Pressure Grows on Swiss Banks to Expose Tax Cheats\' Billions

LONDON - Spare a thought for wealthy tax cheats.

Action by the U.S. and European governments is hacking away at Switzerland's hallowed tradition of banking secrecy, threatening the Alpine nation's reputation as the coolest place to park hot money.

Under budgetary pressure to chase down every last tax dollar and euro, authorities are working with the Swiss to close the last loopholes in a banking regime that once made it the favored offshore haven.

The federal government in Bern said it signed a deal with the United States this week that will bring Switzerland in line with the U.S. Foreign Account Tax Compliance Act (FATCA), a law that obliges banks to share information about U.S. clients' assets.

In London, meanwhile, George Osborne, the British finance minister, gave Parliament details on Wednesday of a treaty with the Swiss that would allow him to levy tax on an estimated £40 billion, or $64 billion, held in secret Swiss bank accounts by British nationals.

Mr. Osborne said the £5 billion he expected to raise over the next six years amounted to “the largest tax evasion settlement in U.K. history.”

And, in Germany, officials in the region of North Rhine-Westphalia have been paying anonymous bank employees for illicitly compiled data discs that reveal billions of euros stashed in Swiss accounts by German depositors.

The Swiss authorities have been cooperating with foreign governments' efforts to track down hidden assets. At the same time, they have been trying to limit the impact of tougher measures on the banking sector.

Eveline Widmer-Schlumpf, the Swiss president and finance minister, has said her country has no more interest in holding undeclared foreign funds.

But she has also said there is no room for further concessions in a tax deal with Germany that was rejected last month by the Bundesrat, the German upper house, after the opposition argued it was not tough enough.

Ms. Widmer-Schlumpf, who is holding talks on tax issues in Paris on Friday with François Hollande, the French president, said the stalemate with Germany could only be “good news” for German tax evaders.

She meanwhile wants a reluctant French government to accept a so-called Rubik agreement of the kind that Switzer land already has with Britain and Austria, but which the Bundesrat has rejected.

It would mandate Swiss banks withhold tax on individual accounts, without revealing the identity of the owners, thus preserving banking secrecy.

Bernard Droux, a Swiss private banker who heads an association of Geneva banks, said he hoped the German lower house, the Bundestag, would succeed in overcoming objections to adopting a similar deal.

Asked by the Tribune de Genève whether a banking sector under attack from all sides would be forced to adopt a “clean money” strategy, Mr. Droux replied: “We prefer to speak of a strategy of fiscal conformity.”

Whatever you call it, the trend towards closing the loopholes in Switzerland and elsewhere translates into big money for the taxman.

Dick Durbin and Al Franken, Democratic U.S. Senato rs, estimated this year that offshore tax havens and similar tax loopholes cost American taxpayers $100 billion a year.

According to Germany's Der Spiegel, Switzerland is being forced to ponder a future era of clean money in the face of the international crackdown.

The weekly said cracks had been appearing in the Swiss banking fortress since the 1980s.

“The abundance of money that was being hidden in Swiss accounts to avoid paying taxes, on the other hand, was not publicly discussed in Switzerland until recently,” according to Der Spiegel's Mathieu von Rohr.

“Everyone knew that it existed, but it only became an issue when other countries started running out of money during the debt crisis.”

However, he qu oted Jean Ziegler, a veteran Swiss campaigner against the banks, as challenging the perception that anything had changed. “No, the banditry of the banks is in full swing!” Mr. Ziegler declared.