US Estate Tax Repeal Spells Trouble For Swiss Banks

by Ulrika Lomas, Tax-News.com, Brussels

23 November 2001

According to a partner of the professional services firm, Baker & McKenzie, the repeal of the estate tax in the US has the potential to threaten Swizerland's banking secrecy and could mean trouble for Swiss banks with wealthy clients.

Speaking at a meeting of the Swiss-American chamber of commerce, Philip Marcovici said the ruling could affect banks worldwide but has particular resonance for Switzerland which prides itself on its strict confidentiality rules. Effectively, said Mr Marcovici, banks will have to decide between breaking the law either in America or in their own countries.

'This is a scary situation for Swiss banks. I don't think banks are as aware of it as they should be and a lot of them don't really want to think about it,' he claimed.

The tax, also known as the death tax, is currently imposed at up to 55 per cent but the US government is aiming to phase it out completely by 2010. Simultaneously the 'step-up' process, which reassesses the value of assets of the deceased at market value, will be withdrawn.

The new ruling calls for more detailed reporting of the transfer of the assets which will force Swiss banks to renege on secrecy or be fined by the US government, which could amount to as much as 5 per cent of the market value of the assets.

'As a result of this, Swiss banks will be in a position where they have no choice but to breach either Swiss or US law. These are very serious and critical issues for the Swiss banking community and any other banking community which is subject to bank secrecy rules,' Marcovici explained.

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