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TAX EVASION

Attempted tax dodge ends up costing Swedish firms dearly

Several hundred Swedish companies will have to pay back a total of half a billion kronor ($70 million) in back taxes after having moved funds to Cyprus in order to evade taxes, reported Swedish Television (SVT).

Published: 26 December 2009 09:16 CET

At the suggestion of unscrupulous tax advisors, many Swedish entrepreneurs have been lured into transferring their profits to a holding company in Cyprus and then borrowing an equivalent amount back home in Sweden.

During a raid of the consulting office by the Swedish Tax Authority (Skatteverket), authorities discovered information that revealed that more than 400 individuals had used the same scheme.

Since it has come to light that their companies in Cyprus were just a smokescreen, the companies involved have been slapped with back taxes.

“Most of them are flimsy set ups without any real business behind them. In those cases, we suspect that it might be a question of tax evasion,” Jan-Erik Bäckman, head of analysis at Skatteverket, told SVT.

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Switzerland’s banks remain among the world’s most secretive

Switzerland remains one of the world's least transparent nations. Photo AFP

Switzerland is in the third place in the 2020 Financial Secrecy Index released by the non-governmental organisation (NGO) Tax Justice Network (TJN), which rates 133 nations based on their financial transparency.

Two other European countries, Luxembourg and the Netherlands, are also ranked among the top 10 least transparent nations on the TJN’s list.

Despite being in the third place, Switzerland ranks better this year than it did in the previous edition of the Index, which is released every two years — it slipped from the first to third place. The Cayman Islands and the United States took the first and second spots, respectively.

Switzerland reduced its risk of being an offshore haven for tax cheats by 12 percent, “finally improving enough to move off the top of the index”, TJN said.

READ MORE: Switzerland's strangest taxes – and what happens if you don't pay them

This improvement is mainly due to Switzerland extending its international network for the automatic exchange of customer information to more than 100 countries.

Also, in a referendum held last year, Swiss voters accepted the Federal Act on Tax Reform and AVS Financing (TRAF). This legislation introduced major changes in the Swiss tax system by ending some preferential tax schemes and replacing them with new regulations which are in line with international standards.

This tax reform prompted the European Union to change Switzerland's status from ‘tax haven' to one which is EU-compliant, removing strict controls on transactions within the EU.

So why, despite all the reforms, does Switzerland still rank among the world’s least transparent nations?

According to a Swiss NGO Alliance Sud, wealthy people from poor countries can still hide their money here from the tax authorities of their home nations.

Alliance Sud noted that despite the progress made in the past years by Swiss financial institutions, “the fight against tax evasion remains insufficient”.

Switzerland is the world’s biggest centre for managing offshore wealth, with a quarter of global assets invested here.

For years, it has been placed on various lists of tax havens where wealthy foreigners could park their money. Faced with widespread criticism for this practice, Switzerland passed an anti-money laundering law in 1997 and introduced strict regulations against tax evasion.

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