Currently, thousand-franc notes account for 60% of all cash in Switzerland
As reported by the portal Swissinfo.ch, Switzerland is widely introducing cashless payment technologies, yet citizens still have a huge demand for the 1,000-franc banknote (approximately 27,000 hryvnias). Over the past ten-plus years, demand for it has almost doubled, and now the number of such banknotes in circulation reaches 48.6 million pieces.
Currently, thousand-franc notes account for 60% of all cash in the country, and this is understandable: such banknotes are an ideal way to cash out and subsequently store financial assets with a guarantee of complete anonymity of the holder. There is also a negative side to this situation: experts suspect that the 1,000-franc banknote is a convenient and flexible tool for tax evasion, evidenced by the suspiciously regular annual demand for these banknotes in December.
It is in this month that all Swiss, as one, suddenly begin to withdraw money in thousand-franc notes from their accounts using ATMs – only to deposit them back into their accounts in January. The Swiss National Bank has been observing this interesting pattern for a long time, and its experts doubt that this trend is related to the holidays and that the Swiss put the thousand-franc notes withdrawn from ATMs under Christmas trees for their relatives and friends.
According to financiers, many citizens use this "trick" to reduce taxable balances on accounts and thus "optimize," of course downward, their tax liabilities, given that when filling out a tax return, it is very easy to "forget" to make a note in the "cash financial assets" section.
The Swiss tax system also plays a role, or rather, systems: they all differ greatly from canton to canton, but if anything unites them, it is a pronounced progressive nature. In countries that do not levy a progressive wealth tax, such a regular spike in demand, for example, for 500-euro banknotes, is not observed.
Recently, German and Swiss experts from the European Central Bank, the Swiss National Bank, and the Ostbayerische Technische Hochschule Amberg-Weiden conducted a study titled "The Nature of the Use of High-Denomination Banknotes in Switzerland." Its purpose was to clarify the mechanisms and features of using large banknotes not for payment, but for accumulation and preservation of financial assets and reserves.
Let us clarify that until 2000, most Swiss cantons had a two-year tax cycle, meaning that the Swiss, who have a well-developed "taxpayer sense," filled out a tax return once every two years, so the volume of reserves and savings was recorded only at the end of each even year. And this rhythm perfectly correlated with spikes in demand for thousand-franc notes. According to experts, in this way, the Swiss smuggled about 1.4 billion francs past the tax authorities annually.
After the transition to an annual tax rhythm, the rhythm of demand for 1,000-franc banknotes also changed. And if we also consider the not-so-small 100- and 200-franc banknotes, the Swiss may be hiding up to 3 billion francs from tax authorities annually. This conclusion is reached, for example, by economics professor Ivan Lengwiler from the University of Basel. Many experts believe that this amount could be even larger, given that before the global financial crisis, the spike in demand for 1,000-franc banknotes at the end of the year was 16%, but later it decreased to 12%.
Now, in January, at the beginning of the new financial year, the Swiss have practically stopped depositing withdrawn funds back into their bank accounts: there is less and less sense in doing so, given the minimal interest banks pay on deposits and savings.
The authors of the aforementioned study conclude that the share of thousand-franc notes kept at home or in bank safe deposit boxes has grown significantly recently. In the 1980s-1990s, only a third of all 1,000-franc notes were used to store financial reserves, the remaining two-thirds were used for payments.
After the introduction of the euro and after the September 11 attacks, the share of thousand-franc notes used for storing assets jumped to 60%, and after the global financial crisis of 2008, this figure rose to 73%. In other words, today the thousand-franc note serves mainly the purpose of preserving assets in cash form, rather than for payments. Interestingly, however, at the end of last year, 2018, the traditional spike in demand for thousand-franc notes was much lower than usual. Nothing like this had been observed in Switzerland since 1995.
It is possible that the new 200-franc banknote is to blame, as demand for these means of payment in cash circulation rose sharply immediately after they were put into circulation. Another possible option: it is quite possible that we are dealing with deferred demand and that the Swiss are simply waiting for the new thousand-franc note. As for the refusal to issue the 1,000-franc banknote following the example of the ECB, which decided in 2014 to start withdrawing from circulation and stop printing the 500-euro banknote, everything is clear here!
Switzerland is a liberal country, and what people do with the 1,000-franc note is none of the state's business. A forceful decision to withdraw this banknote from circulation would be an act of actual expropriation of assets and a powerful blow to the reputation of the Swiss financial system, which is worth much more than the theoretically hidden three billion in cash from fiscal authorities.