1. Tax havens help rich people hide money that should be spent on schools, hospitals, roads and other public services

For example

… Switzerland, not only one of the world’s biggest financial centres but also one of the world’s largest tax havens,[1] Switzerland takes first place on the 2011 Financial Secrecy Index.[2]

The dirty details

Switzerland is home to about a third of the world’s offshore private wealth – a whopping US$ 2 trillion or so.[3]

So how did the country come to earn its title as Europe’s ancient secrecy jurisdiction?[4] Well, there are two principle things to keep in mind. Firstly, Switzerland has continuously maintained a policy of neutrality in foreign conflicts. The result? Over centuries, successive European wars have boosted Swiss banking in a country perceived as a tranquil haven amidst turmoil elsewhere. Commercial interests between countries at war used Switzerland as a mediation point where they could secretly[5] continue doing business with the enemy.

Secondly, in 1934 Switzerland made it a criminal offence to violate bank secrecy, punishable by fines and prison.[6] A widespread myth was subsequently propagated that Switzerland’s famous banking secrecy laws[7] were put in place to protect Jewish money from the Nazis;[8] in fact, Swiss bankers enacted the law for very different reasons, linked to headline-grabbing revelations regarding the influential elite and their dodgy tax deals.[9] Indeed, far from protecting Jewish interests and maintaining political neutrality, it is clear that Swiss bankers collaborated extensively with Nazi Germany, loaning money, supplying weapons, and offering safe deposits for looted Jewish gold, amongst other things. As tax haven expert Nicholas Shaxson puts it, “Switzerland, it seems, was directly and actively complicit in Adolf Hitler’s corrupt system of political patronage in Germany.”[10]

Both Switzerland’s proclaimed political neutrality and its banking secrecy laws have, over time, led the country to have one of the largest offshore financial sectors in the world… and to become one of the biggest tax havens globally. However, in the past few years, several noteworthy events have challenged the financial sector, threatening the veil of secrecy that Swiss bankers are so keen to keep in place. In 2008, for example, US authorities discovered that UBS, the most powerful bank in Switzerland at the time[11], had been involved in criminal activities in the United States.[12] UBS employees were subsequently forced under oath to reveal illicit tactics that had been used to avoid the US Revenue.[13] Likewise, in 2009, a threat by the G20 to blacklist Switzerland and impose certain sanctions upon the country’s financial sector further forced it to slightly loosen (and we mean only slightly) its banking secrecy.[14]

Despite these and other political challenges, the Swiss Finance Ministry remains obstinate, offering very little concessions and, where they do submit, bargaining economic benefits for Switzerland in exchange. The government, for example, has rejected outright proposals for country-by-country reporting for multinationals. Meanwhile, the country’s efforts to be a “five-star establishment”[15] for foreign companies continues apace, leading to more and more corporations, some more dubious than others, locating their headquarters in a country that remains, at least for the time-being, a land of secrets.


Switzerland must be brought, kicking and screaming, into line without European standards on multilateral and fully automatic exchange of tax information, and these standards should be recognised as the effective global standards for information exchange. No ifs, no buts, and no more stonewalling by self-interested OECD countries;

Measures need to be taken to remove the walls of secrecy that encourage and enable dictators and wealthy tax evaders from hiding their ill-gotten gains offshore. Offshore companies, offshore trusts and foundations, and similar legal entities, must be properly registered on public record, and must disclose the identities of every person who benefits from them.

Bankers, lawyers, accountants and tax advisers should be required under international anti-money laundering laws and regulations to automatically report any suspicions that their clients might be engaged in criminal actions, including tax evasion. Failure to make such reports would render them liable to prosecution.

The stats

About 30,000 U.S. taxpayers have disclosed their accounts to the US Revenue since 2009, when UBS, the biggest Swiss bank, was charged with helping Americans evade US taxes. UBS avoided prosecution by admitting it fostered tax evasion, paying $780 million and handing over data on 250 secret accounts. It later disclosed another 4,450 accounts.[16]

The final word

From historian and political scientist Peter Hablützel[17]:

The financial crisis is now disabusing [Switzerland’s] financial sector of its fantasies of omnipotence, and unmasking our political system. It is demonstrating the authorities’ servile attitudes towards major economic interests, and the system as a whole has lost credibility. It could even be said that the crisis has ripped the liberal mask away from the face of Switzerland.


[2] http://www.secrecyjurisdictions.com/PDF/Switzerland.pdf [accessed 6/11/11]
[3] http://www.secrecyjurisdictions.com/PDF/Switzerland.pdf [accessed 6/11/11]
[4] Nicholas Shaxson, Treasure Islands, Chapter 3.
[5] http://www.secrecyjurisdictions.com/PDF/Switzerland.pdf [accessed 6/11/11]
[6] Nicholas Shaxson, Treasure Islands, p.51.
[7] http://www.secrecyjurisdictions.com/PDF/Switzerland.pdf [accessed 6/11/11]
[8] Nicholas Shaxson, Treasure Islands, p.50.
[9] http://www.secrecyjurisdictions.com/PDF/Switzerland.pdf [accessed 6/11/11]
[10] Nicholas Shaxson, Treasure Islands, p.58.
[11] http://www.guardian.co.uk/business/2008/jun/29/ubs.banking [accessed 6/11/11]
[12] www.taxjustice.net/cms/upload/pdf/TJF_6-2.pdf [accessed 6/11/11] p.4.
[13] http://www.guardian.co.uk/business/2008/jun/29/ubs.banking [accessed 6/11/11]
[14] www.taxjustice.net/cms/upload/pdf/TJF_6-2.pdf [accessed 6/11/11] p.4.
[15] www.taxjustice.net/cms/upload/pdf/TJF_6-2.pdf [accessed 6/11/11] p.5.
[16] http://www.businessweek.com/news/2011-11-11/ex-ubs-banker-gadola-earned-leniency-in-tax-case-u-s-says.html [accessed 11/11/11]
[17] www.taxjustice.net/cms/upload/pdf/TJF_6-2.pdf [accessed 6/11/11] p.7.