Swiss laws are tightening for dishonest taxpayers
In this way, the Confederation's financial hub aligns its activities with the requirements of the intergovernmental Financial Action Task Force (FATF). Let's try to understand what the new provisions of the Criminal Code are about.
First of all, it should be noted that in Switzerland, unlike in many countries, there is still a difference between two practically similar offenses concerning tax evasion. In the first case, it is about tax understatement (for example, the taxpayer simply forgot to declare all income or assets). In the second, which is considered willful evasion, the taxpayer knowingly violates the law by submitting forged documents to the tax administration. While ordinary tax understatement may result in a fine roughly equivalent to the undeclared amount, punishment for willful evasion can lead to prison.
Moreover, by joining the Organisation for Economic Co-operation and Development (OECD) standards in 2009, Switzerland provides legal administrative support to authorities of other countries seeking unrecovered budget funds in Confederation banks, regardless of the foreign taxpayer's intent, notes Jan Langlo, deputy director of the Association of Swiss Private Banks, in an article in Le Temps. He explains that this practice of distinguishing between the two offenses, which causes bewilderment in other countries, is linked to the peculiarities of the Swiss tax system.
For instance, in many countries, only one in ten self-completed tax returns is checked. Accordingly, if an error is found in the document, the taxpayer faces severe punishment. In contrast, Switzerland monitors submitted declarations more closely and simply points out the error to the "forgetful" taxpayer – as in, these things happen.
Be that as it may, from January 1, 2016, a new type of crime – "qualified tax offense" – appeared in the Criminal Code. Henceforth, the severity of guilt will be determined by the hidden amount. If the amount due to the budget was understated by the taxpayer by more than 300,000 francs in a reporting period (in this case, a year), they may face imprisonment of up to three years.
This means that in the new year, financial intermediaries of the Confederation, particularly bankers, will have more work: they will have to monitor whether their clients (both in Switzerland and abroad) have evaded taxes on income and assets on the specified amount. Two scenarios are possible, notes Jan Langlo.
If the violation was committed using false documents, the bank must pass on information for further investigation to the relevant authorities, as in cases of suspected terrorist financing and drug trafficking. At the same time, if the taxpayer, under Swiss law, is only guilty of understating the tax base (and a false declaration itself is not considered a fake document, according to the Federal Court definition), the bank is not obliged to "turn in" its client, notes Jan Langlo. However, this does not mean that the financial institution will sit idle: after assessing possible legal consequences, the bank will most likely refuse such a client or suspicious funds.
Although the Swiss order of distinguishing liability for similar offenses cannot be called too strict, such a system is highly effective, the expert believes. He supports his arguments with figures: if in Switzerland banks' suspicions lead to criminal proceedings in 70-80% of cases, in neighboring countries the effectiveness of evidence gathered by financial institutions ranges from 1-2%.
As NashaGazeta.ch notes, the amendments to the Criminal Code came into force in 2016, so we will hear about the first high-profile cases no earlier than 2017, that is, after the end of the reporting period, following which the innovations will actually take effect.