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Swiss Accountability

DW staff (jc)November 11, 2008

The majority of Swiss were in favor of Barack Obama's candidacy. But now that he's been elected, they may find out that they'll be asked to make more changes, especially in the financial sector, than they bargained for.

President-elect Obama
Obama could start calling for the Swiss to change their banking waysImage: DW/AP

Going after tax havens was a minor part of Obama's campaign platform. But with America mired in which some are calling the worst economic crisis since the Great Depression, Switzerland has every reason to believe that the president-elect means business on this issue.

In 2007, as Illinois senator, Obama co-sponsored a piece of legislation called the "Tax-Haven Abuse Act," which named Switzerland as one of 34 countries US citizens might be using to evade taxes.

That proposed legislation, which attempted to close fiscal loopholes, did not become law. But experts almost unanimously agree that an Obama-led Washington will urge Switzerland to abandon its tradition of strict banking confidentiality -- which is seen as facilitating tax evasion.

The Credit Suisse building in Horgen, Switzerland
Tax authorities around the world want more cooperationImage: picture-alliance / dpa/dpaweb

"The pressure on Switzerland will definitely increase now," Martin Naville, the head of the Swiss-American Chamber of Commerce, told the Swiss daily newspaper Der Tagesanzeiger. "Anyone who wants to get Switzerland out of the firing line can't go with empty hands."

The tradition of Swiss banking secrecy goes back to legislation from 1934. It placed unusually tight restrictions on the amount of information banks are allowed to share with third parties, including foreign governments seeking tax cheats.

But even the Swiss government admits that it may now have to amend those rules.

"It is clear that fiscal questions will come to the forefront and we have to face them, as much from the European Union as from the United States," Swiss Foreign Minister Micheline Calmy-Rey told the Swiss daily newspaper Tribune de Geneve.

"That is the logical consequence of the financial crisis," Calmy-Rey said, saying many countries would want to crack down on tax evaders as a means of paying for their national economic bailout plans.

According to an estimate by the Boston Consulting Group, around 27 percent of the world's undeclared assets -- $2 trillion -- are held in Switzerland.

Transatlantic pressure

The ABC news ticker announces the passing of the Wall Street bailout bill in New York's Times Square
Western nations are pumping in billions to keep their economies rollingImage: AP

Increasing Switzerland's worries is that fact that the EU will likely support Obama if he does indeed intend to ratchet up the pressure on Bern.

In October, German Finance Minister Peer Steinbrueck called for Switzerland to be placed on the Office for Economic Cooperation and Development's black list of countries that were not cooperating in the international fight against tax evasion.

French President Nicolas Sarkozy has also called for the eradication of tax havens.

Indeed, the pressure has already started. US authorities are currently investigating whether the Swiss bank UBS helped wealthy Americans hide their money from the Internal Revenue Service.

The Swiss Finance Ministry has denied US newspaper reports that data concerning some 70 Americans had been turned over.

But experts think that, in the long term, Switzerland will have no choice but to give in.

"The economic pressure on Switzerland will be enormous if the EU and the United States pursue it together," Matthias Graf von Krockow of the German bank Sal. Oppenheim told the German business weekly, Bilanz. "You can't build a business model just on banking secrecy."

So when Obama takes office in January, the first cracks may begin to appear in the proverbial wall of silence around Switzerland's banking industry.