|
Media conference on 13 September 2001
|
 |
|
|
Tour d'horizon
Dr. Georg F. Krayer, Chairman of the Swiss Bankers Association
Ladies and Gentlemen
On the eve of our Swiss Bankers Day, it is a special honour for me to inform you
personally of the most recent developments in our industry.
Switzerland is currently engaged in bilateral talks with the EU. I would like to take this
opportunity to present our position on the issues in these talks that affect the banks. I
will also address an issue that is often the subject of public scrutiny, primarily in the
media - the measures put in place by Switzerland to combat money laundering. I intend not
only to place this point in a wider context but also to state clearly our unequivocal
position. I will then address the question of fiscal policy, a perennial topic in
Switzerland. Lastly, I am to explain why the initiative aimed at introducing a capital
gains tax is not the way to secure a sustainable improvement in the federal budget and
why, in contrast, the "debt brake" package constitutes a step in the right
direction.
The EU, OECD and FATF and their impact on the Swiss financial centre
You may remember that in June of last year the Financial Action Task Force (FATF) compiled
a list of 15 countries which it considered as having failed to put in place effective
anti-money laundering measures and subsequently urged these countries to take remedial
action. This list was updated on 22 June of this year and the new version is now
available. The Bahamas, Cayman Islands, Liechtenstein and Panama no longer feature on the
list. However, the spotlight is now on what these countries aim to do in the future to
combat money laundering. Unfortunately, this spotlight has fallen on Switzerland, too, a
matter I will address in greater detail later in my speech.
With regard to the OECD and its fight against "harmful tax competition", we are
quietly optimistic in light of the change of position brought about by the new Secretary
of the US Treasury, Paul H. O'Neill. Last May O'Neill said his Administration had major
reservations regarding the OECD's stance on tax havens. This is a new and very welcome
departure. It means the United States now shares Switzerland's view that tax competition
is an effective means of keeping the tax burden in check. (It is important to note that
Switzerland abstained from the vote on the OECD's report way back in 1998.) As a result of
the US's position, the OECD has had to postpone the publication of its updated tax haven
list until November. We are pleased to see that other countries share our view.
At our last press conference in February, one issue we addressed in detail was the EU's
proposed directive on taxation of interest income. We feel certain critical questions have
to be answered. There are also additional matters between Switzerland and the EU which
have to be addressed. The exploratory talks held in the spring of this
year focussed on ten issues. Some of these issues are extremely important to us, namely
the taxation of interest income mentioned previously, liberalisation of the services
market and, somewhat less directly, anti-fraud measures and the Schengen and Dublin
Agreements.
If I were to comment in detail on all of these issues, you would have very little time
left to actually write up your reports today. Instead, let me set out our position in a
few words.
On 18 July of this year, the EU published a new draft directive on the taxation of
interest income. This draft followed from decisions made at the Feira summit in June 2000
and the ECOFIN meeting in Brussels. Nothing new, then. Nonetheless, we have to keep a
close eye on how the European Parliament handles the issue. You will find our position on
this matter on page 22 of our Annual Report.
Shortly after bilateral agreements were concluded, Switzerland explored with the EU the
possibility of holding further talks on issues, such as the liberalisation of the market
for services, measures aimed at combating fraud and the signing of the Schengen and Dublin
Agreements. The Swiss financial centre is affected in that the issue at stake is the
expansion of judicial assistance in criminal matters and administrative assistance, in
particular regarding the mutual exchange of information. First, let me point out a few
fundamental elements.
Previously, judicial assistance in criminal matters was basically provided as an auxiliary
means of assisting national court systems. If a court required evidence to
enforce legislation within its own country, it could appeal to another country for
judicial assistance.
For some time now, a new trend has been emerging. Some countries no longer view judicial
assistance in criminal matters as an auxiliary and complementary process but as a means of
securing preliminary information before even initiating criminal proceedings within their
own borders. Naturally, it is easier to "outsource" to a competent,
cost-efficient court abroad the task of securing evidence than to leave it up to your own
overstretched and often slow-moving national judicial system. This phenomenon is also
visible in the area of taxation: more and more tax officials are obtaining information on
their taxpayers via their counterparts abroad.
