Problem of Non-payment of Taxes in Switzerland

Technology has been the foundation of major worldwide changes that affected multiple aspects of everybody’s lives. It made our realities smaller bringing together global markets and interconnecting businesses and people. Advantages of this innovation can be measured by thinking at a company increase in productivity, reduction of costs, and easiness to communicate with anybody anywhere in the world. However, along with great advantages several issues arose as well. In fact, technology implemented considerable alterations too quickly not leaving time to society to adapt. Such a dramatic development apposed distinct cultural and judicial systems highlighting their discrepancies.

Swiss Banks Secrecy has been on the table for discussions since several years now; however, not many people know what it actually is about and its most recent developments. Banks, as any other financial entity, aim to make a profit by offering a product. Besides usual bank tasks and transactions, Swiss economic institutions opted to make dependability and safety the core of their company belief. A federal law, most commonly known as Bank Secrecy, was consequently approved to help creating a relationship of trust between the two parts. Nowadays, Bank Secrecy has been part of Switzerland since 1934 when, during World War II, special provisions were taken to protect foreign bank accounts and assets.

These exclusive agreements ensured the confidentiality of any activity between the bank and its clients making Switzerland one of the primary economic haven in the world. In fact, this privacy-service attracted an undefined number of tax evaders from any part of the globe. Anyway, it is only been about a decade since the fraud committed came out, the lawbreakers started to be held legally accountable for their actions, and the Bank Secrecy started to be view as controversial.

Between these law transgressors there are three main Swiss financial institutions, UBS AG, Credit Suisse AG, and Julius Baer AG, which were all found guilty by the US justice department of helping Americans evading taxes and file false tax return. The three banks were respectively charged with penalties of $780 million in 2009, $2.6 billion in 2014, and $547 million in 2016. Many other Swiss banks were charged and pleaded guilty during the investigations. On the other side, we have wealthy people who wanted to hold the benefits of the society they live in without paying taxes for it.

The answer to why both banks and rich people committed illegal actions such as tax fraud or tax evasion is easily attributable to money and avidity. However, it is appropriate to make a clarification between two concepts that sound like the same but that in the eyes of Swiss law are not. In fact, tax fraud is when an individual purposely creates false documentation to hide taxable income and it is punishable with jail. Instead, tax evasion is when a person does not completely declare his/ her own income while filing tax returns and it is punishable with a fine. This small detail does not cancel the fact that Swiss bankers were aware of helping people not paying contributions to their governments and basically stealing public money from the government’s pockets. At the end of long-lasting negotiations Swiss banks and world governments found different agreements to share sensitive clients information.

However, not everybody will benefit from this agreements. If initially privacy related issues were just a Swiss prerogative now they extend to countries seeking to obtain those delicate data from the financial institutions. In fact, developing countries do not have proper resources to ensure a safe exchange of information and can not guarantee that the information handed over by Swiss authorities will remain classified. In addition, poor countries do not have clear and official records of the assets of Swiss citizens living abroad which was one of the terms for a mutual exchange of information. Analyzing even deeply the tax evasion situation and the obstacles to acquire delicate clients information, it comes natural to wonder if the problem stops there or if it generates further concerns activating a chain of events.

In fact, if governments are not able to collect all of the revenue an important slice of money will be lost. Those missing money are mostly going to have a negative impact on lower and middle income classes. Translated in facts, that means less investments in education, health, infrastructures, and charity associations. Tangible examples of this phenomenon are more expensive medical services and cuts in school funding which cause raises in school tuitions. Rich people are not going to be affected by these changes since they can afford to spend more money. However, poor people will suffer for this deductions enlarging the gap between rich and poor.

In developing countries the problem seems even more marked than in industrialized countries. Governments of emerging countries already struggle with internal economic difficulties, tax abuses, and corruption. The inability to exchange information contributes to the unstable situation slowing down the developing process. Consequently, tax avoidance is not a harmless procedure since it prevents the utilization of financial resources that could be employed to improve a country’s economical situation and decrease inequality between poor and rich people. As far as today, Switzerland and several other countries have signed agreements to defeat tax evasion.