OECD approval uncertain over tax transparency request procedures

Thursday, 14 May 2015

The Swiss government and parliament are negotiating how the country should respond to foreign governments' requests for bank account information, when the requests result from stolen data.

The matter is sensitive. Switzerland's initial position was that it would not respond to administrative assistance requests based on illegally obtained information. Even the Swiss Federal Council's adoption of the Tax Administrative Assistance Act in October 2010, under which foreign governments that have tax agreements with Switzerland could request data on any named individual, excluded 'tainted' requests of this kind.

However, this position led to pressure from the Organization for Economic Co-operation and Development's (OECD) Global Forum for Tax Transparency, which demands a less restrictive approach to international cooperation. Switzerland's refusal to comply was one of the reasons for its failure to advance in the OECD's peer review process, bringing the threat of blacklisting.

In August 2013, the Swiss government agreed to amend the Act to allow responses to requests derived from illegally obtained data provided that the requesting state had acquired the data 'passively', for example via another state.

This concession led the OECD Global Forum to accept that Switzerland's law now complies with its tax transparency standards. In March this year, it announced that Switzerland had been cleared to proceed to Phase Two of the peer review process. This exercise, which will begin in the last quarter of 2015, will check that the country is properly implementing its information exchange laws to the OECD's satisfaction. A key part of the review process will scrutinise how Switzerland responds to requests based on stolen data in practice. If the peer review group decides that Switzerland is insufficiently open to these requests, it may refuse Phase Two approval – which has prompted the Swiss Federal Council into action.

Many members of the Swiss parliament are opposed to any further relaxation of banking secrecy. The Federal Council therefore has to find a compromise 'clarification' that will satisfy both parliament and the OECD tax transparency group.

Switzerland is one of the most common targets of international administrative assistance requests, reportedly receiving about 1,500 each year. A significant number of these result from 'tainted' data, notably the famous HSBC Private Bank disk stolen by Hervé Falciani and later distributed to many governments.

'The treatment of requests based on stolen data is particularly challenging for Switzerland', noted the Swiss Federal Council in a statement. The OECD is expected to report its findings in the second half of 2016.

  • Luxembourg failed its Phase 2 assessment in 2013, partly because it refused to honour requests based on stolen data.


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