Swiss Federal Council Opposes 'Protection Of Privacy' Initiative

by Ulrika Lomas, Tax-News.com, Brussels

27 August 2015

The Swiss Federal Council has recommended that Parliament reject the popular initiative "Yes to the protection of privacy" on the grounds that it interferes in tax and prosecution procedures and would endanger the accurate levying of federal, cantonal, and communal taxes.

The "Yes to the protection of privacy" initiative was launched in March 2013 by a cross-party committee headed by banker and Member of Parliament Thomas Matter. The popular initiative was filed with 117,596 signatures in September 2014. It calls for restrictions on the information third parties can provide to the authorities. It recommends that taxpayer information only be made available within the scope of criminal proceedings, and then only in cases in which a court confirms the suspicion of a serious tax offence.

Bank-client confidentiality is provided for in the Banking Act and Stock Exchange Act, which establish professional confidentiality comparable to that between doctors and their patients, lawyers and their clients, and priests for disclosures during confessions.

The Federal Council said that there are necessary limits to the protection of privacy in tax law. In order for income tax and wealth taxes to be correctly levied, taxpayers must disclose their income and assets to the tax authorities. However, as the Council pointed out, the information is confidential and may not be shared unless under a legally defined exception.

The Council said that, under the plans, if taxpayers violate their duty to cooperate, it would no longer be possible for the authorities to obtain information from employers or insurance companies. In addition, it argued the initiative would restrict the authorities' capacity to seek information from banks in criminal proceedings concerning indirect taxes and in special serious offence investigations by the Federal Tax Administration.

The initiative covers domestic taxes only and should not impact Switzerland's commitments on the automatic exchange of information. However, the Council said that it could restrict Switzerland's options for obtaining information from other jurisdictions. Were the initiative to apply to the Anti-Money Laundering Act, financial intermediaries would be prohibited from notifying the Money Laundering Reporting Office Switzerland (MROS) of aggravated tax offenses by those who have their registered office or residence in Switzerland. Likewise, the exchange of information on money laundering and terrorist finance between Swiss and overseas authorities would be compromised, the Federal Council said.

The Council concluded: "The privacy of tax-compliant persons is sufficiently protected thanks to tax secrecy and would therefore not be affected by the initiative. However, if a person refuses to cooperate and thereby violates the relationship of trust between citizen and state, the tax authorities should continue to be able to obtain information from third parties. Against this backdrop, the Federal Council also sees no reason for a direct or indirect counterproposal."

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