Switzerland agrees to give up its secret bank details
One of the world's biggest tax havens, Switzerland, has agreed on request to hand over the secret bank account details of Australians, in a hit to money laundering and international tax fraud.
The revised tax treaty, signed by Assistant Treasurer David Bradbury on Tuesday, will contain information exchange rules to allow for data held by Swiss banks and financial institutions to be shared with Australian tax authorities with few questions asked. It is the first time the government has changed the treaty since it was established over three decades ago.
The revised treaty comes at a time when tax authorities in Britain, the US and Australia are grappling with a huge cache of secret offshore data leaked to the International Consortium of Investigative Journalists earlier in the year. The data revealed the activities of dozens of accountants, lawyers and financial advisers who have assisted in the establishment of companies in tax havens.
While tax experts warn the revised treaty could have gone further to include automatic information exchange - the new standard set by the Organisation for Economic Co-operation and Development - they say it is still a landmark step in countering Switzerland's long-entrenched bank secrecy rules. Those exposed will be rich Australians as well as criminals, they say.
"What this is going to unlock is tax evasion - or secret bank accounts - that haven't been disclosed to the ATO (Australian Tax Office)," said Michael Kobetsky, associate professor at the University of Melbourne. "This might be people who have set up an account maybe 20 years ago thinking they will never have to disclose it. Now they will be exposed."
Mr Bradbury said the treaty was important given the push for more tax transparency globally.
"In the last decade, more has occurred in tax transparency than in any other period," he said. "That is the case internationally as well as here."
The revised tax treaty also addresses multinational tax avoidance though anti-abuse clauses. These attempt to counter base erosion and profit shifting by denying companies the ability to set up shell companies with the sole purpose of taking advantage of the treaty.
Many large companies based in Switzerland invest in Australia, such as Anglo-Swiss mining giant Glencore Xstrata. According to the Treasury, Switzerland was Australia's fifth largest source of foreign direct investment, with $23 billion spent in 2011. Australian foreign direct investment in Switzerland amounted to $6.2 billion for the period.
The Swiss government said on Tuesday that despite being known for its bank secrecy laws, it was committed to greater transparency.
"The paradigm has changed," Swiss ambassador Marcel Stutz said. "If you want to have good investment, you want to be sure people play by the rules."
Mr Bradbury would not say how much revenue he hoped to bring in from the new treaty.
"We haven't done this on the basis that we expect to raise an extra 'x' million dollars," he said. "We do think it will be an important contribution."