This approach is diametrically opposed to our understanding of the law. For future
bilateral negotiations between Switzerland and the EU, a few conclusions can be drawn:
 |
Bank client confidentiality is based on a long-established tradition of safeguarding the financial privacy of each and every individual. In complying with a request for judicial assistance in criminal matters, however, bank client confidentiality is lifted to the advantage of the judicial authorities. This is as it should be, and here no one is suggesting any need for further action or modifications. |
|
|
Given the growth of organised crime, individual countries have to be able to better co-ordinate the criminal prosecution instruments at their disposal. Switzerland has played a leading role with, for example, the action it has taken in the fight against large-scale crime, and is committed to continuing this role in the future. |
|
|
Switzerland has a long tradition of providing judicial assistance in criminal matters. Our country follows clearly-defined and easy-to-understand rules. This is a basis on which we can build in our dealings with the EU. In any case, proceeding in this manner is much more effective than drawing up new, general but nonetheless relatively imprecise principles. |
|
|
Our state should aim to uphold values which have their roots in democratic legitimacy. This goes hand in hand with responsibility for the public good being shared by individuals and the state. Switzerland will press its view firmly on these issues, since behind its politicians lies the clear resolve of the Swiss people. |
|
|
We cannot allow bank client confidentiality to be whittled away through an unbounded expansion of official administrative assistance procedures or a later adoption of the "acquis communautaire" without us having any say in the matter. |
|
Switzerland must join the UN
Next year the Swiss will vote on whether to join the United Nations Organisation. The
Swiss banks wish to state their position well in advance of the vote. As time goes on,
choosing to remain outside a forum that seeks to find, assess and decide on answers to the
challenges faced by the world today is increasing nonsensical in our view. Together with
the Vatican, Switzerland is currently the only non-member of the United Nations. We can
think of no reasonable objections to Switzerland's joining the UN. In September 1998 our
Board of Directors stated that it supported membership for Switzerland.
Switzerland is a pioneer in the fight against money laundering
Over recent weeks and months, Switzerland's endeavours to combat money laundering have
been repeatedly criticised in the press. Implementation of the 1998 legislation on money
laundering has highlighted a particular gap in the parabanking sector. This is hardly
surprising in such a short space of time, however, given that the legislation is not only
extremely ambitious but also applies to a new area. The severe criticism, which sparked
something of a sideshow in early summer, was often wide of the mark and viewed from too
narrow a perspective. Let me just say here that the right measures have already been put
in place thanks to the new appointments to the head of the Money Laundering Control
Authority and, in particular, the expansion of capacities. Nevertheless, I would like to
widen the perspective somewhat and clearly set out where we stand on five points. After
all, even if the criticisms concerning the implementation of the legislation apply only to
the parabanking sector, the reputation of the entire financial industry is at stake, in
Switzerland, yes, but primarily abroad.
| 1. |
A financial centre can only be "clean" if it makes comprehensive endeavours to combat money laundering. The Swiss banks are unanimous on this point. At the risk of repeating myself, let me state clearly that we neither want nor need funds stemming from crimes. |
|
| 2. |
In the fight against money laundering, Switzerland was the first country to deploy a comprehensive range of instruments aimed at preventing and prosecuting money laundering. By way of an example, these instruments are not restricted to drug-related offences and organised crime, but encompass all types of criminal activity, unlike the European money laundering guidelines currently in force. |
|
| 3. |
It cannot be emphasised enough that, in the most important economic sectors - banks, securities dealers and insurance - anti-money laundering procedures have been functioning smoothly for a considerable length of time. Thanks to its systematic implementation of know-your-customer principles, the Swiss financial centre has played a pioneer role since 1977. So much so that the United States is currently re-examining the question of whether US banks should be asked to implement customer identification procedures similar to those in Switzerland. |
|
| 4. |
The Swiss banking sector is not directly affected by the temporary difficulties experienced by the Money Laundering Control Authority. In the Swiss banking sector, there is ample evidence to show that the strict supervision of the Federal Banking Commission interacts optimally with the additional self-regulation under the aegis of the Swiss Banking Authority. |
|
| 5. |
Lastly, we remain committed to our call for adequate supervision of all financial intermediaries. This does not mean, however, that we support the popular call for a new "super" government agency. We are convinced that the advantages of good self-regulation should not be forsaken or overlooked. Our motto is thus: as little state intervention as necessary and as much self-regulation as possible. |
|
Switzerland is not facing any sort of crisis in its fight against money laundering, nor
does it have anything to hide from the rest of the world. It broke new ground in 1998 with
its anti-money laundering legislation for the non-banking sector. Justified criticism has
to be taken seriously and the Swiss banks are more than willing to support the
implementation of the anti-money laundering legislation. Lecturing of any kind, however,
is out of place. It is hard to understand the criticism directed at Switzerland from
abroad for the teething problems it is experiencing in implementing complex new
legislation, when similar laws do not even exist in these other countries.
