Automatic information exchange – but properly done

Blanchiment d'argent
Political article

Automatic tax information sharing will soon become the international standard. But Switzerland insists on the most restrictive possible conditions when it comes to implementation – to the clear disadvantage of developing countries.

At the St. Petersburg G20 Summit, the leading industrialized and emerging countries again came out clearly for automatic tax information exchange. They want to see it implemented by the end of 2015 at the latest. The OECD was tasked with working out a framework agreement by next February and quickly completing work on the requisite technical infrastructure.

Moreover, the G20 Heads of State promised in their final declaration also to allow developing countries access to automatic information exchange. They pledged to support low-income countries where necessary in building up the appropriate capacities. Thus, the argument that in terms of human resources and technology poorer countries could be overwhelmed by the task of evaluating foreign bank data may soon be invalidated.

Until automatic information sharing can become a reality, however, several questions of principle must yet be clarified. Already actively involved in the negotiations under way in the OECD, Switzerland is applying the brakes and yet again defending a markedly conservative position in the interest of its financial centre. For the purposes of introducing automatic information exchange it is insisting not only on the strictest possible data protection conditionalities, but also on the principle of reciprocity.

Developing countries could be left out

Should the Swiss demand for strict reciprocity prevail, the poorest developing countries would in fact be excluded from automatic information sharing. They would only have access to foreign bank records if they in turn were able to deliver such data. In many cases, however, the elaborate administrative apparatus they would have to put in place for the purpose would be simply too expensive. The costs could quickly outweigh the benefits of the automatic information exchange.

This begs the question as to whether the principle of reciprocity makes any sense at all in dealings with developing countries. Unlike Switzerland, most of these countries hardly harbour any undeclared offshore accounts. Why, then, should they be obliged to send their bank data abroad? It would make more sense for actual tax havens to offer to transfer information unilaterally to developing countries.

As pertains to the request for strict data protection, tax secrecy does prevail in most countries. Consequently, there is little reason to assume that foreign bank data would not be treated confidentially. Besides, as early as last year the OECD drew up a report on the main protective measures. It is now assisting those developing countries that are still behind in this regard in introducing such measures. Switzerland should get involved in these endeavours as a matter of urgency.