Article

«Inequalities are rooted in the system»

21.06.2021, Finance and tax policy, 2030 Agenda

Stefano Zamagni, Italian economist and President of the Pontifical Academy of Social Sciences, explains in an interview why a new beginning with the civil economy can no longer be postponed.

«Inequalities are rooted in the system»

© Vincenzo Pinto / AFP210

Article

Debt crisis: Disaster delayed

17.03.2022, Finance and tax policy

The corona pandemic is leading to a global debt crisis. Poor countries of the South are the ones bearing the brunt of it. Despite some multilateral efforts at debt relief over the past two years, the situation is growing steadily worse.

Dominik Gross
Dominik Gross

Expert on finance and tax policy

Debt crisis: Disaster delayed

© Philip Bürli

With the onset of the corona pandemic two years ago, the issue of debt once again became front and centre in development policy debates. That it is one of the principal political points of contention in the struggle against global inequality is nothing new, however. Nor is it a secret that a fundamental change in the political handling of government debt is needed if the world's economies are to be put on a course towards developing more environmentally aware, more socially-oriented and democratic societies. As is so often the case, mere acknowledgement is often not a sufficient condition for practical changes when it comes to this topic. According to the annual Global Sovereign Debt Monitor published by the German NGOs Misereor and erlassjahr.de, 135 of the 148 countries it studies currently have a debt problem. Of that number, 39 are at severe risk of State bankruptcy, among them countries from all income groups, and their number has quadrupled since the onset of the pandemic.

Unlike the rich countries of the North, which generally borrow in their own currency and retain a certain flexibility in the management of their debts through their financial and fiscal policy institutions (including central banks), poor countries usually incur debt in foreign currencies like the US dollar or the Chinese renminbi. Moreover, because their economies are weaker, poor countries pay much higher interest on financial markets than rich ones – generally around 5%. Over recent years, Switzerland or Germany, in contrast, have been able to raise new debt at virtually zero interest rate.

Without debt forgiveness, poor countries will hardly ever escape the debt trap. But before debt forgiveness, the policy question must be addressed as to who will bear the costs of the credit default in question – the general public which, on the back of cost-cutting by government to pay for the debt reduction, will be faced with inferior public health, education and infrastructure systems and have less disposable income, or the creditors, who must forego interest and accept capital losses.

Damocles' sword of debt merely pushed further away

With respect to the current sovereign debt crisis in the Global South, the influential G20 countries, in collaboration with the IMF and the World Bank, have had the same response for the past year and a half: the societies in the affected countries must bear the cost of this crisis, not the creditors. Several initiatives were in fact launched within these multilateral institutions since the outbreak of the crisis to provide temporary relief to the indebted countries. Not all of them represent genuine ways out of the debt crisis, however. These initiatives include the IMF’s Catastrophe Containment and Relief Trust (CCRT) and the Debt Service Suspension Initiative (DSSI) of the G20 countries.

The IMF created the CCRT in 2010. It responded to the corona crisis by expanding the Trust to 29 low-income countries. Until April this year, the CCRT will take over all payments due from these countries to the IMF. The G20 countries created the DSSI following the outbreak of the corona crisis in the spring of 2020. It offers a debt moratorium to the world's 73 poorest countries that meet the eligibility criteria for lending from the International Development Agency (IDA) (owned by the World Bank); countries that availed themselves of the DSSI were able to suspend their 2020 and 2021 payments to bilateral lenders (i.e. other countries). But they will have to make good on these payments between 2023 and 2027. Whereas the CCRT covers only a limited number of countries and offers IMF debt relief only in isolated cases, the DSSI, for its part, merely postpones the problem. For the countries concerned, the Initiative was indeed helpful in allowing them some financial leeway for immediately addressing the pandemic. The problem is by no means solved, as is clear from the Global Sovereign Debt Monitor prepared by Misereor and erlassjahe.de. It states that in 2020, interest and principal payments by 58 low and middle-income countries to private creditors abroad exceeded the amount made available to them by those creditors in new lending over the same period.

The combination of moratoriums on public and multilateral loans and the refusal of private lenders like banks and commodity traders to participate in debt relief produces a situation in which private claims are offloaded on to government budgets. The Global Sovereign Debt Monitor further states that, at the same time, the breathing space that was created by the G20’s DSSI debt moratorium and the massive liquidity support provided were not taken advantage of to effect overdue debt architecture reform.

