economics

January 18, 2011

Swiss whistleblower Rudolf Elmer plans to hand over offshore banking secrets of the rich and famous to WikiLeaks

Filed under: Uncategorized — ktetaichinh @ 4:19 pm
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He will disclose the details of ‘massive potential tax evasion’ before he flies home to stand trial over his actions
Rudolf Elmer in Mauritius
Rudolf Elmer in Mauritius: “Well-known pillars of society will hold investment portfolios and may include houses, trading companies, artwork, yachts, jewellery, horses, and so on.” Photograph: Rene Soobaroyen for the Guardian
Ed Vulliamy

The Observer, Sun 16 Jan 2011 00.06 GMT
The offshore bank account details of 2,000 “high net worth individuals” and corporations – detailing massive potential tax evasion – will be handed over to the WikiLeaks organisation in London tomorrow by the most important and boldest whistleblower in Swiss banking history, Rudolf Elmer, two days before he goes on trial in his native Switzerland.
British and American individuals and companies are among the offshore clients whose details will be contained on CDs presented to WikiLeaks at the Frontline Club in London. Those involved include, Elmer tells the Observer, “approximately 40 politicians”.
Elmer, who after his press conference will return to Switzerland from exile in Mauritius to face trial, is a former chief operating officer in the Cayman Islands and employee of the powerful Julius Baer bank, which accuses him of stealing the information.
He is also – at a time when the activities of banks are a matter of public concern – one of a small band of employees and executives seeking to blow the whistle on what they see as unprofessional, immoral and even potentially criminal activity by powerful international financial institutions.
Along with the City of London and Wall Street, Switzerland is a fortress of banking and financial services, but famously secretive and expert in the concealment of wealth from all over the world for tax evasion and other extra-legal purposes.
Elmer says he is releasing the information “in order to educate society”. The list includes “high net worth individuals”, multinational conglomerates and financial institutions – hedge funds”. They are said to be “using secrecy as a screen to hide behind in order to avoid paying tax”. They come from the US, Britain, Germany, Austria and Asia – “from all over”.
Clients include “business people, politicians, people who have made their living in the arts and multinational conglomerates – from both sides of the Atlantic”. Elmer says: “Well-known pillars of society will hold investment portfolios and may include houses, trading companies, artwork, yachts, jewellery, horses, and so on.”
“What I am objecting to is not one particular bank, but a system of structures,” he told the Observer. “I have worked for major banks other than Julius Baer, and the one thing on which I am absolutely clear is that the banks know, and the big boys know, that money is being secreted away for tax-evasion purposes, and other things such as money-laundering – although these cases involve tax evasion.”
Elmer was held in custody for 30 days in 2005, and is charged with breaking Swiss bank secrecy laws, forging documents and sending threatening messages to two officials at Julius Baer.
Elmer says: “I agree with privacy in banking for the person in the street, and legitimate activity, but in these instances privacy is being abused so that big people can get big banking organisations to service them. The normal, hard-working taxpayer is being abused also.
“Once you become part of senior management,” he says, “and gain international experience, as I did, then you are part of the inner circle – and things become much clearer. You are part of the plot. You know what the real products and service are, and why they are so expensive. It should be no surprise that the main product is secrecy … Crimes are committed and lies spread in order to protect this secrecy.”
The names on the CDs will not be made public, just as a much shorter list of 15 clients that Elmer handed to WikiLeaks in 2008 has remained hitherto undisclosed by the organisation headed by Julian Assange, currently on bail over alleged sex offences in Sweden, and under investigation in the US for the dissemination of thousands of state department documents.
Elmer has been hounded by the Swiss authorities and media since electing to become a whistleblower, and his health and career have suffered.
“My understanding is that my client’s attempts to get the banks to act over various complaints he made came to nothing internally,” says Elmer’s lawyer, Jack Blum, one of America’s leading experts in tracking offshore money. “Neither would the Swiss courts act on his complaints. That’s why he went to WikiLeaks.”
That first crop of documents was scrutinised by the Guardian newspaper in 2009, which found “details of numerous trusts in which wealthy people have placed capital. This allows them lawfully to avoid paying tax on profits, because legally it belongs to the trust … The trust itself pays no tax, as a Cayman resident”, although “the trustees can distribute money to the trust’s beneficiaries”.
Now, Blum says, “Elmer is being tried for violating Swiss banking secrecy law even though the data is from the Cayman Islands. This is bold extraterritorial nonsense. Swiss secrecy law should apply to Swiss banks in Switzerland, not a Swiss subsidiary in the Cayman Islands.”
Julius Baer has denied all wrongdoing, and rejects Elmer’s allegations. It has said that Elmer “altered” documents in order to “create a distorted fact pattern”.
The bank issued a statement on Friday saying: “The aim of [Elmer’s] activities was, and is, to discredit Julius Baer as well as clients in the eyes of the public. With this goal in mind, Mr Elmer spread baseless accusations and passed on unlawfully acquired, respectively retained, documents to the media, and later also to WikiLeaks. To back up his campaign, he also used falsified documents.”
The bank also accuses Elmer of threatening colleagues

