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Passing a further significant parliamentary hurdle, the Swiss Council of States has recently given its go-ahead to the bilateral tax deals concluded with Germany, the UK and with Austria, aimed at resolving the issue of undeclared and untaxed assets of foreign residents held in Swiss bank accounts.
The agreement with Germany was adopted by 31 votes to 5; the treaty with the UK was backed by 30 votes to 6; and the accord with Austria passed by 34 votes to 3.
Lawmakers rejected the request from the Swiss People’s Party (SVP) that the agreement with Germany be resubmitted to the Federal Council for further negotiations. The SVP underlined the need to ensure that the use of stolen bank data be explicitly forbidden in the treaty text and insisted that the proposed withholding tax rates be revised downwards.
The majority of lawmakers in the Council of States provided their backing for the agreements, albeit with a distinct lack of enthusiasm, arguing that the withholding tax model agreed with the three states in question serves as a pragmatic solution to the longstanding dispute, without the need to relinquish traditional banking secrecy.
During the debate, Swiss Finance Minister Eveline Widmer-Schlumpf defended the accords, emphasizing that the withholding tax deals are an effective alternative to an exchange of automatic information. Alluding to the “enormous challenges” currently facing the internationally exposed Swiss financial centre, Widmer-Schlumpf stressed that such challenges can only be met if the country is prepared to take the necessary precautions.
Representatives of the Confederation’s banking sector have also provided their full support for the agreements, maintaining that the provisions will serve to regulate the past, to provide legal security for the future for both institutions and employees, and to ensure better market access in treaty partner states.
Based on a withholding tax model, the intergovernmental treaties concluded recently between the Confederation and Germany, the UK, and Austria, are designed to legalize the undeclared, untaxed assets held by wealthy foreign residents in Swiss banks, applicable to both old money and to future investments.
The agreements are due to enter into force following ratification by the relevant treaty partner states on January 1, 2013.
The Swiss National Council is due to vote on the withholding tax agreements shortly.
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