State bankruptcy with Swiss "assistance"

Switzerland bears special responsibility when it comes to dealing with the debt crisis. This is evident when we a look at the three countries in the Global South where State bankruptcy is already a reality. They can no longer fund debt servicing from their own national budget and are therefore dependent on IMF or World Bank help, or on the willingness of their creditors to waive their claims.

  • In Chad, the only private creditor is called Glencore. The commodity trading corporation conducts most of its business transactions, including the granting so-called resource-backed loans (RBLs), via the Canton of Zug. The way RBLs work is that raw material-mining countries pledge future deliveries to traders, through forward contracts, in exchange for which they receive advance payments from those traders for the amounts concerned, at a specified price and in the form of credits. Despite being urged in the spring of 2021, even by World Bank Chief David Malpass, to grant debt relief to Chad, the Zug-based corporation has so far not budged.
  • To date, Zambia has also been one of Glencore's leading raw material mining locations. Glencore's dealings also include large-scale, verifiable tax evasion – to the detriment of Zambia’s national budget and for the benefit of Switzerland’s tax authorities.
  • In the case of Mozambique, illicit lending transactions with Credit Suisse are even largely responsible for bankrupting the State. Instead of being used to build up a parastatal fishing fleet, the loans disappeared into the pockets of the local economic and political elites.

These three countries are among those prioritised by the Swiss Agency for Development and Cooperation (SDC). The business dealings of major Swiss corporations, with which the Federal Government also collaborates abroad in the framework of its foreign policy, are undermining the credibility of Switzerland's commitment to sustainable development. It would therefore be salutary if the Federal Government could use its no doubt excellent connections with these corporations to persuade them to participate in the necessary debt relief.

Article

Credit Suisse vs. Global South

24.03.2023, Finance and tax policy

What does Pakistan have to do with a bank in Silicon Valley which invests short-term client funds in long-term paper, the value of which diminishes when interest rates rise?

Andreas Missbach
Andreas Missbach

Director

Credit Suisse vs. Global South

The Mozambican press has also picked up on the collapse of CS. In Mozambique, the Swiss bank has caused great damage in the past.
© O Pais

And what does Bolivia have to do with the fact that a bank in Switzerland has been chalking up one scandal after another for over 10 years now? That's right, absolutely nothing. But yet they suffer the consequences.

So Credit Suisse has now been thrust into the embrace of UBS, and the US-European banking crisis is momentarily on hold. Its repercussions will be felt in the Global South for some time to come. This is so because investors in the North are now shunning government bonds from highly indebted countries in the South. There is a stock reaction to any sign of trouble in global financial markets: investors discover with astonishment that there are indeed risks. They demand higher returns on investments with greater risk, whether real or feared, or they simply go on a buyer's strike. "Risk appetite for distressed emerging-market credit has collapsed, as the market looks at these guys as the weakest links and highly susceptible to a sudden stop," a London trader is quoted by Bloomberg as saying. This can result in State bankruptcies or force countries to offer higher yields on their government bonds in order to attract buyers – the effects do, therefore, tend to linger over time.

It is worth noting that banks like CS, which push credit-ridden countries ever closer to the edge, are the very same ones whose asset management services offer tailor-made tax evasion solutions to wealthy clients from Asia, Africa and Latin America. The irony is that even in the wake of the CS debacle, this private banking, of all things, is again being viewed as the best way forward for the Swiss financial centre. At least outwardly, the current motto of the new banking behemoth UBS is: stick to what you know best, and get out of the financial casino of investment bankers. For millionaires from countries in the Global South, where there is no automatic exchange of information (AEOI) with Switzerland, Paradeplatz is still a special place. For them, the good old banking secrecy remains in place.

It is yet to be seen just how serious UBS really is about leaving the casino and engaging in risk-free business. The Financial Times has reported that UBS wanted to reverse the sale of CS's investment bank "First Boston", which had already been decided. Risk is always very much a matter of perspective. UBS's investment banking entity in Brazil, which operates in partnership with the State-owned "Banco do Brazil", is a meat industry and agribusiness fat cat. For land rights activists, the biodiversity, or sloths, that business is by no means "risk-free".

Back to Credit Suisse: Besides the structural damage it has just helped to cause for the Global South, the bank had also ruined the lives and futures of the people of Mozambique quite directly. The Credit Suisse scandal with the highest number of victims is also the one that is currently being reported on the least. Of course, considering that the 470 million-dollar fine paid in that connection by Credit Suisse in the USA for corruption only ranks 7th on the list of fines levied on the scandal-ridden bank in that country. And it was only about corrupt loans worth a billion dollars – one-tenth of its deals with the criminal investment company Greensill Capital. And in Mozambique, it was not wealthy hedge fund clients who lost money, but only about a million people who were plunged into absolute poverty on the back of the sovereign default provoked by Credit Suisse in 2016.

