Swiss tax haven no longer a reality

00:41, Jun 16 2014

Tax officials snooping around secret Swiss bank accounts may be a decade too late, with criminals constantly one step ahead of authorities.

In Australia, Treasury is taking submissions on an updated tax treaty with the Swiss, in an attempt to crack down on the notorious tax haven.

But the new rules do not apply retrospectively, and may have come too late.

New Zealand already has a double tax agreement with Switzerland, which includes information sharing, and the IRD said it "does not stand out more than any other jurisdiction".

Ron Pol, a lawyer and managing director of Team Factors, is doing his PhD research on money laundering, tax evasion, and enforcement.

"These days, the perception of Switzerland no longer matches the reality," he said.

Pol said the Swiss banking's sector's focus had almost entirely transformed from strict secrecy to private banking excellence.

Criminal entrepreneurs have since found new hiding places to stash their filthy lucre.

"For New Zealand, the Cook Islands and Vanuatu are perhaps the most conspicuous as the new Switzerland of the South Pacific," said Pol.

The IRD has an information exchange agreement in the Cook Islands, effective since 2012, and has signed an agreement with Vanuatu, which is not yet in force.

However, regulators best efforts to play hide-and-seek with tax dodgers may be somewhat futile.

"It's extremely difficult, and may be impossible, to know the real extent to which our tax treaties catch the biggest and most sophisticated tax cheats," said Pol.

An IRD spokesperson said the department's work on "abusive offshore arrangements" had gathered over $50 million in additional tax in the five years to June 2013.

However, Pol said those actually caught "may just represent the tip of the iceberg".

"Because the richest companies and individuals can afford the best and most innovative professional advisers, it's almost impossible to tell whether those caught are simply the least sophisticated, with relatively small sums involved," he said.

Pol said it was a "stark reality" that the world of offshore finance was in a constant state of change.

"In a practical sense, this means that whatever most experts say is usually at least several years out of date."

The only people at the cutting edge were the criminals themselves, and a small group of lawyers and accountants either assisting them or "wilfully blind" to their activities.

One ray of hope in the fight against tax evasion and money-laundering is that traditional bilateral agreements are increasingly becoming multi-lateral.

"The prospect of a genuine globally coordinated approach by enforcement agencies could well represent the biggest law enforcement catch-up in history," said Pol.