As its European neighbours agree to Switzerland’s tax agreement, the country of France is holding steadfast to its resolve not to accept the unprecedented proposal. Called Project Rubik, the arrangement allows Swiss banks to avoid releasing the names of their account holders if they agree to impose an income tax on the deposited funds. The monies are then transmitted to the countries in which the depositors reside, serving as a means of recouping the lost revenues from previously unpaid taxes.
Faced with staggering losses following the 2008-9 financial crisis, some European countries took the unusual step of strongly pursuing wealthy tax evaders. For years, many of the rich have deposited funds into Swiss bank accounts to avoid paying income tax on their earnings. However, the Swiss Government recently struck a deal with two European Governments, Germany and Britain, to begin taxing the funds in exchange for the privilege of keeping the names of depositors private. It is the latter part of the arrangement that troubles French officials.
French Officials Express Concern
Some influential advisers consider the Rubik plan to be a form of amnesty for tax criminals – something the French Government is opposed to granting. While France is unlikely to agree to the plan for now, Government officials have not ruled it out in the future. The French budget adviser stated that authorities would examine similar Swiss agreements reached with Britain and Germany to see if they are in line with French policies. The main area of contention is whether France could compel Swiss banks to disclose the names of tax evaders for legal purposes.
For the French Government, the matter is a weighty one. Budgetary concerns continue to be an issue in the republic and officials unveiled a large plan in August designed to increase taxes on the wealthiest members of the nation in an effort to raise revenues. Since agreeing to the Rubik project, Germany estimates that its annual revenues will reach €1 billion simply from the taxes it collects on Swiss funds. With such a financial windfall at stake, some experts believe that France cannot afford to hold out on principle for long. Because many residents of France could view the plan as a concession to the wealthy, political advisers believe that French president Nicolas Sarkozy will not even consider agreeing to the Rubik project until after the 2012 election.
The Effect on International Tax Evasion
Regardless of France’s eventual decision, the willingness of Swiss banks to consent to collecting income tax on deposits heralds a turning of the tide regarding tax evasion in general. If account holders are subject to the same or higher income tax rates in Switzerland as they are in their home countries, the appeal of opening up a Swiss account decreases significantly. For now, other countries, most notably some Caribbean islands, still offer tax-free havens for wealthy banking clients. However, if the economic welfare of developed nations continues to decline, the widespread practice of international tax evasion may soon die out.
Related Blog Posts
- The International Battle Towards Banking Transparency
- How Will The Swiss-German Tax Treaty Affect Banking
- UK / Switzerland - New Amnesty Deal This Month?
Download one of our 16 available whitepapers on jurisdictions including Ireland, the UK, Canada, New Zealand, the USA, Cyprus, the Seychelles and Samoa.