Because we live in an upside-down world, Switzerland is being persecuted for being a productive, peaceful nation that has a strong human rights policy with regards to privacy.
More specifically, politicians from high-tax nations resent the fact that investors flock to Switzerland to benefit from good policies, and they are pressuring the Swiss government to weaken that nation’s human rights laws so that governments with bad fiscal systems have an easier time of tracking and taxing flight capital.
I’ve resigned myself to this happening for the simple reason that it is well nigh impossible for a small nation (even one as well-armed as Switzerland) to withstand the coercion when all the world’s big nations are trying to impose one-size-fits-all policies designed to make it easier to raise tax rates and expand the size and power of government.
But, as the Wall Street Journal reports, the Swiss aren’t going down without a fight.
Switzerland’s lower house of Parliament voted 123-63 against the measure, which would have enabled many of the Alpine nation’s banks to sidestep the Swiss banking secrecy laws and start handing information to the U.S. Department of Justice about any past help they may have given to Americans hiding undeclared wealth in Swiss accounts. Earlier Wednesday, the smaller, upper house of Switzerland’s Parliament voted 26-18 in favor of the proposed plan. But in the lower house, lawmakers had raised concerns about the heavy-handedness of the U.S. effort to have them sign off on legislation that might have exposed the country’s banks and bank employees to legal hazards. Lawmakers had also raised concerns about the lack of detail in the plan regarding potential fines for banks that would have opted to participate.
I heartily applaud the lawmakers who rejected the fiscal imperialism of the United States government.
As I stated in my recent BBC interview on tax havens, I believe in sovereignty, and the IRS should have no right to impose bad American tax law on economic activity inside Swiss borders (just as, say, China should have no right to demand that the United States help track down Tiananmen Square protestors that escaped to America).
But I’m not opening champagne just yet, in part because I don’t like the stuff and in part because I fear that this will be a temporary victory.
The Swiss have resisted American demands before, and on more than one occasion, only to eventually back down. And it’s hard to blame them when they’re threatened by odious forms of financial protectionism.
That being said, I’m going to enjoy this moment while it lasts and hope that somehow David can continue to withstand Goliath.
P.S. If you want to understand more about the underlying economic and philosophical implications of this issue, I heartily recommend this New York Times column by Pierre Bessard of Switzerland’s Insitut Liberal.
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The IRS is out of control.
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Great post Dan and as always thanks for a great contribution to the discussion.
Reblogged this on U.S. Persons Abroad – Members of a Unique Tax, Form and Penalty Club and commented:
Wonderful post – note the following comment from:
A good commentary was posted on Linkedin that I recommend you reading…
http://lnkd.in/Smx_Wg
Switzerland: is a “PR blunder” from DoJ compromising the chances of FATCA?
And with this initiative, the DoJ has turned general mood sour. Besides, there are already voices that a popular referendum would start in case the Parliament accepted, which would automatically suspend the law until it goes to the vote… which means the law could not enter into force on 1st of January 2014. And of course, those who are untertaining that idea, are now getting exposure and feel they have acquired legitimacy.
Had the DoJ kept a lower profile, none of this would have happened. Furthermore, when one is holding a gun, they should also be willing to shoot. Is the US Federal Government really willing to down banks with tens of thousands of small accounts, at the risk of creating not only a banking rush, but also a wave of panic and resentment throughout the rest of Europe — not unlike in Cyprus? I believe they did not contemplate for one second that things could ever go that far.
What Switzerland needs to do is buy small parts of large counties that are either uninhabited, or nobody wants ( what Switzerland was before it became wealthy, an undesirable mountainous region) make it into Swiss cantons and invite swiss minded people throughout the world to inhabit it. Heck, if Swiss mentality turned a landlocked, mountainous region devoid of resources into such a wealthy country, the same can sure happen to portions of the Chad savannah.
Heck, maybe Libertarians want to do that. I bet that you can buy sizable portions of Chad for a couple billion dollars, with international sovereignty in the sales contract. The couple of thousand locals that live there can vote whether to join the free libertarian state, or stay with Chad. For once, democracy will work in favor of libertarians. If they renect, you keep asking until you find the country and sparsely populated community that accepts.
Geez, I wonder what the OECD thinks about that.
I have to say that I find Mr. Mitchell’s patriotism admirable. He equates American worldwide prosecution of those who resist the taxing pitchforks to prosecution of Tiennanmen square protesters, yet remains patriotically committed to the US.
I have to admit that I have accumulated a lot of patriotism towards my adoptive country, the USA over the years, for having me allowed personal individual freedom, above what other countries would have offered. But I no longer feel that way. I have seen the movie of where this is all going and I think Euro mandatory collectivism is in store, together with the same decline and oppression Europe is now finally visibly entering. I see an American majority on board with that plan, so excuse me if my acquired patriotism is waning.
But perhaps when one is born in a country, he/she maintains an attachment to said country for life, though I seem to have lost mine for Europe. Perhaps this American patriotism will prolong some the momentum into the American age of the Smorgasbord : Patriotic Americans working hard in a last ditch effort to save their country, while the rest of us, more realists, make the best of a declining situation by enjoying the ever deteriorating government freebies. Welcome to France. Poor Americans, you ain’t seen anything yet. The vicious cycle is merely starting.
With its current economic policies, the USA will soon become a second class and then a third class power. The USA was the same size economically as Argentina a century ago, and pulled away because of Argentina’s disastrous policies.
Switzerland has the right idea, they need to continue resisting interference and oppression for ever. But it is rather small, perhaps the Swiss Federation needs to expand. Invite parts of adjacent countries to join them whenever unhappy with their overbearing and financially incompetent central governments. Become a far more attractive alternative to the European Union…
Brilliant commentary on Linkedin about the PR diaster DOJ has wrought, and possible impacts on FATCA, now that this story is out of the elite business and economy news and on the front pages of the Tabloids.
“But here some unexpected trouble started: as long as the DoJ was discussing with the Swiss executive and the bankers, the matter was well under control; it was mostly discussed in the “upper” news media that deal with finance and economy. When the two houses started devating about this, it stopped being a matter of banks and taxes. Angry discussions started about sovereignty, democratic rights and national pride. To make things short, the lower house trashed the law with a majority of 2/3.
Of course, that does not change the pending action by the DoJ. But in order to work best, a court settlement should be quiet and confidential. The matter is now splattered all over the tabloids, and news websites have been giving a minute-per-minute of the proceedings in parliament, quoting representatives who were asking for details of the deal.
To make things more complicated, several of the banks mentioned are not wealth management banks, but your typically Swiss retail banks where hundred of thousands of people have their savings, pension, house mortgages, and even shares. Plus the the Post Bank. Now, average people really started to get concerned.”
Read more here.. http://lnkd.in/Smx_Wg