Whistleblower Disclosures Lead To Switzerland Joining The OECD Convention Permitting The Exchange Of Tax Information Between Countries
On October 15, 2013, Switzerland became the 58th country to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Multilateral Tax Convention) during a ceremony at the Organization for Economic Cooperation and Development (OECD). This Convention allows for the exchange of tax information upon request and joins all major countries worldwide in addressing the issue of tax evasion.
The approval of this Convention comes in the wake of disclosures made by former UBS employee Bradley Birkenfeld. Birkenfeld, who blew the whistle on illegal Swiss banking and obtained a $104 million dollar reward from the U.S. Internal Revenue Service. As a direct result of Mr. Birkenfeld’s disclosures, UBS paid the U.S. Government a fine of $780 million to avoid criminal prosecution and the bank turned over account information regarding more than 4,500 American clients.
Furthermore, according to a study by the General Accounting Office, the impacts of Birkenfeld’s disclosures have been immense. Fearing detection, over 39,000 U.S. taxpayers turned themselves into federal authorities under an amnesty program. To date, over $5.5 billion in new revenues have been collected.
According to Stephen M. Kohn, the Executive Director of the National Whistleblower Center, and an attorney for Mr. Birkenfeld: “One whistleblower changed the world of Swiss banking. Twice Mr. Birkenfeld rocked the Swiss banking industry, which was the largest and most sophisticated secret banking system in the world. First, when he stepped forward and turned in the evidence of the illegal accounts. Second, when the U.S. government rewarded him by granting the largest individual whistleblower reward in history.”
“Fearing that other bankers would follow in Mr. Birkenfeld’s footsteps, the Swiss government and its banking system have agreed to a radical restructuring that will prevent Americans from secreting their assets in Swiss banks and undermining the U.S. tax base,” Kohn said.
The Multilateral Tax Convention signed by Switzerland and 57 other countries, provides for all forms of mutual assistance: exchange on request, spontaneous, tax examinations abroad, simultaneous tax examinations and assistance in tax collection, while protecting taxpayers’ rights. It provides the option to undertake automatic exchange while requiring an agreement between the Parties interested in this form of assistance. With the support of the G20, automatic exchange is becoming the new international standard, and Switzerland adheres to an instrument that will allow it, in due time, to join the jurisdictions that will decide to exchange financial information automatically.
OECD Secretary-General Angel Gurria welcomed Switzerland’s adherence to the Convention, which he said, “sends a clear and strong signal that Switzerland is part of the community of states which consider international tax co-operation as a necessity. This signature is an important step for Switzerland to resolve the issues identified in its Peer Review by the Global Forum on Transparency and Exchange of Information on June 2011.”
Learn more about how Bradley Birkenfeld’s heroic whistleblowing that cracked the vault of bank secrecy.