Aug 23, 2013

Germany Gets Its Way With UBS; When Will Others? [Update 1]

Reuters is reporting that UBS has buckled under the pressure of German authorities in the latter's fight against tax evasion through offshore accounts.

Wealthy Germans prefer to park their monies in Switzerland. In a majority of the cases, these clients have not paid tax on these funds and this is what the German government is chasing.

UBS has told its German clients that they need to be tax compliant by end-2014 or face the consequences.

I presume that the consequences will force the non-compliant Germans close their accounts and take their money somewhere else.

UBS is not the only Swiss bank to set such timelines. Credit Suisse has already set a deadline of end-2013 for its German clients.

The Swiss banks have come under intense pressure from the US, the German and the French governments to come clean on the "black money" problem.

In fact, the Swiss government had to step in and re-look at the secrecy laws under the changed circumstances. All these developments have definitely made Switzerland a less attractive destination for private banks and tax cheats alike.

There is a lesson in this for all the other countries, especially like India that also have a humongous problem of "black money".

If Germany, with one of the strongest economies in the world, can go after tax evaders, then there is no reason for the weaker countries not to follow the leader.

To bring in the technology angle, the cloak of Swiss secrecy was torn by IT professionals who collected (stole, as the banks & police would argue) data on wealthy clients and sold it to governments.

In an ironic twist, just after publishing this post, I came across news that a Swiss court has handed down a 3-year prison sentence to a German IT expert who sold data from Julius Bär to the German tax authorities.

To be developed further...