Offshore tax fraud has been divided by three in less than ten years. This is the encouraging news that we can read in the report published by the European Tax Observatory, a research laboratory led by French economist Gabriel Zucman. Before 2013, the financial assets of large fortunes housed in tax havens represented 10% of the planet’s GDP. Above all, most of it was not declared, whereas today, experts estimate the share that escapes the vigilance of the tax authorities at 25%. The weight of Switzerland – “historically the epicenter of offshore wealth management”, according to this report – in the management of these offshore assets has decreased considerably since 2008. Proof of the effectiveness of the automatic exchange of information mechanism set up a few years ago, greets the former director of the OECD Center for Tax Policy and Administration, Pascal Saint-Amans.
L’Express: What do we call offshore or extraterritorial tax fraud?
Pascal Saint-Amans: It is a completely illegal approach which consists of hiding your money, cash or not, in a jurisdiction where you are not a resident, a country which will not communicate information to the country where you pay your taxes.
According to the report published Monday October 23, Switzerland was “historically the epicenter of offshore wealth management”. How do you judge the published figures, namely that Switzerland now only represents 20% of offshore assets managed in the world, compared to around 50% before the 2008 crisis?
The report shows that more taxes were paid and the volume of undeclared offshore assets decreased. This is proof that the automatic exchange of information, an instrument to combat tax fraud put in place from 2016 thanks to the efforts of the OECD, works. We can even go back to the aftermath of the financial crisis: the exchange of information on demand began in 2009, thus dealing a blow to banking secrecy. At the same time, the United States implemented the Foreign Account Tax Compliance Act – known as Fatca -, then this mechanism was multi-lateralized (Editor’s note: around a hundred countries are now concerned). All this has led to the end of banking secrecy: Swiss banks now communicate on millions of accounts each year.
What risk did Switzerland risk by not submitting to it?
All countries have ended banking secrecy. Not doing so would have marginalized her. It was a healthy and desirable movement, which allowed the Swiss financial center to become more competitive: instead of resting on the laurels of an annuity economy, to share the cake of fraudulent clients, it was pushed to produce a better service.
Are States’ public finances winning?
The report estimates that more than $140 billion in taxes could have been collected over ten years thanks to the declaration of accounts abroad. There will always be police and thieves, but yesterday the police had neither weapons nor handcuffs, today they are equipped. Yesterday you went to Geneva and you could hide a lot of money without any risk. Today, you have to go to other territories, dubious places, via crooked lawyers, without being sure of getting your money back. It’s more complicated…
This example shows that it is possible, with political will, to collectively tackle an international problem…
It seemed impossible. It was necessary to align the planets: for the major countries to agree – those of the G20 did -, for an event to provoke the decision – the financial crisis of 2008 served as a trigger -, for the general public to be made aware and that an agile organization like the OECD coordinates everything.
What is the next step ?
The United States must now do like the others: the automatic exchange of information is not yet reciprocal. Furthermore, this exchange only concerns bank accounts. An OECD report proposed this summer that it also cover real estate assets, this seems to me to be a relevant project. Finally, information on the beneficial owners, who are hidden behind a chain of ownership, must be available.
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