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Switzerland signs tax evasion accord with EU

The European Union and Switzerland signed a major accord on Wednesday designed to prevent EU residents from hiding undeclared income in Swiss banks, the European Commission said.

Published: 27 May 2015 12:54 CEST

Switzerland signs tax evasion accord with EU

Photo: European Union External Action

The agreement deals “another blow against tax evaders, and (represents) another leap towards fairer taxation in Europe,” said Pierre Moscovici, the EU commissioner for tax issues.

Moscovici signed the accord, which takes effect in 2018, along with Jacques de Watteville, the Swiss secretary of state for international financial matters, and Latvian Finance Minister Janis Reirs, whose country currently holds the EU presidency.

“The EU led the way on the automatic exchange of information, in the hope that our international partners would follow,” Moscovici said in a statement.

“This agreement is proof of what EU ambition and determination can achieve.”

Under the accord, the EU and Switzerland will automatically exchange information on the bank accounts held by their respective residents beginning in 2018.

However, the Swiss federal government emphasized that this exchange of information would only take place “once the necessary legal basis has been created”.

The government also said the agreement is subject to consultation and ratification in Switzerland.

Interested parties and the country's 26 cantons have until September 17th to comment on the deal with the EU.

After that the federal government will submit a text for the two houses of parliament to consider.

Despite these caveats, the European Commission praised the agreement as a step forward in the fight against tax evasion.

“This new transparency should not only improve member states' ability to track down and tackle tax evaders, but it should also act as a deterrent against hiding income and assets abroad to evade taxes,” the European Commission said.

The EU executive is negotiating similar accords with Andorra, Liechtenstein, Monaco and San Marino that are expected to be signed by the end of the year.

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Why does Switzerland have to comply with European court rulings?

In a landmark ruling handed down on April 9th, the European Court of Human Rights (ECHR) in Strasbourg sided with a group of Swiss pensioners who ‘sued’ the country for not doing enough to mitigate the effects of global warming.

The ECHR ruled that Switzerland had violated Article 8 of the European Convention on Human Rights, which guarantees the “right to respect for private and family life,” and ordered the government to pay the complainants a fine of €80,000 (78,555 francs).

READ ALSO: Who are Switzerland’s victorious climate ‘Elders’?

While environmental groups and a number of political parties welcomed the verdict, questions also arose about why Switzerland, which is not a member of the EU, must comply with the decision handed down by the Council of Europe’s court.

This fact was not lost on the populist, anti-EU Swiss People’s Party (SVP).

One of its MPs, Jean-Luc Addor, questioned not only the court’s judgment, but also the fact that foreign judges have ‘meddled’ in Swiss matters.

“What is the legitimacy of the ECHR to pronounce such a ‘condemnation’?,” he asked.” Is it now going to send the European army to Switzerland?”

So why is Switzerland obligated to conform to the ECHR’s judgment?

In 1974, the country, though neutral, signed the European Convention on Human Rights.

As the European court was established expressly to monitor the parties’ compliance with the provisions enshrined in the Convention, Switzerland must heed its judgements. (The ECHR hears only matters related to human rights. It does not handle any criminal cases).

To ensure that rulings are just and impartial, the ECHR’s judges come from the 46 countries that ratified the Convention.

Switzerland is represented by Andreas Zünd, who has served on the ECHR since January 2021.

How do Swiss cases end up in front of ECHR judges?

Switzerland has different court levels: district, cantonal, and federal.

Complainants first file their cases in the district court. If they are not happy with the verdict, they can appeal it within 30 days, at which point the case will go to the higher judicial level, that is, the cantonal court.

The next step up the judicial ladder is the Federal Supreme court, the highest judicial authority in Switzerland.

Headquartered in Lausanne, it is the final instance on all appeals against decisions of the cantonal courts.

But though this final judgment can’t be appealed in Switzerland, the case — if it relates to rights outlined in the Convention — can be taken to the ECHR.

READ ALSO: What you should know about Switzerland’s courts

What ‘Swiss cases’ have been judged by the European court?

The climate activists’ case is the latest of dozens of rulings involving complaints from Switzerland.

Some of the other successful ones involved a widower whose pension benefits were denied by a Swiss court; a Romanian woman fined for beginning in Geneva; and a Sudanese man who won his appeal against deportation from Switzerland.

You can see all the ECHR rulings for Switzerland (in German or French) for the last 45 years here.

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