Swiss banks have maintained client confidentiality for more than 300 years. They kept the assets of the rich who were persecuted for their religion and those of people who suffered from war. Even Jews persecuted by the Nazis brought their money to Swiss banks. In 1934, Bern introduced a financial confidentiality policy that penalized banks for leaking client information. Accordingly, despots in developing countries or organized crime hid their loot under the roof of Swiss banks.
Switzerlands impregnable financial confidentiality is being gradually shaken by its reputation as a dirty money paradise. The country in the 1990s allowed the disclosure of a customer`s identity if a court made a ruling on criminal activity. In 2008, the largest Swiss bank UBS provided the account information of an American customer suspected of tax evasion due to pressure from Washington. When the Organization for Economic Cooperation and Development pressured tax havens with sanctions, Bern said it will adjust its bank laws to meet OECD standards.
No provision on information exchange exists in the tax treaty signed between Korea and Switzerland. If the treaty is revised in July as agreed on by the two countries, information will be available early next year. Under the deal, Koreas National Tax Service obtained transaction details of 14 accounts opened by a suspected tax evader in Switzerland, Hong Kong and Singapore. The suspect, who runs a manufacturing company in Seoul with the money he earned in the U.S. a decade ago, had overseas deposits of 500 million U.S. dollars and his balance at the end of last year was 130 million dollars. He had to pay 213.7 billion won (168 million dollars) in taxes including comprehensive income tax after allegedly sending more than 400 billion won (314.7 million dollars) to other countries.
Korean tax officials have not even scratched the surface of overseas tax evasion by nationals. Seoul has little information on foreign accounts and cannot detect sophisticated money laundering. So the tax agency formed a center for cracking down on overseas tax evasion in November last year. After struggling with audits for six months, it collected back taxes of 339.2 billion won (266.6 million dollars) from four people and their company. Tax official Lee Hyeon-dong, who led the audits, said, We will track cases of overseas tax evasion that steal national wealth even if it takes a long time. After information on secret Swiss accounts is made available this year, the tax service could catch even bigger fish.
Editorial Writer Hong Kwon-hee (email@example.com)