Unfortunately, even after the takeover, there is no "all-clear" when it comes to direct losses. Although not penalised for it, UBS inflicted millions in damage on the dirt-poor country of Papua New Guinea through shady-to-criminal business dealings by its investment bank in Australia. In the South, nothing new means fearing the banking behemoth.

Article, Global

New York instead of Paris!

18.06.2023, Finance and tax policy

In 2016, the OECD promised to reform the international tax system such that it would also serve the interests of the Global South. Seven years on, the OECD has clearly fallen short of its own ambitions. It may now be time for the UN to step in.

Dominik Gross
Dominik Gross

Expert on finance and tax policy

New York instead of Paris!

A main street in front of the United Nations building in New York on 24 March 2022.
© Ed JONES / AFP / Keystone

"Let’s keep the money in Switzerland". This is what could be seen on the posters of those supporting Switzerland's introduction of the OECD minimum tax. With this simple slogan, and the kind assistance of the centre-right parties, the business associations economiesuisse and SwissHoldings were able to win the vote on 18 June. As of 1 January 2024, the Federal Council can enact the minimum tax. Should it in fact generate substantial amounts of additional revenue in Switzerland, those funds will go towards promoting Switzerland as a business location. This would be tantamount to channelling the additional revenue back to the very corporations in Switzerland that extract more than USD 100 billion annually in taxable funds from other countries, thereby assuring Switzerland's low-tax cantons like Zug and Basel City of generous profit tax revenue. The mere possibility of implementing the minimum tax in such a way is evidence of the failure of efforts by the Paris-based Organisation for Economic Cooperation and Development (OECD) over the past decade to shape a more just worldwide tax system. That is hardly surprising. For although more than 140 countries took part in negotiating the minimum tax, including some emerging and developing countries, once again it was the interests of the rich countries in the Global North that prevailed in this framework.

Level playing field only at the UN

The history of the "inclusive framework" created in 2016 by the OECD is also a factor at play. What was promised at the time was a level playing field for all countries. But the condition for admission to this OECD framework is adopting the rules against "Base Erosion and Profit Sharing" (BEPS), which were worked out in the preceding years exclusively by the OECD's 39 Member States (mainly rich countries of the Global North). More than 100 developing countries were excluded from this process. As a result, these rules are tailored to suit the countries of the North, and the price of "inclusive framework" membership for developing countries is therefore high. The countries of the Global South, where the bulk of production is located in today's global economy, will see very little of the roughly 250 million in additional revenue being anticipated by the OECD as a result of introducing the minimum tax.

An alternative is now needed, and it is currently taking shape in New York. At the end of last year, the UN General Assembly adopted a resolution put forward by the African group of countries and the G77 (comprising all developing countries), designed to launch the groundwork for a draft UN convention on tax cooperation. Like the UN Climate Convention, which has influenced the pace and direction of global climate policy since 1992, it would create a truly inclusive multilateral framework for international tax policy. This would pave the way for elaborating and negotiating global tax policy principles for the world, and which would redress the fundamental imbalance between North and South in today's global tax system. A UN tax convention would lay the groundwork for multilateral rules on a tax system that is grounded transnationally, and hence no longer based on bilateral treaties. Under the present system, a few multilateral treaties do in fact supplement rules that are enshrined in bilateral double taxation agreements (DTAs), which ultimately determine just how countries divide up the taxable revenue generated from cross-border financial flows in the world economy. This often takes place at the expense of developing countries which, given their economic weakness, often lose out in bilateral negotiations of DTAs with countries in the North.

Time for global taxation

A UN framework convention on tax policy would also be a condition for effectively working towards the global taxation of multinational corporations. The present tax system treats individual subsidiaries of multinationals in different countries like separate companies. Accordingly, corporations should be taxed in each country based on the profits they generate there. For decades now, profit-shifting has indeed been a major problem for countries with relatively high tax rates. Many countries are losing billions in tax revenue each year because multinational corporations do not declare their profits for tax purposes in the places where they actually create value, but instead where profit tax rates are the lowest. A global unitary taxation with formulary apportionment would render profit-shifting obsolete, as individual subsidiaries of multinational corporations would no longer be taxed by country, and corporations would therefore no longer have an incentive to book their profits in places with the lowest tax rates. Instead, all profits from all countries where a corporation is active would be added up and the profit tax base allocated to each country according to a formula that considers the number of workers per country, sales, and physical assets (such as factories). Countries would in turn tax these profits in keeping with their domestic tax regulations.

