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Switzerland's adoption of the declaration on the new automatic exchange of information (AEOI) standard in tax matters signaled its commitment to global crackdown on tax fraud and as well as its concession in nearly-a-century-long tradition of bank secrecy and a consent to reveal clients account information to a third party under the domain of the new standard.
New standard to combat tax cheats
During the Organization for Economic Co-operation and Development (OECD)'s annual Ministerial Council Meeting, over 40 states, including Switzerland and Singapore, signed the Declaration on Automatic Exchange of Information in Tax Matters in Paris on Tuesday.
The declaration committed countries to implement a new single global standard on automatic exchange of information, which was developed by OECD and would oblige countries and jurisdictions to obtain all financial information from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis, said OECD.
In June last year, Swiss Federal Council declared to contribute actively, within the framework of the OECD, to the development of a global standard for the automatic exchange of information so as to ensure tax compliance.
More importantly, it required any tax standard agreed must satisfy its demands in terms of adherence to the principle of speciality and data protection, as well as guarantee reciprocity and include robust regulations for identifying the beneficial owners of all types of legal entity, including trusts and domiciliary companies.
The first part of the new AEOI standard was published by OECD in February this year, with the various technical details to be finalized by mid-2014.
OECD said that the detailed package of standards will be submitted during a meeting of G20 finance ministers scheduled in September.
The new standard is reportedly scheduled to enter into force in 2017.ATTITUDE OF OECD AND SWISS GOVERNMENT
For the global program to pinpoint taxpayers's hidden accounts, the position of Swiss, the largest offshore financial center with over 2 trillion dollars of assets, was vital due to its long-time adherence to the principle of bank client confidentiality.
OECD Secretary-General Angel Gurria said earlier that the commitment by the signatories to implement the new global standard was a major step forward in combating tax cheats.
Swiss State Secretariat for International Financial Matters said in a position statement that Switzerland supported the OECD ministers' declaration on the new standard, and welcomed the commitment of both the OECD members and non-members that have a major financial center.
It noted that Swiss considered the documents adopted by OECD up to the present have met its above requirements, and declared it "will continue to be involved in the development of the new standard within the framework of the OECD."
The agency said that "Swiss Federal Council still has to comment on the adoption of the standard as well as set out how the standard is to be transposed into Swiss legislation and with which countries Switzerland intends to implement the automatic exchange of information as a matter of priority."
Furthermore, the Federal Council would continue its efforts to resolve past tax problems related to untaxed assets and to facilitate access to foreign markets for Swiss financial institutions.
Application conditions listed by switzerland
Swiss Federal Councilor and Economic Minister Johann N. Schneider-Ammann who was attending the OECD annual meeting said on Wednesday that Switzerland has made a first step by signing the OECD declaration on AEOI, but he noted that negotiations were just started and "a good compromise" need to be reached.
The senior official reemphasized Switzerland's requirements for the application of this new standard, including the full engagement of major financial centers, principles of speciality and reciprocity and regulations associated with the identification of beneficial owners.
He pointed out that the final decision for the new standard were up to Swiss parliament and Swiss people, noting the agreement would be submitted to the parliament for vote and there was a possibility to hold a referendum in this regard.
Schneider-Ammann detailed that the agreement, if finally passed, would not apply for Swiss residents.REACTIONS FROM SWISS BANKING SECTOR
UBS, the biggest bank in Switzerland, told Xinhua this afternoon that UBS was committed to international standards and welcomed the Swiss government's engagement in the OECD process.
The bank stressed that it had strict rules in place around tax compliance for its clients.
Moreover, the Swiss Bankers Association (SBA), told Xinhua this afternoon that the trend towards more transparency in tax matters was a global one, which concerned both Switzerland and other financial centers across the world.
SBA's spokesperson Sindy Schmiegel Werner said that it was not a surprise for the banks in Switzerland that the landlocked European country famous for its long-time tradition of bank client privacy would join the OECD declaration on the automatic tax information exchange.
She noted that the banks in Switzerland are willing to adopt the automatic exchange of information along with other financial centers, provided that the exchanged information is only applied for tax purposes.
But Werner particularly stressed that the automatic exchange of information did not change the bank client secrecy provisions as they are laid down in the Swiss Banking Act that enjoyed a 80-year history.
It should be distinguished between bank client secrecy in general, which is protecting the clients' financial privacy stipulated in the Banking Act, and information exchange for tax purposes, as she highlighted.
"One important characteristic of the exchange of information is that it is only related to tax matters. Other authorities or third parties won't have access to the exchanged data," said Werner.