April 30, 2010

Swiss Seek Tougher Taxes for Bankers Move Comes as Government Pursues Support for a Bill That Would Allow Bern to Settle UBS Case

ZURICH—The Swiss government proposed tougher taxes on bank bonuses in order to shore up parliamentary support for a bill that would allow Bern to meet its obligations in last year’s settlement of a tax case with the U.S. government.

One proposal would compel companies to classify bonuses as a distribution of profits, rather than as personnel expenses. That way, the company would pay taxes on bonuses even if it posted a loss.

Employees receiving the bonuses wouldn’t, however, see any change to the taxes they pay on them, in contrast to the one-time tax on bonuses levied recently in the U.K.

In February, the Swiss government presented an ad hoc law that would lay the legal groundwork for it to hand over to the IRS the names of thousands of U.S. taxpayers who had secret accounts with UBS. Parliament is expected to vote on the bill in June, so that Bern can hand over the names by an August deadline.

That law has been deadlocked in parliament after some Swiss parties demanded the government restrain banker bonuses and strengthen capital rules for UBS and Credit Suisse Group as a solution to the “too big to fail” dilemma.

The debate over bonuses in Switzerland heated up again after UBS paid its top investment bankers huge bonuses for 2009 even as the bank posted a large loss. Soon after, Credit Suisse Chief Executive Brady Dougan cashed in options valued at more than 70 million Swiss francs ($64.4 million).

Switzerland moved more quickly than many countries in requiring companies to subject bonuses to claw-back provisions and to pay out some variable compensation over a number of years, but there is popular pressure to do more. The bonus measures presented Wednesday also include a provision to tax employee stock options at the time they are exercised, instead of when granted. The government didn’t indicate how much money its proposals could raise.

March 18, 2010

Swiss Tax Play Lures Business Cantons Compete With Lower Rates to Land New Headquarters

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By DEBORAH BALL And CASSELL BRYAN-LOW

ZUG, Switzerland—Low taxes have long given Switzerland a strong hand in the battle to lure the operations of big multinational companies. Now, an intramural war is on in which individual Swiss states are competing harder to attract business.

Switzerland’s states, known as cantons, are offering rock-bottom tax rates meant to tempt multinationals into establishing regional headquarters or other operations in their jurisdictions. In doing so, other cantons are trying to take business away from Zug, the Swiss canton that has mastered the game of attracting business to such a high degree that it is beginning to run out of space.

Since the 1960s, Zug has set the pace in persuading multinationals to set up shop, drawing names such as Johnson & Johnson, Burger King Holdings Inc. and Siemens AG.

As Zug now runs short on housing and office space, small cantons nearby are getting in on the act. “Zug made an extremely good decision years ago to have a competitive tax code,” says Georges Meyer, a tax partner at PricewaterhouseCoopers in Zurich. “Now you see a trend of neighboring cantons trying to attract business too.”

Switzerland as a whole is battling with countries such as Ireland, the Netherlands, the U.K. and Germany for a share of multinationals’ business. While Switzerland’s top research universities, efficient public sector and strong intellectual-property protection are attractive, its low tax rates are a huge draw.

Switzerland’s federal corporate tax rate is just 8.5%. When average cantonal and municipal taxes are included, the average corporate tax rate in Switzerland is 21.2%, compared to about 30% for Germany and 25.5% for the Netherlands, according to KPMG.

But in Switzerland, the cantons—which enjoy far more autonomy than do U.S. states—are the main drivers in luring multinationals. Two-thirds of total taxes are levied by the cantons, which also have wide autonomy on social-security contributions, business permits, residency requirements and construction rules. As a result, the cantons take the lead in pitching for companies to come to Switzerland.