In the information pack we have provided you will find details of the main points of
legislation. It is a guide to the numerous measures aimed at preventing and combating
money laundering in Switzerland.
"No" to a harmful capital gains tax…
On 2 December, Switzerland will vote on two draft pieces of fiscal policy legislation that
will have a major impact on Switzerland's tax environment and hence its overall appeal as
a business location: the introduction of a capital gains tax and a package of legislation
known as the "debt brake".
The fascinating thing about taxes is that new ones are always being invented despite the
fact that no one wants to pay the existing ones. No doubt this was the motto taken up by
the Swiss Federation of Trade Unions when it launched its call for a capital gains tax of
20%. This tax is to be imposed in addition to income tax, wealth tax and the taxes on
consumption and is aimed in particular to hit those taxpayers who already generate the
majority of all federal and cantonal tax revenues. Today, 3% of all taxpayers generate
more than 50% of direct federal taxes in Switzerland. Introducing such a tax would
increase the reluctance to pay taxes on the part of the very group that generates so much
of our tax revenues. A major increase in attempts to avoid paying taxes or
getting round them would have to be expected. Why then would we Swiss voluntarily opt to
run such a risk and upset the balance once and for all?
A capital gains tax would also generate much less in the way of tax revenues than many
people expect. Switzerland's cantons abolished the tax for this reason. The last canton to
take such a move was the Grisons in 1997. The Federal Council estimates revenues of CHF
100 million to CHF 400 million in years when stock markets are strong. After deduction of
the costs of the substantial efforts needed to collect the tax, however, the net income
remaining could be somewhere in the region of zero!
In the absence of any strong arguments, the proponents of this tax repeatedly point to the
United States, where a capital gains tax is credited with eliminating the budget deficit.
But a closer look at the facts tells a different story. Although private individuals in
the US pay a tax on their capital gains, there is no such thing as a wealth tax. The
situation is completely different in Switzerland. A comparison of revenues clearly shows
that the easy-to-levy wealth tax is the better option: in the United States, the capital
gains tax imposed on private individuals generates 2.8% of total tax revenues. In
Switzerland, the wealth tax imposed on private individuals (1997: CHF 3bn) accounts for 4%
of total tax revenues.
The supporters of a new tax continually point out that most European countries impose a
capital gains tax. What they fail to point out, however, is that most of these countries
do not have a wealth tax and that, in addition, the double taxation of joint-stock
corporations and their shareholders has either been alleviated or eliminated entirely.
Often it is only a matter of taxing short-term gains or the gains produced by disposals of
major holdings. The situation is completely different in Switzerland. Consequently, direct
comparisons with the legislation in force in other countries are not possible. A new
capital gains tax would be an additional burden on a particular group of taxpayers and
would send the wrong signal, to the detriment of saving and private pension planning.
In short, the initiative would create an imbalance in our well-run tax system. It would
lead to an unacceptable and unprecedented double burden. Furthermore, it would
restrict growth and place the middle-income bracket as well as our small and medium-sized
enterprises under a disproportionate level of strain. Lastly, there would be no reasonable
balance between the cost of collecting such a tax and the revenues it would generate.
…."yes" to the forward-looking debt-brake package
The referendum on the debt-brake package shows that Swiss banks don't always say
"no" on matters of fiscal policy. This issue is of the utmost importance if
fiscal policy is to have the flexibility needed for the future. The Swiss banks and the
economy support the Federal Council and the Parliament by recommending a resounding
"yes". So what is involved? The "debt brake" is to be a constitutional
mechanism for managing the federal budget and keeping the level of debt in check. The aim
of this mechanism is to safeguard the budget against structural imbalances, thereby
preventing increases in federal debt on a scale similar to those witnessed in the past.
This new instrument will replace transitory constitutional rules, called the budget target
2001. Whereas this target was aimed at eliminating the structural deficit, the debt brake
will prevent the federal budget from slipping back into imbalance and building up another
structural deficit in the first place.
This would be achieved with a balanced budget over an entire economic cycle. Compared with
other countries, Switzerland has low taxes and a high level of government expenditure.
This must stay as it is. The debt brake will make spending more disciplined. In future,
the government will have to be very careful with its money and, with the debt brake, will
have an effective means of implementing a responsible fiscal policy over the long term.
Future generations will reap the rewards of sensible spending policies and should not have
to bear the brunt of high budget deficits.
|
|
|
|
|
|
|
Junior
Bank