The Office of UN Secretary-General António Guterres is currently drafting a report on the creation of a tax convention, and this will be tabled in September in New York following consultations with UN Member States and stakeholders. The Global Alliance for Tax Justice (GATJ) and the European Network on Debt and Development (Eurodad), of which Alliance Sud is a member, are very actively involved in this process.

Switzerland opposes it

Switzerland did vote in favour of the resolution in the General Assembly. However, in replying to an interpellation from National Councillor Fabian Molina, the Federal Council stressed that while it supports "a review of the institutional framework for international cooperation in tax matters" at the United Nations, it is opposed to the creation of a UN tax convention. The Federal Council is obviously convinced that it knows better than the developing countries themselves what is good for them. Thus, writing very much in the old colonial and paternalistic style, it states: "On the other hand, the Federal Council deems the usefulness of a United Nations tax convention to the position of developing countries to be questionable."

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global

The Alliance Sud magazine analyses and comments on Switzerland's foreign and development policies. "global" is published four times a year (in german and french) and can be subscribed to free of charge.

Article, Global

Aligning investments with climate targets

06.12.2022, Finance and tax policy

In signing the Paris Climate Agreement in 2015, the international community pledged, among other things, to orient financial flows towards a low-carbon economy. Switzerland is moving along that path – but in very small steps.

Laurent Matile
Laurent Matile

Expert on Enterprises and Development

Aligning investments with climate targets

© House of Switzerland

Although it is sometimes forgotten, the Paris Agreement does commit States – besides reducing their CO2 emissions and adapting to the impacts of climate change – also to directing financial flows towards low greenhouse gas and climate-resilient development. Countries are therefore expected to take appropriate steps to ensure that financial market participants use their financing and investments to help redirect capital flows towards concrete solutions for mitigating climate change and adapting to the changing climate. Simply put, “investments should be oriented towards the goals of the Paris Agreement”.

Given its global importance – 24 per cent of cross-border asset management takes place in Switzerland – the Swiss financial sector would be ideally placed to play a key role as a catalyst for driving this reorientation. But while there is general agreement on the goal, opinions diverge considerably as to the means of achieving it.

EU taxonomy: “sustainability” at last defined

In June 2020, the EU adopted the Taxonomy Regulation, which forms the backbone of its Action Plan on Financing Sustainable Growth. One of its primary aims is to identify and promote investments in “sustainable” activities that are consistent with the EU goal of climate neutrality by 2050. To this end, the Regulation creates a classification (taxonomy) of corporate economic activities, based on their potential to contribute to the EU’s six environmental objectives. At various levels, it encompasses more than 70 activities from the fields of energy, transport, forestry and construction; these account for more than 90 per cent of EU greenhouse gas emissions. Large companies are required to report their activities that are aligned with the taxonomy and to indicate the share of overall activity that they represent. This information should enable financial market participants to prioritize the funding of projects and assets that can be shown to contribute most to reductions in the direction of climate neutrality. As of 2023, large companies will also be required to disclose the degree to which their activities are aligned with the taxonomy. Financial institutions will also be subject to the same requirement starting in 2024.

For an activity to be classified as “green” under the taxonomy, it must make a vital contribution to at least one of the EU’s six environmental objectives, without significantly counteracting the other five, and must respect guarantees relating to human and labour rights. The criteria for identifying environmentally friendly activities are set by the European Commission. An initial legal instrument focused on climate has been in force since January 2022, and addresses activities that contribute to achieving the first two objectives of the taxonomy (climate change mitigation and adaptation). The criteria for the other four goals (environmental pollution, water, circular economy and biodiversity) are to be set by the end of the year. Further social criteria and governance -related aspects are also to be determined.

