The Swiss banking secrecy is subject to much discussion at the moment and Switzerland is under strong pressure to change the country’s banking secrecy laws. It is easy to say that Switzerland immediately must change their banking secrecy laws since it only protect criminals around the world. But why does Switzerland have such strong bank secrecy and why was the laws in this area once created? There is almost always a good reason (well, a reason anyway) behind laws and of course the Swiss banking secrecy laws are no exception.
Switzerland itself explains that “According to the Swiss conception of democracy, citizens are not here for the State, but rather the State is here for the citizens. Citizens are not primarily taxpayers, but rather free human beings who have a right to privacy. Banking secrecy should be seen in this context. Banking secrecy protects the financial privacy of citizens from unauthorized access by other private persons or also by the State. Banking secrecy does not protect criminals, however: banking secrecy is subject to various legally defined limits.”
One could always argue about how strong secrecy laws should be but the philosophy that the citizens are not here for the State, but rather the State is here for the citizens is something that most of us will be prepared to accept even though in the practical life you have the impression that the situation is quite the opposite.
Switzerland has published a more detailed account for its bank secrecy and the country’s obligations in an international context with exchange of tax information etc. It is definitely worthwhile reading for anyone who would like to get more knowledge in the subject and the complete text can be obtained by clicking the link down below.
The term offshore company is somewhat ambiguous. It can mean either a company incorporated outside of the jurisdiction of its primary operation or any company that is incorporated in a tax haven or offshore financial center.
Most often the definition of ‘offshore company’ is a mix between the two above and an offshore company is defined as a company that:
a) is incorporated in a jurisdiction where the owner not is domiciled at the time of incorporation,
b) do not perform any business in the jurisdiction where it is incorporated,
c) is incorporated in a jurisdiction with low taxes, and
d) is incorporated in a jurisdiction with strong secrecy laws.
Monaco has since long established itself as a home for the riches. One of the means to achieve this status has been a tax system with almost no taxes in combination with strict secrecy laws. Actually only French nationals pay income tax in Monaco and these taxes are paid directly to the French Government. Other nationals pay no income tax at all in Monaco.
However, like many other low-tax jurisdictions, Monaco has been put under international pressure and last year adopted international standards for banking openness and information-sharing. This adoption includes a commitment from Monaco to abide by the standards outlined under Article 26 of the organization’s Model Tax Convention, which requires the tax authorities to exchange information on request if there is probable cause to suspect tax evasion.
The following video shows not only the extraordinary life that you can enjoy in Monaco but does also highlight some of the issues that Monaco faces following the changes that are taking place on an international level regarding the openness and information-sharing with offshore and low-tax jurisdictions.