“Switzerland is such a popular choice for multinationals that it was high on our list from the start,” says Rich Riley, senior vice president for Europe at Yahoo Inc., which established its European headquarters in the canton of Vaud in late 2008. “We looked at multiple countries and multiple cantons within Switzerland.”

The battle for multinational business comes as companies have become savvier about relocating more activities to regional headquarters to lower their tax burdens. According to consultancy McKinsey & Co., Switzerland attracted more than 180 regional headquarters of large foreign companies between 1998 and 2008. In just the last several years, Kraft Foods Inc., Yahoo and Google Inc. have established European headquarters in Switzerland, and more than 150 U.S. companies now have a presence here.

In 2007, Zug attracted 1,600 new businesses. Last year, as many companies put relocation plans on hold due to cost-cutting, it drew only about half that, but Zug officials say they are satisfied, given the economic slump.

But Zug is a victim of its own success. International schools here are scrambling to expand to accommodate requests for new students, and housing and office space are in short supply.

“If someone says to me, I want to be here within a year with 500 people and I want space near the railway station, I can’t do that,” admits Hans Marti, head of Zug’s economic promotion board.

March 14, 2010

Swiss Reject Law On Animal Rights

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By DEBORAH BALL

ZURICH—Swiss voters overwhelmingly rejected a referendum that would have compelled all cantons to hire lawyers to defend the rights of animals, a setback to animal-rights organizations.

According to preliminary results, 71% of Swiss voters rejected the proposal on Sunday, with the rest voting in favor of the measure.

The referendum was hotly debated in a country that has some of the toughest animal-welfare laws in the world. If it had passed, each of the country’s 26 cantons would have had to hire official animal lawyers—a sort of public defender—to represent pets, farm animals and wildlife in court.

Animal-welfare groups had argued that if people accused of mistreating animals can hire lawyers, the victims of such abuse are also entitled to representation.

The Swiss generally take civil liberties very seriously, whether animal, vegetable or human. Scientists must consider the dignity of plants before embarking on experiments. The country is also known for its right-to-die laws that draw hundreds of foreigners each year to Switzerland to kill themselves.

Yet for all the existing protections, Swiss Animal Protection, the group behind the referendum, says that officials rarely prosecute animal-welfare infractions and that the average fine—just 439 Swiss francs ($409) in 2008—is hardly a deterrent.

“We do have very, very tough laws,” says Mark Rissi, spokesman for the organization. “But in some cantons, judges aren’t applying the law to the fullest.”

Several cantons had just two animal-mistreatment cases in 2008. In a statement released Sunday, Swiss Animal Protection said it was disappointed by the vote, and urged authorities to step up their enforcement of animal-welfare laws.

Instead, the Swiss government had urged voters to reject the referendum, arguing the money should go to extra veterinary resources to uncover animal abuse. Switzerland’s powerful farming lobby also opposed it, arguing farm animals are already closely monitored by state vets.

Since the 1970s, Swiss animals have enjoyed greater protection than their brethren in most countries. In 2008, a 160-page law tightened animal-welfare laws even further, requiring, for instance, that prospective dog owners take a four-hour course before buying a pet.

The run-up to the vote threw the spotlight on Zurich, the only canton that has an official animal lawyer. Antoine Goetschel, the canton’s animal defender, has recently become a media darling in Switzerland thanks to his high-profile defense of the referendum.

Mr. Goetschel, 51 years old, is a vegetarian who has no pets and avoids taking medication because of his opposition to research on lab animals. He became interested in animal rights at 23, when an accident left him unable to speak for 10 days, helping him understand the plight of animals who can’t express themselves. He was a major advocate of a 2003 Swiss law under which animals are to be treated as sentient beings, not personal property.

Last month, Mr. Goetschel went to court in defense of a pike that had fought a fisherman for 10 minutes before surrendering, after animal-welfare groups filed a complaint alleging animal cruelty in the fish’s epic battle.

The case emerged after a local newspaper photo showed the fisherman proudly showing off the 22-pound fish—a scene that, to Mr. Goetschel, was reminiscent of a safari hunter with his foot perched on the head of a dead lion.

“It is this Hemingway thinking,” he says. “Why should this be legal when other animals have to be slaughtered in a humane way?”

Mr. Goetschel lost the pike case last month, but is considering an appeal. Any further court action would come too late for the fish, which has been eaten.

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