Swiss court forbids provision of UBS data to Dutch fishing requests. Yet banking secrecy has not been reinstated.

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 national flag of Switzerland sticking in a pile of mixed european banknotes.(series)

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,
  • address,
  • 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.

Mr. drs. W. de Vries

Mr. K.M.T. Helwegen

 

Tax evaders at Credit Suisse decide before 24 March: withhold information from the tax authorities?

Next week, the deadline for preventing the provision of information to the Netherlands by the Swiss Federal Tax Authority (FTA) will close. Following the UBS, Credit Suisse has now also received a request to provide information about its ‘tax evaders.’ Although the only possible conclusion, in my opinion, is that this is a fishing expedition and therefore not permitted based on the Treaty, information will be provided if no objection or appeal is brought against the request. If a ‘saver’ has not (yet) been disclosed to the tax authority in the Netherlands, the stakes may be high.

Zurich, Switzerland - September 9, 2012: Main entrance of the Swiss bank's Credit Suisse headquarter on Zurich Paradeplatz.

Credit Suisse exchange of information

After it was announced at the end of last year that the Swiss bank had provided UBS with information on the request of the Tax Authority, Credit Suisse also informed its Dutch ‘tax evaders’ on 4 March 2016 that – unless an objection was filed – that it will provide their banking information to the Dutch tax authority via the Swiss Federal Tax Authority. This time it concerns a group request, whereby the banking information of all Dutch citizens who had an account at Credit Suisse, with a balance of at least EUR 1,500 between February 2013 and the end of 2014 will be provided. Information about bank accounts that have been closed in the meantime will therefore also be exchanged.

Following the initial success with the UBS and Credit Suisse, it is expected that similar group requests will be made to the Swiss banks Julius Bär, UBP and Sarasin.

Deadline until next week

Credit Suisse has now also sent a letter to a group of identified Dutch savers with the request from the Swiss tax authority as an enclosure. These savers must respond to the letter within 20 days after the letter – so, before Thursday, 24 March – providing either an address in Switzerland or a Swiss authorised representative.

If there is no response, there is threat of an ‘anonymous publication’ in the Bundesblatt – the ‘final decision’ will be published here, which will mean:

  • that, according to the Swiss tax authority the requirements for information requests have been met;
  • that the request from the Netherlands can be executed for the period from 1 February 2013 to 31 December 2014;
  • that the information was requested from the Credit Suisse by the Swiss tax authority;
  • that the parties involved cannot file any objection or appeal against this.

Doing nothing is providing information

The previous group request to the UBS showed that information about savers who did not respond was actually provided to the Netherlands. More and more (ex) UBS account holders are receiving post from the Tax Authority stating that they have been identified as an account holder. It looks like (a lot) more information from Switzerland has been provided than the ‘approximately 100’ that have been reported so far.

Various objectors that had indicated in Switzerland that the voluntary disclosure procedure has started in the Netherlands have been able to successfully stop the provision of information. The procedures that were appealed at the Swiss court are still on-going and we the outcome of these is still pending. The race of the Dutch tax authority is therefore not over yet. Given the text of the Treaty, it is my expectation that the (highest) court in Switzerland will ultimately rule that the group ‘fishing’ request has to be rejected.

Well-founded appeal

After the final decision – which may or may not be published in the Bundesblatt – the appeal for this group of Credit Suisse savers may be appealed within 30 days. All cards have to be on the table for this, however: all the reasons why the persons involved disagree with the provision of information to the Netherlands must be stated directly in the appeal.

To prevent the provision of information, the following has to be done within this 30-day term:

Request for ‘banking institution correspondence’

The latest development in the land of voluntary disclosure is that the Tax Authority is now routinely requesting the foreign bank’s correspondence. The Tax Authority, moreover, claims that providing this letter or these letters is supposedly mandatory. Correspondence that shows that a saver was aware of possible or intended provision of information, or in which it is states that the obligation to report equity to the Dutch tax authority is, however, not relevant for the levy.

After all, the tax to be paid does not depend on whether your bank wrote about tax obligations or the possibility of information being provided to the tax authorities. The correspondence may, however, be incriminating: the knowledge of which means that you are too late for voluntary disclosure? Because it is not relevant to the amount of the tax to be paid, taxpayers are therefore not obliged to provide this and the tax authorities therefore cannot force them to do so. In my opinion, the Tax Authority is abusing their power by making this request.

Voluntary disclosure is still possible

The interest that the tax authority does have (or thinks they have) is the penalty interest: these types of letters could be used to prove that the disclosure is too late. This, however, is still open to debate. It has not yet been determined what the final ruling is going to be on the justification of the Dutch group request. In other words, anyone that knew that they were on ‘the list’ following the group request, did not have to expect that information would be provided to the Netherlands and that the tax authority would track them down anyway. Voluntary disclosure is therefore still possible.

Mr. V.S. (Vanessa) Huygen van Dyck-Jagersma