International Finance
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Switzerland Tops Financial Secrecy Index

An estimated $ 21 trillion to $ 31 trillion of private financial wealth is located in untaxed or sparsely taxed secrecy jurisdictions, according to the Tax Justice Network. November 18, 2013 : Switzerland, the world’s largest centre for cross border wealth management, retained the top spot in a financial secrecy index by the Tax Justice Network (TJN), a London based campaign group. The country continued to...

An estimated $ 21 trillion to $ 31 trillion of private financial wealth is located in untaxed or sparsely taxed secrecy jurisdictions, according to the Tax Justice Network.

November 18, 2013 : Switzerland, the world’s largest centre for cross border wealth management, retained the top spot in a financial secrecy index by the Tax Justice Network (TJN), a London based campaign group. The country continued to be ranked No.1, even after being targeted by the U.S. to divulge tax details of tax evaders. It has also signed more than 40 bilateral agreements on tax information administrative assistance, the TJN reported.

Luxembourg, Hong Kong the Cayman Islands and Singapore trailed Switzerland in the benchmark, which is published once in two years. The U.S. which topped the index in 2009, is placed sixth in the study of 82 jurisdictions.

The ranking is based on a combination of a country’s secrecy score and a scale weighing based on their share of the global market for offshore financial services. Thus, for instance, even though Mauritius had a secrecy score of 80 – it was ranked lower at 19, against Singapore which had a lower secrecy score of 70 points but was ranked at fifth position, as it accounted for less than 1 percent of the global market share for offshore financial services.

An estimated $ 21 trillion to $ 31 trillion of private financial wealth is located in untaxed or sparsely taxed secrecy jurisdictions, according to the Tax Justice Network. The index ranks those jurisdictions based on bank secrecy rules and the share of the global market for offshore financial services, using reports by governments and the Organisation for Economic Co-operation and Development (OECD) and surveys of financial ministries. In 2009, Switzerland agreed to implement the Paris based OECD standards for tax information exchange. In 2012, its private cross border financial assets rose to $ 2.2 trillion and it is the largest cross border private wealth centre, Boston Consulting Group said in a report in May. The total assets under management at Swiss banks increased by 320 billion francs ( $347 billion) to 5.6 trillion francs, with the proportion of foreign assets unchanged at just over 50 percent in 2012, according to a separate study published in September by the Basel – based Swiss bankers association.

Tax matters still unresolved ?

The country is making efforts to improve its transparency by signing a mutual accord with the European Union on tax matters in October and said it’s adopting a negotiating mandate to revise EU rules on the taxation of cross border savings. The government also agreed this year to discuss a new system of automatic exchange of information with other authorities and supported U.S. demands for a voluntary disclosure initiative for Swiss banks to give up information on undeclared American clients. The U.S. Department of Justice is investigating 14 banks, including Credit Suisse Group AG, (CSGN), Julius Baer Group Limited and HSBC Holdings Plc, for allegedly helping Americans hide money from the Internal Revenue Services (IRS).

What is the TJN?

TJN is an independent organisation launched in the British houses of parliament in March 2003. The organisation is dedicated to high level research, analysis and advocacy in the field of tax and regulation. The organisation explains the harmful effects of tax evasion, tax avoidance, tax competition and tax havens. Its network includes eminent academicians, economists, financial professionals, journalists, lawyers, public interest groups and trade unions.  TJN uses 15 indicators for computing the secrecy scores which include banking secrecy, disclosure of company ownership, maintenance of records of local trusts and foundations, exchange of information and anti money laundering legislations, etc.

Tough for Bankers

Switzerland is unlikely to move from the top spot in the secrecy ranking unless the financial industry shifts its focus from gathering assets to implementing more transparent, spontaneous co-operation with other countries to counter tax evasion, according to Markus Meinzer, a researcher at Tax Justice Network based in Marbug, Germany.

“Swiss bankers are having a hard time because on the one hand they are being told they have to get clean and on the other hand are being pressurized to achieve their performance targets.,”

“To show its integrity, Switzerland has to sign up for automatic exchange of information”, he said.

Financial Secrecy, Index 2013

Rank Country or Territory FSI Value Secrecy Score Global Scale Weight
1 Switzerland 1,765.2 78 4.916
2 Luxembourg 1,454.4 67 12.049
3 Hong Kong 1,283.4 72 4.206
4 Cayman Islands 1,233.5 70 4.694
5 Singapore 1,216.8 70 4.280
6 USA 1,212.9 58 22.586
7 Lebanon 747.8 79 0.354
8 Germany 738.3 59 4.326
9 Jersey 591.7 75 0.263
10 Japan 513.1 61 1.185

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