Swiss banks have paid billions in fines to clean up with their past aiding and abetting tax crime. A draft law introduced by the Swiss government seeks to close a loophole that allowed the banks to deduct hefty criminal fines and legal fees from their corporate tax bill.
Switzerland’s private banking organization Banquiers Prives — which include Geneva-based Pictet, Lombard Odier and Mirabaud — said on Tuesday it wants the Swiss government to allow tax deductions for criminal fines, arguing that foreign laws don’t apply in Switzerland.
This hits at the heart of one of Switzerland’s most prevalent defense strategies of offshore accounts used for tax evasion and fraud: namely that it wasn’t responsible for upholding foreign laws and regulations.
Loss of Tax Break
The defense was mooted by massive international pressure on Swiss banks, which pursued prominent banks such as UBS, which paid $780 million in fines to the U.S. for its offshore dealings, and Credit Suisse, which paid roughly $2.5 billion, as well as a host of far smaller companies which had done similar business.
Now, Swiss banks fear they will lose a tax break set aside for penalties if the draft law, which is waiting for a government response to a consultation period which is split along left- and right-wing party lines, eventually comes into force.
Aggressive International Pursuit of Swiss Banks
The Banquiers Prives said on Tuesday it advocates tax deductions for penalties that arise from the normal course of business, even if the sanctions are for criminal behavior.
While the U.S. has been particularly aggressive in pursuing Swiss banks over their dealings with wealthy clients, Germany and France have also been ramping up pressure.
