There have been a few clashes between Switzerland and the US, and to a certain extent, Britain, in recent months over the fact that centuries-old Swiss bank secrecy laws prevent Swiss-based banks from divulging information about their clients to foreign governments that suspect people to be evading taxes. Evasion is not a crime in Swiss law, contrasting with the Anglo-Saxon legal distinction between avoidance (which is broadly ok), and evasion (which isn’t). UBS, the Zurich-listed banking and wealth management giant, is currently embroiled in a case in the US in which the Department of Justice is demanding that the Swiss bank reveals details on up to 52,000 US clients. UBS is, so far, telling the American authorities to sod off. But the affair has cost UBS: the bank has stopped offering offshore banking to US clients and other non-US banks may also follow suit, or start to do so.
Meanwhile, countries such as Germany and the UK have been leaning on Switzerland to crack its secrecy laws, but that is not easy. To do so means that the Swiss electorate would have to approve primary domestic legislation and given that Swiss banks account for about 13 per cent of the country’s GDP, I can hardly see the Swiss voters, unless they are very stupid, throwing away one of their economic ace cards.
And I have defended tax havens several times before, for those who want to see why I take my position in the way I do. In summary: I consider what some countries are doing to be nothing less than an attempt to create a global tax cartel, with jurisdictions such as Switzerland, Singapore or Monaco in the position of non-cartelised competitors. But as we have seen in the case of OPEC in the 1990s, when the oil price was low, cartels crumble eventually. I cannot see countries such as India, China, Russia or Brazil shunning the opportunity to provide low-tax attractions to investors who become fed up at the larceny of their home governments. Even though some taxes – such as sales taxes and land taxes – are quite hard to dodge, I think it is a mark of an open, free world that people can migrate to jurisdictions where the taxes are to their liking, rather than have all their options cut off at source, which the cartelisers would do. Unfortunately, the drive against tax havens is too good an opportunity for the current transnational progressive class to miss.
Of course, the US has a tax haven called Delaware, and the UK has its numerous offshore dependencies, such as the Isle of Man, Jersey, British Virgin Islands and the Caymans. There is an element of cant to the stance taken by the likes of say, Barack Obama on this.
So, drawing all this together from a symbolic point of view, I hope Roger Federer, the debonair Swiss tennis genius, overcomes the boom-boom serving machine, Andy Roddick. No offence Andy – who seems a nice guy – but I want the dude from the mountains to win.
I was idly musing the other day about how the rise of liberalism coincides historically with the opening up of the New World and colonial eras. I wondered in a half-baked kind of a way whether the two are connected, that is, the existence of somewhere else to go acts as a moderator against oppression. Even if one cannot oneself actually go to the Other Place, the mere knowledge that somewhere else people are living without the curtailments of freedom one experiences has a positive effect- “they don’t suffer this law, why do we?” kind of thinking.
We’re now in a stage where there is no New World again- nor colonies (which may have had a similar if smaller effect, as many of the colonial lands, though not “new worlds” were further from centres of power and thus places one could disappear to, kind of thing). The world is become one again. There is increasingly nowhere, again, to go to get away from it all. We see thus the evolution of global hegemony in various matters, such as the imposition of worldwide moral codes, gradually aligning all nations as the same on various issues. This applies to matters of economics and tax too.
The closing down of tax havens is thus part of this process- the “Old World” needs to get rid of alternatives as they are a challenge to the hegemonic moral (in economic terms) system. The current far-left hegemony sees universal crippling taxes- or “tax justice” as it is called- to be essential. The presence of tax havens challenges that, just as the Old World religious hegemony was challenged by the presence of places that one could escape to and worship freely. It thus becomes very important indeed for those who would impose a universal state of tax serfdom to obliterate tax havens.
(You could argue the same regarding communism- one important reason for its downfall was that its unhappy victims could look beyond their borders at “another world” free of communist hegemony).
It may thus be that any sealed system will inevitably tend towards tyranny and in fact the development of freedom requires a continual process of moving on somewhere else and starting again, which provides both freedom for the movers and moderation for those left behind in the old societies.
Unfortunately, there is no indication that new lands are likely to be discovered on Earth, and neither does space offer us much hope as colonisation of it will be under strict hegemonic control due to the financial and technical challenges involved in simply getting there. If freedom requires bolt-holes, we who seek it face an interesting challenge.
Just speculating.
Good point about the new world, Ian B. I Hadn’t thought of that, but it had certainly occurred to me that one difference between the GDR and the UK was that they had somewhere free to go, we don’t.
What intrigues me is whether some country in a location where the west cannot trivially project power might welcome western economic migrants?
Delaware is more of a regulatory haven than a tax haven for corporate governance. There are a number of states that have low or no corporate taxes, but the prime reason most companies have nominal Delaware HQs is that Delaware corporate law is very permissive in corporate governance.
Ian B,
That is precisely why I’m a fan of space travel and the commercial space industry. I admit that it’s rather irrational – I don’t expect to live to see an extraplanetary New World – but it has some effect on me even “if one cannot oneself actually go to the Other Place”.
As one of Heinlein’s characters said: “When a place gets crowded enough to require ID’s, social collapse is not far away. It is time to go elsewhere. The best thing about space travel is that it made it possible to go elsewhere.”
Interesting theory, but I don’t think many of those in Europe were anything but happy to see their unsatisfied neighbors go overseas. Those who left did so for a variety of reasons, most having nothing to do with taxation. The Puritans, after all, left England because they deemed it too IRRELIGIOUS, not heavy-handed. However, your point is well taken in that our current governments seem intent in squeezing us ever harder to their will and Switzerland et al serve as a safety valve for those who manage to escape the system’s “rules”.
The ‘Fed’ won big! Well done! Let’s hope it’s an omen for Switzerland against the powers of Taxness.
The key thing for the Swiss Confederation (really it is sadly a Federation) is to stop the central government taking money from low tax Cantons and giving it to high tax Cantons.
This undermines the very thing that Ian B. and others here have rightly supported – i.e. real differences so that people can “vote with their feet”.
Of course V.I. “Lenin” only wanted people to vote with their feet in the sense of giving up the fight against the Germans (who had paid him – and in gold). But that should not stop us using the words.
I totally agree with you, Johnathan, that tax havens are a mark of a well-developed society. Now, that said, I think this quote bears at least thinking about: “The global infrastructure of international financial secrecy with headquarters in Switzerland has helped bleed trillions of dollars in illicitly generated money out of Africa and the rest of the developing world.” (quoted from http://www.newsy.com/videos/timeout_of_the_titans)
I would still rather have tax havens than not, but we do see some of this corruption as a side effect. Or rather, the vehicle by which the corruption becomes easier.