The phone has been ringing off the hook the past few months with calls from tax evaders who still wanted to make last minute use of the voluntary disclosure option. This was the result of articles about the Swiss bank UBS and then about Credit Suisse. Based on a ‘group request,’ banking information of Dutch account holders was supposedly being provided to the Swiss Federal Tax Authority, which in turn was transferring it to the Dutch Tax Authorities. A discussion broke out: is this fishing expedition excluded on the basis of the Dutch-Swiss treaty? Many tax evaders did not want to wait for the answer and decided to voluntarily disclose their Swiss equity to the Dutch Tax Authorities.
The Switzerland Court: anonymous group requests are not admissible
In its ruling of last Monday, the Swiss federal administrative court in St. Gallen has now put a spanner in the works. The Dutch tax authorities had submitted the group request with reference to the Treaty with Switzerland for the prevention of double taxation. According the judgement of the Swiss court, it follows from provision XVI of the Protocol, which is part of the Treaty, that information requests can only be permitted if they pertain to identified individuals.
The judge quoted (§6.3) that the Protocol explicitly requires that the group request must meet sufficient specified information, in particular:
- the person’s name and if known,
- account number,
but also other information to enable the identification of that person or group of people, such as:
- date of birth,
- civil status, and
- tax identification number.
The group request by the Dutch tax authorities, however, did not even contain the names of the account holders involved in the investigation. Although the Swiss Federal Tax Administration (FTA) permitted this state of affairs, the court conclusively ruled (§ 9) that group requests without specification of the names that the investigation pertains to, are not permitted, based on the Treaty and accompanying Protocol. The ‘additional agreement’ that was entered into at the end of October 2011, and signed by Switzerland and the Netherlands in connection with the interpretation of the relevant provision from the Protocol and the ‘OESO commentary’ on the exchange of information between the Contracting States, has not led to a different ruling.
Reinstate Swiss banking secrecy?
Has this led to the reinstatement of Swiss banking secrecy? Certainly not. Although the Swiss court found the group request from the Dutch tax authorities to be too general, the Dutch court has approved this investigation methodology – which, in our opinion, (still) qualifies as a ‘fishing expedition’ – at national level.
The Tax authority will obtain the information it wants in a roundabout way. The Project Debit/Credit led by the Functional Persecution Office in Zwolle, for example, has ordered a credit card data provider to carry out a similar group request by the Dutch tax authorities. A banking secrecy that is respected abroad is undermined by this.
Through ‘information requests’ to (nearly) all processors of (credit and debit card) payment transactions active in the Netherlands, the Tax Authority has received transaction details about payment transactions that were carried out in the Netherlands with foreign debit or credit cards. during the period of 2009 through 2011. Using this transaction data, travel bureaus and car rental agencies, for example, have started ‘third party investigations’ to retrieve the identity of the card holder/user.
As a result of this, generously provided information, a number of criminal procedures have been instigated on these credit cards and the associated Swiss, Andorran and Luxembourg bank accounts. Those who (so far) are not included in the criminal proceedings, are being forced to submit proof against themselves through disclosure requirements and setting themselves up for a penalty or criminal case.
Not too late for voluntary disclosure
The Swiss tax authorities are expected to appeal the ruling by the court. Meanwhile, this ruling does offer support for anyone who has voluntarily disclosed or who is considering doing so; there is no reason to assume that the tax authorities would have tracked down these UBS (and Credit Suisse) tax evaders without voluntary improvement. For now, the phones can keep ringing.