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What International Pressure Can Do – Switzerland Edition

November 8, 2011

By EJ Fagan

EJ Fagan was New Media Coordinator for the FTC from 2011-2013. He is now Deputy Communications Director for Global Financial Integrity. You can follow him on Twitter @ejfagan.

The hook from a story published by SwissInfo today:

The global pressure on Switzerland to cede further concessions in a tax evasion row is showing no signs of relenting after comments last week at the G20 summit.

French President Nicolas Sarkozy called on Switzerland and ten other so-called tax havens to be “excluded from the international community” for refusing to sign up to an automatic exchange of information agreement.

Switzerland is currently playing a game of chess with various other countries in an effort to manoeuvre itself through a global minefield of criticism and clear its reputation as a responsible international financial centre.

What did Credit Suisse do today? They announced to U.S. clients suspected of tax evasion that they would be handing information over to the IRS. Clients must either voluntarily allow the information to be sent to the IRS or hire a Swiss layer and contest the action. It is a huge victory for the United States, and a major blow to Swiss banking secrecy. Credit Suisse is the second-largest bank in Switzerland.

I’m very happy that the IRS is going to be able to track tax evasion, recover tax dollars, and maybe even find some justice for U.S. taxpayers. International pressure works – who thought a few years ago that the Switzerland would force its banks to give this kind of information to the United States?

What we shouldn’t mistake this for is a major victory for the developing world, at least for now. It’s great that the largest and most powerful economy in the world can penetrate the legendary banking secrecy of Switzerland and recover a few dollars stashed away, but the rest of the world needs access to that information as well. The United States demonstrated that international pressure can work to open up secrecy juridictions, but we’re going to need a whole lot more international pressure to make a real dent in poverty and create an equitable international finance system for the developing world.

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Disclaimer: Unless specifically stated to be the views of the Financial Transparency Coalition, the opinions expressed on this blog are solely the opinions of the individual blogger and are not necessarily those of the Financial Transparency Coalition.

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