Translated material
Secrets of insurance
In the Swiss "paradise" tax evaders are increasingly less comfortable
Switzerland continues to lose its status as the world's main tax haven. Last year, under US pressure, the country was forced to hand over information about many of UBS's American clients and endure a wave of intense criticism from Germany and other European neighbors. Now the Swiss authorities themselves have taken up the revelations: they suspect that life insurance policies are used to hide unaccounted assets from tax authorities.“We are conducting a random check to determine the need for regulatory action in relation to the risk management of insurance companies and banks,” said Alain Bichsel, a spokesman for the Swiss Financial Markets Commission. “We warn that there are risks of illegal operations.”
Swiss authorities are concerned that special insurance products sold by insurers through units in Luxembourg, Liechtenstein and Singapore are being used to minimize taxes. In particular, the insurance company Swiss Life Holding AG sold about 5 billion Swiss francs, or $4.7 billion, of such policies last year. Another large insurer, Baloise Holding AG, reported a doubling of sales of similar products from its life insurance division in Liechtenstein.
Clients of insurance companies receive premiums from investing their funds through banks. In addition, their investments are classified as non-income-producing, so taxes are minimized or deferred. “An insurer who receives money without verifying its legal origin becomes an accomplice in the crime of tax evasion,” says Walter Frei, an associate at the law firm Bill Isenegger Ackermann AG. “It’s nothing more than old wine in new bottles.”
Swiss Life CEO Bruno Pfister said the country's largest insurer does not want its business to become a tool for tax evaders. "We took the Financial Markets Commission's warning seriously," he said. “We are ready to try to stop such violations.”
Some insurance divisions of Swiss banks already require their foreign clients to provide a written statement about the tax status of their assets.
The commission's statement comes a year after Switzerland agreed to sign a cooperation agreement with international financial regulators to avoid being blacklisted by the Organization for Economic Co-operation and Development (OECD). Last September, the OECD removed Switzerland from its gray list of countries that create tax havens for foreign clients. Previously, the OECD stated that Switzerland follows information exchange standards, but does not put them into practice.
Last June, the President of the Swiss Confederation, Hans-Rudolf Merz, said that Switzerland would strengthen cooperation with other countries in the fight against financial abuse, but would not abolish or soften banking secrecy. As Mr. Merz explained, the Swiss authorities agreed to the introduction of OECD standards to avoid sanctions that could have affected the country's economy, but “this does not concern the core values of the national banking system, from which we will not deviate.”