Further development of the financial market strategy

Bern, 14.06.2013 - During its meeting today, the Federal Council took due note of an initial report of the group of experts for the further development of the financial market strategy. The Federal Council is prepared to cooperate actively, within the scope of the OECD, on the development of a global standard for the automatic exchange of information to ensure the tax compliance of foreign asset management clients that satisfies the exacting requirements for compliance with the principle of speciality and data protection, guarantees reciprocity and incorporates reliable rules for determining the beneficial owners of entities of all legal forms, including trusts and domiciliary companies.

Switzerland's financial centre has been confronted with a challenging international environment for quite some time now. The framework conditions for the Swiss cross-border asset management business have been changing ever more rapidly in recent years. This concerns primarily the issue of how to ensure foreign clients are tax-compliant. Moreover, market access, particularly to EU markets, could be increasingly jeopardised by various regulatory initiatives. This is why over the past few years Switzerland has been striving, with its financial market strategy, to develop strategies to overcome these specific challenges.

Back in December 2012, it became apparent that the challenges at the international level would become more pronounced. Consequently, the Head of the Federal Department of Finance (FDF) instructed an independent group of experts, led by Professor Aymo Brunetti, to prepare the basis for the further development of the Federal Council's financial market strategy.

There are specific challenges regarding the framework conditions for the cross-border asset management business. The group of experts thus focused on this topic during the first stage. This report analyses the situation, discusses various options and makes recommendations as to how the strategy could be further developed in this area.

Based on its analyses, the group of experts has suggested how the financial market strategy could be further developed in the area of the framework conditions for the international asset management business.

Stance of the Federal Council

The observation made in the Federal Council's report on Switzerland's financial market policy of 19 December 2012, whereby the automatic exchange of information (AEI) in order to combat abuses – as opposed to withholding tax – has its weaknesses, remains true. The automatic exchange of information interferes with the privacy of clients and has flaws with respect to efficiency. The AEI can only partially address the objective of taxing all taxpayers. This does nothing to alter the fact that the OECD is working on a new standard based on the AEI. Consequently, the Federal Council stated at its meeting today that it is prepared to contribute actively, within the scope of the OECD, to the development of a global standard for the automatic exchange of information to ensure tax compliance that satisfies exacting requirements for compliance with the principle of speciality and data protection, guarantees reciprocity and incorporates reliable rules for determining the beneficial owners of entities of all legal forms, including trusts and domiciliary companies.

If such a standard materialises and if it is recognised and introduced by the G20 countries, OECD member countries and all major financial centres worldwide, the Federal Council will propose incorporating it into Swiss law in order to ensure that asset management clients whose tax domicile is abroad are tax-compliant.

Wherever possible, standardised withholding tax agreements with the exchange of information upon request should continue to be concluded with interested states that do not introduce the global standard.

Before the automatic exchange of information is introduced, an agreement is to be reached with each partner state for settling the past as regards existing untaxed assets, and market access is to be secured or improved for Swiss financial institutions.

For future work concerning the further development Switzerland's financial market strategy, the Federal Council will appoint a broad-based group of experts. The FDF has been instructed to submit to the Federal Council a draft mandate and a proposal for the composition of the group of experts.

Address for enquiries

Brigitte Hauser-Süess, GS-FDF Communications
+41 31 322 63 01
brigitte.hauser-sueess@gs-efd.admin.ch