And in Switzerland: between competitiveness and/or sustainability

In its 2020 Report on sustainability in Switzerland’s financial sector, the Federal Council recognized the importance of a uniform system of classification for sustainable activities (taxonomy), primarily “because comparable information means transparency for clients, insured parties, investors and the public”. However, in the wake of opposition from the industry, and invoking the sacrosanct principle of subsidiarity with regard to State action, it opted to pursue a voluntary and hence a non-regulatory approach. In June 2022, it adopted the Swiss Climate Scores (SCS), which were drawn up by a working group comprising industry players, representatives of the federal administration, academia and NGOs. Their aim is to provide institutional or private investors with “reliable and comparable” information regarding the degree to which their financial investments are compatible with international climate goals. The Federal Council recommends that all Swiss financial market participants should apply the Swiss Climate Scores to financial investments and client portfolios “wherever this makes sense”.

Is the approach credible?

To be worthy of their status as “best practices” in the realm of climate transparency, the SCS are to be reviewed at regular intervals and, “if necessary”, adapted to reflect the latest insights. The Federal Department of Finance (FDF) and the Federal Department of the Environment, Transport, Energy and Communications (DETEC) have been tasked with reviewing the progress made, by the end of 2023, towards the adoption of the “Swiss Climate Scores” by Swiss financial market players – as previously noted, on a voluntary basis. It will be useful, in this context, to compare such progress with that achieved in the EU through the application of the taxonomy and other regulatory measures.

At present, the SCS raise several questions. Will they actually be implemented in the financial sector? Will mere pressure by clients on financial institutions suffice to ensure that they are implemented? Or can a sufficiently substantial climate incentive be created only by introducing further regulations to ensure that investments are consistent with the goals of the Paris Agreement to which Switzerland has signed up? To be continued in 2023.

Die 5 + 1 Indikatoren der Swiss Climate Scores

Die SCS umfassen fünf obligatorische und einen optionalen Indikator. Drei Indikatoren beziehen sich auf den aktuellen Stand der Portfolios (Treibhausgasemissionen; Exposition gegenüber fossilen Brennstoffen; glaubwürdiger Klimadialog mit Unternehmen). Zwei Indikatoren sind «zukunftsorientiert» (verifizierte Bekenntnisse zu Netto-Null; Management auf Richtung Netto-Null). Der Indikator «globales Erwärmungspotenzial», also das Ausmass der globalen Erwärmung, wenn die Weltwirtschaft mit der gleichen Ambition wie die Portfolio-Unternehmen handeln würde, bleibt vorerst optional.

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The Alliance Sud magazine analyses and comments on Switzerland's foreign and development policies. "global" is published four times a year (in german and french) and can be subscribed to free of charge.

Federal finances

Federal finances

Switzerland has an extremely low level of public debt compared to other countries. It must use its robust financial situation to contribute substantially towards funding a globally equitable ecological transformation, in Switzerland and abroad.

What it is about >

Publikationstyp
Is the greenwashing fog about to clear?
, Is the greenwashing fog about to clear?
Finance and tax policy

In late May, public prosecutors in Frankfurt searched the offices of Deutsche Bank and its asset management subsidiary DWS. The reason was presumed greenwashing practices. Time to ensure greater clarity in also Switzerland.
On the side of warmongers and crisis profiteers
, On the side of warmongers and crisis profiteers
Finance and tax policy

After the USA, Switzerland is the world’s most opaque financial centre. This is clear from the new Financial Secrecy Index of the Tax Justice Network (TJN).
Debt crisis: Disaster delayed
, Debt crisis: Disaster delayed
Finance and tax policy

The corona pandemic is leading to a global debt crisis. Poor countries of the South are the ones bearing the brunt of it. Despite some multilateral efforts at debt relief over the past two years, the situation is growing steadily worse.
Eurocentric elation
, Eurocentric elation
Finance and tax policy

In October, the OECD and G20 approved the new international minimum tax for multinational corporations. Hailed in Europe and North America as a historic success, the decision is being sharply criticised in Africa, Asia and Latin America.
Tax optimisation at the expense of the poorest
, Tax optimisation at the expense of the poorest
Finance and tax policy

The agribusiness group Socfin shifts profits from commodity production to the low-tax canton of Fribourg. This tax avoidance goes hand in hand with profit maximisation at the expense of the population in the affected regions in Africa and Asia.
«Inequalities are rooted in the system»
, «Inequalities are rooted in the system»
Finance and tax policy, 2030 Agenda

Stefano Zamagni, Italian economist and President of the Pontifical Academy of Social Sciences, explains in an interview why a new beginning with the civil economy can no longer be postponed.
The upcoming referendum on corporate tax reform
, The upcoming referendum on corporate tax reform
Finance and tax policy

On 19 May, Switzerland votes again on its corporate tax reform, which Parliament has linked to additional funding of its pension system (AHV). From a development policy point of view, the tax proposal does not represent any significant progress.

