Holman W. Jenkins, Jr.: Does the World Still Need the Swiss?
[Holman W. Jenkins, Jr. is a journalist, editorial writer and member of the Wall Street Journal Editorial Board.]
Harry Lime gave a shout-out to the cuckoo clock but he might have mentioned Switzerland’s other contribution to global culture, the secret numbered bank account, fortified by a 1934 law that made it a crime to betray an account holder.
We do mean "contribution." By accident or design, customers at the time included German Jews hiding their money from Nazi predators. Of course the Swiss didn't ask questions. Customers included more than a few Nazi predators too. That's the paradoxical virtue of Swiss banking secrecy, which has protected both greedy tax scofflaws and those merely trying to save something for the next generation when politicians are burning down the economy back home.
Last week's settlement between the IRS, the Swiss government and the giant bank UBS blows another hole in what had been a sacrosanct wall of discretion. The Swiss, after a bit of due process, will hand over names of 4,450 U.S. citizens whose secret accounts may hold as much as $18 billion in assets.
This follows a piecemeal chipping away in recent decades as the Swiss agreed to recognize the crimes of money laundering and insider trading, but the ultimate bulwark was always said to be Swiss refusal to join the world in treating tax evasion as a felony. Now that bulwark has begun to fray. Swiss secrecy in the future may be a privilege only for those with nothing to hide.
A decade ago, this column took a more sanguine view of this gradual erosion than we might today. Then, we noted that the world was moving toward democracy and rule of law. Governments were dismantling senseless regulations and tax rates so high they inhibited growth and collected less revenue than government would have collected with lower rates.
The world was becoming more like the Swiss, we said at the time—i.e., sane.
A similar judgment does not leap from our lip today, not after two years so reminiscent of the omen-filled early 1930s. We aren't predicting a feedback loop of crisis and chaos on a global scale, as the world suffered then. Such things are not impossible but neither are they likely, given humanity's craving for order. Still, today's IRS war on Swiss banking secrecy does not occur in a vacuum.
In 1934, Swiss politicians were legislating in response to specific events abroad: a Nazi law that made it a death-penalty crime to hold assets outside the country; a scandal stoked by French socialist politicians over Swiss bank accounts held by prominent citizens. The Swiss looked out and saw a world gone mad: bank failures, depression, militarism, fascism, communism. The new law was meant to buttress the world's confidence in the privacy and security of a Swiss bank account...
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Harry Lime gave a shout-out to the cuckoo clock but he might have mentioned Switzerland’s other contribution to global culture, the secret numbered bank account, fortified by a 1934 law that made it a crime to betray an account holder.
We do mean "contribution." By accident or design, customers at the time included German Jews hiding their money from Nazi predators. Of course the Swiss didn't ask questions. Customers included more than a few Nazi predators too. That's the paradoxical virtue of Swiss banking secrecy, which has protected both greedy tax scofflaws and those merely trying to save something for the next generation when politicians are burning down the economy back home.
Last week's settlement between the IRS, the Swiss government and the giant bank UBS blows another hole in what had been a sacrosanct wall of discretion. The Swiss, after a bit of due process, will hand over names of 4,450 U.S. citizens whose secret accounts may hold as much as $18 billion in assets.
This follows a piecemeal chipping away in recent decades as the Swiss agreed to recognize the crimes of money laundering and insider trading, but the ultimate bulwark was always said to be Swiss refusal to join the world in treating tax evasion as a felony. Now that bulwark has begun to fray. Swiss secrecy in the future may be a privilege only for those with nothing to hide.
A decade ago, this column took a more sanguine view of this gradual erosion than we might today. Then, we noted that the world was moving toward democracy and rule of law. Governments were dismantling senseless regulations and tax rates so high they inhibited growth and collected less revenue than government would have collected with lower rates.
The world was becoming more like the Swiss, we said at the time—i.e., sane.
A similar judgment does not leap from our lip today, not after two years so reminiscent of the omen-filled early 1930s. We aren't predicting a feedback loop of crisis and chaos on a global scale, as the world suffered then. Such things are not impossible but neither are they likely, given humanity's craving for order. Still, today's IRS war on Swiss banking secrecy does not occur in a vacuum.
In 1934, Swiss politicians were legislating in response to specific events abroad: a Nazi law that made it a death-penalty crime to hold assets outside the country; a scandal stoked by French socialist politicians over Swiss bank accounts held by prominent citizens. The Swiss looked out and saw a world gone mad: bank failures, depression, militarism, fascism, communism. The new law was meant to buttress the world's confidence in the privacy and security of a Swiss bank account...