
And other “offshore” banking centers are still available in the Caribbean, Panama, Dubai and elsewhere.
Swiss authorities have already provided the U.S. with the banking details of up to 300 wealthy Americans suspected of tax fraud. But Switzerland has refused to identify about 50,000 more U.S. account holders Washington wants.
UBS and Swiss officials have said further cooperation would violate national law, which makes an unclear distinction between the serious crime of tax fraud and the minor offense of tax evasion.
Switzerland toughened its secrecy laws in 1934 during a worldwide depression and under the threat of espionage by France and Nazi Germany.
Strict penalties were imposed on Swiss bank employees for disclosing client information, including a life sentence given to one in 1943 for providing the Nazis with details of 74 account holders. German citizens at the time risked the death sentence for depositing money abroad.
Since then, secrecy standards have eroded somewhat. In addition to disclosing dictators’ cash, the Swiss cracked down on money laundering in the 1990s. After the 2001 attacks on the United States, they made it easier to freeze assets and investigate suspected financiers of global terrorism.