Feb 10 2012

The Economist on Swiss banking; the titillation of Konrad Hummler

Posted by: Nick Shaxson in: Thoughts

I’m quoted in The Economist in an article about Swiss banking secrecy and the concessions Switzerland is currently being forced to make, bit by bit. It’s a nice overview, and I’m glad in particular that the author notes this, which quite a few journalists have missed:

Critics also say British hopes that the deal could raise up to £7 billion ($11 billion) are hugely optimistic.

Indeed, and it’s good to see a mention about those slippery creatures, discretionary trusts, and the fact that the EU is in effect striking these deals down, at least in their current form. Read all about that whole issue here.

The article notes recent research by the Tax Justice Network estimating $3.1 trillion in annual global tax evasion costs, and contains a useful table showing the location of the world’s offshore wealth: $2 trillion in each of Switzerland and the UK+its islands; between $750 billion and $1 trillion for each of the following; Caribbean/Panama; Hong Kong/Singapore; the United States; and Luxembourg.

For a great editorial contrasting the U.S.’ tough approach to tax evasion to the lily-livered, cosy deal-making preferred by Britain and Germany, read this from the New York Times. It provides an overview of the indictment of Swiss bank Wegelin (whose controversial and occasionally outrageous former head, Konrad Hummler, I interviewed in St Gallen for Treasure Islands) and the negotiations between Switzerland and the U.S. on getting more data:

“Switzerland would prefer that its banks simply withhold tax on deposits and remit the money to the proper tax authorities without identifying the clients. It made such agreements with Germany and Britain, but those have been harshly criticized in Europe as inadequate and might yet fall apart.

There is no need for the United States to accept this sort of arrangement. If Switzerland stonewalls, the Justice Department can indict banks that benefit from tax evasion and seize their assets in the United States, moves that could put them out of business. At some point, the Swiss government will find that result a lot more costly than handing over information on American tax cheats.”

Spot on. One of the keys to American success in opening up the Swiss fortress is that the U.S. first targeted Swiss banks, rather than going after Switzerland as a country. The former approach divides the Swiss (many Swiss hate all this secrecy stuff and hate their big banks) while going after Switzerland as a country will cause the Swiss to pull together in the face of a shared adversary, and resist whatever it is you are trying to do. This is one reason why the “Rubik” deals the UK and Germany have signed are so weak.

How weak are they? Yesterday I spoke to a Swiss journalist who mentioned an article in November in the Neue Zürcher Zeitung, a conservative German-speaking Swiss newspaper, in which Hummler the banker described the Rubik deals as “voll geil.” Now that’s interesting, because the term ‘voll geil’, it was explained to me, is a slang word which not only means something like ‘totally cool’ but also, the journalist explained, has strong connotations of ‘it gives me a hard-on.’  Which tells you pretty much all you need to know of the balance of interests in these deals.

I’d put the balance like this: Swiss Banks 5, European Taxpayers 0.

Just for the record. The Economist article calls me ‘a former Economist journalist’ – that’s kind of true, and I certainly have written for the magazine, but I don’t want to give the impression that I worked as a staffer: I only contributed (and then only occasionally) as a freelancer to the main Economist magazine. My big Economist contribution has been to its sister publication the Economist Intelligence Unit (EIU,) part of the Economist Group, for which I reckon I wrote well over a million words between 1997 and 2009. So I suppose I am a ‘former Economist journalist’ but I don’t want to give a false impression. I still like The Economist; I disagree with plenty in it, but I could say that about most newspapers too.

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[…] Artikel zum Thema Schweizer Abgeltungssteuer („Rubik-Vorschlag“) finden sich im Economist, indirekt in der New York Times, und dann gibt es diese Schmanckerl von Konrad Hummler, Chef der […]

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