Greek-Swiss Treaty Athens Closes in on Wealthy Tax Evaders

For years, Greece has been pledging to redouble its efforts against tax evasion. Only now, however, is Athens finally set to sign a tax deal with Switzerland in the hopes of generating billions in revenue. Critics, though, say the agreement won't make much of a difference.

Greece is set to sign a new tax treaty with Switzerland in an effort to crack down on tax evaders.

Greece is set to sign a new tax treaty with Switzerland in an effort to crack down on tax evaders.

The negotiations have been going for years. And if all goes well, Greece and Switzerland will finally finalize a tax treaty this September which could bring billions of euros back to Athens. Modelled on Switzerland's agreements with Germany, Great Britain and Austria, the deal is aimed at the billions of euros Athens estimates that wealthy Greeks have parked in the Alpine country to avoid taxes back home.

After months of delays, the three party coalition led by Greek Prime Minister Antonis Samaras now wants to implement the deal as quickly as possible in hopes that they'll be able to find billions for Athens' coffers. But there's also another reason for the rush: Samaras needs to show he is serious about reform. Greece desperately needs a win in its fight against rampant tax evasion.

For one, Samaras needs to demonstrate resolve on the issue to his country's international creditors. Indeed, the issue was a topic when the Greek prime minister paid a visit to Chancellor Angela Merkel in Berlin last Friday. For another, the Greek government is eager to show honest taxpayers that their dishonest compatriots can't get off so easy.

The first discussions regarding a bilateral tax treaty between Greece and Switzerland took place two years ago. Last year, there were stories in the Greek press that the deal was imminent. Since then, however, not much has happened; Greeks holding Swiss bank accounts have had little to fear.

The hold up, if one believes Philippos Sachinidis, was for political reasons. Sachinidis is currently a parliamentarian with the socialist PASOK party, but this spring, he spent a few weeks as finance minister under then-Prime Minister Lucas Papademos. His term coincided with the signing of Swiss tax deals with Germany and Great Britain.

"From then on we could have signed the agreement with the Swiss government at any time," Sachinidis told SPIEGEL ONLINE. "However both me and my successor were of the opinion that our mandate was limited and that only the new Greek government could finalize and sign the deal."

Dimitrios Papadimoulis, an expert on the issue from the opposition Coalition of the Radical Left (Syriza), sees it differently. He accuses the parties then in leadership, the center right New Democracy party and PASOK, of inaction. "The agreement with Switzerland could have been signed at anytime since 2005." Papadimoulis sees only one possible explanation for the delay. "The agreement is moving at a snail's pace because Greek politicians who are supported by powerful businessmen would be affected," he says. Sachinidis, however, insists that "there was no political pressure to stop the treaty."

Tricky Calculations

Still, even if the treaty is signed in September as expected, it is unclear just how much Greek coffers will benefit. Estimating how much Greeks have stashed in Switzerland is tricky. According to the most recent figures released by the Greek central bank, the amount held in private savings accounts in Greece has declined by 35 percent since hitting its peak of almost €200 billion in June 2009. A large portion of this €70 billion likely found its way abroad. Both Swiss and German banks showed a keen interest in providing the money with a new home.

Not all of the cash fleeing Greece is untaxed, however. Many honest Greeks were driven to park their money abroad out of fear that the country could leave the euro zone.

With its bank secrecy laws, however, Switzerland became an especially attractive destination for wealthy depositors, especially those who were looking to safely stash their untaxed money. "I have it on reliable information that after the crisis began, Swiss banks even opened extra counters for their Greek clients," said Papadimoulis of Syriza.

Temporary Relief

Switzerland for its part claims to have no idea how much Greeks have stored in the country's banks. "The Swiss government does not keep statistics on the sum of Greek deposits in Switzerland," a spokesman for the Swiss Finance Ministry told SPIEGEL ONLINE.

The Swiss finance broker Helvea provides the most exact estimate, calculating that Greeks have parked about €20 billion in Switzerland of which 99 percent has not been reported to Greek tax authorities. The estimate is far lower than others, but even still it could mean a windfall of tax revenue for Athens.

The draft deal allows for withholding tax of between 20 to 30 percent of non-declared assets abroad, or about the same level as the German agreement. Taxing the €20 billion at that level wouldn't completely rehabilitate the Greek budget, but it would at least provide temporary relief.

Legalizing Ill Gotten Gains

The public debate about the tax deal between Greece and Switzerland sounds very similar to the German discussion about its own Swiss tax treaty earlier this year. In Greece, just as in Germany, critics fear that the agreement is too lax and actually gives tax evaders the chance to cheaply legalize their ill gotten gains.

John Christensen, who heads the Tax Justice Network, a group which promotes international tax transparency, is one of the most vocal critics of the tax deal. "It would be a terrible deal for Greece," explains Christensen. In an analysis of Swiss tax agreements with Germany, Austria and Great Britain his organization found 15 different loopholes that tax dodgers could use to evade requirements with bank help.

Because these agreements basically guarantee bank secrecy in Switzerland, says Christensen, wealthy tax evaders could, for example, funnel their money to branches in Singapore or Hong Kong by setting up anonymous foundations.

With so many loopholes, he continues, the dream of cleaning up Athens' budget by going after tax evaders will remain just that: a dream.


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