A specie in danger of extinction

A Summary translated of the article “Secret Bancaire a l’etranger: du neuf”, by Mr. Manoel Dekeyser, a tax lawyer in Brussels, which was published in “La Libre Belgique”, in May 2013.

Last May 14, the Finance ministers of the 27 EU countries gathered to develop a more effective cooperation between the tax authorities of each State. The specific objectives were to provide a common training to tax officials from all EU States regarding the regulations in force, and to ensure that all officials will know how to communicate with their counterparts from other countries and with compatible computer programs.

Another point on the agenda was to review the terms of the Directive on “Savings”. This is the “European law” that automatically organizes information regarding interest on foreign accounts between relevant countries. The Directive also applies to Switzerland and other non-EU countries (Andorra). Some exceptions are made, for Luxembourg and Switzerland: These countries may continue not informing other countries, on the condition of applying a 35% levy on the interests of these accounts.

The meeting on May 14 intended to extend the Directive to other products, such as interests on insurance, and other situations, such as financial income distribution by a trust based in Jersey or in Liechtenstein to a Union resident.

To have a bank account abroad, even in Switzerland and Luxembourg, is still perfectly legal, as well as being the beneficiary of a foundation. But omitting reporting this income to the Tax authorities is now illegal; and it is very risky to “bet” on a lack of communication between countries. In fact, in Switzerland and Luxembourg the banking secrecy is now an endangered species for European residents. Banks in these countries, which in the past promoted the benefits of bank secrecy, now invite their European customers to regularize their situation. They are now insisting more on this issue, knowing that in a few months they will have to inform those who have not regularized their situation that their account will be blocked, or that they will report them to the tax authorities in their country of residence. What a change!

Switzerland has already submitted to the United States the name of thousands of customers from their banks, including the names of banking staff members who had been in contact with them. In the last months of 2012, Switzerland and Luxembourg have agreed to disclose the accounts, as a result of the U.S. pressure and the recent financial scandals, such as the Cypriot disaster which has shown the risks linked to opacity in local banking systems. Holders of undeclared assets will continue to have a worse situation, since some European governments, such as France, stigmatize such holders as “bad citizens”.

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