What it is about

Switzerland brought in a debt brake in 2003. It is currently very rigorously configured, and is being applied even more stringently. The upshot is automatic debt reduction, despite Switzerland's long history of low public indebtedness compared to other countries.

The Swiss policy of austerity for austerity’s sake means that the Confederation's financial elbow room remains needlessly restricted when it comes to investing in sustainable development. This policy furthermore keeps the budget for international cooperation (IC) under constant pressure, as IC is one of the few non-earmarked expenditure items in the federal budget, together with agriculture, the army, and some areas of culture.

The centre-right-dominated Parliament is thus able to exert considerable influence on financial policy. This financial policy is no longer adequate for responding to the current polycrisis. Swiss financial policy needs a paradigm shift that frees up the financial resources required to tackle the immense social challenges at home and abroad.

Sustainable finance

Sustainable finance

Alliance Sud works towards ensuring that the Swiss financial centre contributes consistently and effectively towards realising the UN Sustainable Development Goals and that its business activities are aligned with the objectives of the Paris Climate Agreement.

What it is about >

What it is about

The Paris Climate Agreement requires countries to gear financial flows towards development with low greenhouse gas emissions and which is resilient to climate change. Similar goals are also in place internationally in the realm of biodiversity.

Switzerland is the world's leading centre for crossborder asset management, and has an insurance industry that covers global risks. It therefore bears prime responsibility for ensuring that financial flows are aligned with the goals of sustainable development and climate protection, and do not support greenwashing. 

Debt relief

Debt relief

The debt burden of countries in the Global South has again been growing for some years now. Climate crisis, war and the economic consequences of the pandemic are compounding the problem. Swiss lenders must play an active part in debt relief processes.

What it is about >

What it is about

The over-indebtedness of many countries in the Global South is a major stumbling block to the funding of new, pro-growth investments. Money that they must devote to servicing their debt for the benefit of the creditors in the North is then unavailable for urgently needed development spending. In Switzerland, banks and commodity traders act as lenders. Considering Switzerland's role as the country of domicile of major private creditors, it is not enough for them merely to make modest contributions towards the debt relief programmes of the IMF (International Monetary Fund) or the World Bank.

There is also a significant lack of transparency in this area: it is not known which banks and commodity traders have provided precisely how much credit or subscribed to bonds, and where. Alliance Sud wants to see greater transparency in this area and an active federal government that encourages private lenders in Switzerland to get involved in substantial debt relief programmes for countries in the South.

Corporate taxation

Corporate taxation

Switzerland is a world-leading location for multinational corporations and, with its very low profit taxes, a popular destination for profit shifting. 

What it is about >

What it is about

Each year, Swiss corporations shift profits worth more than 100 billion dollars to the low-tax jurisdiction that is Switzerland. This boosts tax revenues in the cantons of Zug, Basel Stadt, Vaud or Geneva. In countries that cannot afford to promote aggressive tax avoidance, such revenues decline dramatically. Profits are not taxed where they were generated, but where company tax rates are the lowest.

Switzerland has reformed its corporate taxation law several times since 2016. Yet, the scope for corporations to shift profits has hardly diminished. This substantially reduces the tax base mainly of countries in the Global South. Alliance Sud is committed to ending this tax avoidance through greater transparency and better cooperation, especially with countries in the South.

Swiss financial centre

Swiss financial centre

Despite all the reforms of the past 15 years, the Swiss financial centre remains a preferred hiding place for tax evaders, money launderers and corrupt people from around the world. Alliance Sud is doing the utmost to help finally change this.

What it is about >

What it is about

In 2017, Switzerland introduced the international Automatic Exchange Of Information (AEOI) with regard to bank client data; such exchange now takes place with over 100 countries. The Swiss public often construe this as the elimination of Swiss banking secrecy. The introduction of the AEOI is in fact a crucial step towards better identifying wealthy individuals who evade taxes with the help of banks in Switzerland and other financial intermediaries.

The AEOI has not, however, put an end to banking secrecy. It remains enshrined in the relevant laws. Besides, many countries in the Global South still do not benefit from this information exchange with Switzerland. With banking secrecy still intact in Switzerland, there is also a powerful incentive for foreign clients of Swiss banks to relocate to Switzerland so as to circumvent the AEOI with their home countries. Alliance Sud is working towards reforms that will change this.

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