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October 8, 2018updated 18 Oct 2018 10:59am

Swiss banking secrecy comes to an end

The long-lasting  Swiss banking secrecy has come to an end as the Federal Tax Administration (FTA), the Swiss tax agency, has started exchanging bank account data with tax authorities in other countries for the first time in an effort to curb tax evasion.

The data exchange occurred under the global standard on the automatic exchange of information (AEOI) at the end of September according to the FTA.

The data swap agreement

Under the data swap agreement, financial institutions registered with the FTA collected data on millions of accounts and sent them to the tax agency.

In turn, FTA sent data on around two million accounts to partner states including European Union countries, Australia, Canada, Guernsey, Iceland, Isle of Man, Japan, Jersey, Norway, and South Korea.

The data, taken from nearly 7,000 Swiss banks and other financial institutions, includes owner’s name, address, state of residence, tax identification number, reporting financial institution, account balance and capital income.

The exchanged information allows the cantonal tax authorities to verify whether taxpayers have correctly declared their financial accounts abroad in their tax returns.

The Swiss tax agency did not disclose the value of the financial accounts concerned.

Moreover, it has deferred information exchange in France and Australia as these states could not provide data to the FTA owing to “technical reasons”. Croatia, Estonia and Poland also failed to provide data, FTA said.

At the same time, the Swiss tax agency excluded Cyprus and Romania from the process as the countries failed to comply with international confidentiality and data security norms.

Next year, the information exchange is expected to expand to around 80 partner states.

What does this mean for Swiss banking secrecy?

This move is big change for the Swiss banking system.

Bank secrecy will still exists in some areas though as the FTA cannot see what citizens have in their domestic bank accounts, however this is a major change against tax avoidance.

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