Thursday, April 30, 2009
It is a well known fact that the Swiss banks adhere to the Bank secrecy rule like anything. There is some sort of secrecy in all banks. A bank employee in any bank would not reveal the account details for another person simply for the asking. The difference in Swiss banks is that the rules of secrecy there are stringent and it is a criminal offense for a bank employee to reveal the details of an account. He will not only lose his job, but also have to face prosecution. The offense would attract a long jail sentence and public scorn. The bank secrecy is foundational principle of Swiss banking and the exotic attraction of Swiss banks is also its secrecy and trustworthiness.
The Swiss Parliament passed the Banking law in 1934 which regulates the banking rules in the country and the federal banking commission supervises the Swiss banks. The UBS (Union Bank of Switzerland) is the biggest Bank and Credit Suisse the 2nd biggest in Switzerland.The country's central bank is Swiss National bank.
Switzerland is a prosperous nation and its GDP is higher than most of the advanced countries .Its currency, Swiss Franc(C H F) is proverbially stable. In fact the economy of the nation and the prowess of its currency lean heavily on banking. In order to create the right climate for banking it remained a neutral country for all time. In the two world wars the nation did not take any sides. Though Switzerland is within Europe it is still not a member of the European Union. It was just recently that it became even a member of the U.N.
It is a nation for the banking and by the banking. An estimate is that one-third of all off-shore funds fall within the vaults of Swiss banks. It means that one-third of the money went out side of each nation in the world came to a Swiss bank. It is more than 7-8 trillion dollars an year as per a conservative estimate.
In this period of financial melt down many countries have scaled up the income tax. Just recently the U.K.has increased the income tax to 50 percent for an income of 150000 pounds an year.One of the reasons of capital flight is this kind of unjustifiable taxation.
In Switzerland tax fraud is a crime whereas the tax evasion is not an offense and that makes the Swiss banks such a lucrative destination for politicians and business folks. Most of the off-shore funds there are tax evaded money and the Swiss authorities regard such funds as legal.
The Swiss banks with their high and mighty clientele and secrecy of accounts have gained a feeling amongst the general public that Swiss banks are for millionaires and not for common people. This is not true. In fact the Swiss banks are just like any other bank you see in your town. Any one can open an account in a Swiss bank with 5000 Swiss franc (or less than 5000 dollars.)There are also accounts which require no minimum balance at all. In order to open an account you need not go all the way to Switzerland. All transactions including opening of account can be done thru internet. The Swiss banks give out attractive interest for the deposits like any other bank. In short, one would get all the amenities and services in a Swiss bank that are available in any other bank, perhaps in a better style. Also remember that a common man in Switzerland deposits cash in a Swiss bank. He cannot go out of his country in search of a 'common' bank.
The Swiss banks entertain no accounts of drug traffickers and arms smugglers and if any client is proved to be in one of the categories the bank will show him the door at once. This is a strict law adhered to in the Swiss banks.
It is no longer a secret that almost all nations nurse a little grouse against the Swiss banks as they encourage to evade tax and attract capital flight. But some heads of nations and business folks are also the Banks’ clients. So partly because of a conflict of interest and partly because of the iron laws of Swiss banking, no nation had come forward to confront the Banks so far. The U.S.also is a sufferer. Many U.S.Billionaires have accounts in the Swiss banks and the tax evaded American deposit there might come to hundreds of billions.
In Florida, when a UBS client (he was U.S. citizen) gave testimony against the bank that the bank encouraged him to deposit in the bank to evade tax, the U.S Govt.found that it was an opportunity to confront the bank. The Senate and FBI vigorously purused the case. In the end the Union Bank of Switzerland had to agree to pay a fine of 780 million dollars to defer prosecution and the agreement also covered an undertaking to reveal the names of account holders to the U.S.Govt. It has not named its full clients as the case is still not closed.
Normally a client of the bank does not give testimony against it, especially when the client is on the receiving end of the benefits.The testimony and the follow up prosecution of this kind is unheard of in the history of banking anywhere in the world.
The incident when reported all over the world by the media and it turned out to be a sensational news that the Swiss banks would reveal the account details if the respective governments approached the banks. That was a twisted version of the fact. For,the Swiss Govt has not changed its banking law. The bank secrecy is still there. A nation to get the details has to go the way U.S.went in the matter. It is not an easy process. Besides, the Swiss banks might have already taken enough precautions against such an eventuality. In Swiss Parliament a member described it as “American Blackmail “and it amply shows how they feel about the whole matter.
In Switzerland neither the law makers nor the general public like to water down their much protected Banking laws. They see it with a nationalistic pride. Besides, Switzerland is not flouting any law.They abide by their law of the land and constitution. If other nations capital is flowing to Swiss Banks, the nations concerned should take appropriate action within their country to remedy it. It is the logical stand of Swiss people.
Now, coming back to Sri Advani's demand of bringing all the tax evaded money from the Swiss banks to India. it is unlikely to get the names of Indians who have deposits in Swiss banks just by asking for it by India other than thru the rare American way and Sri advani of course knows it all, but then, he also knows that all is fair in love and election campaign..