John Baird: Canada's freedom agenda - Diplomat Magazine

DEBATE|DIPLOMATICAThis is definitely not the case. The aimof the system is to transfer to partnerstates the taxes due on the past and futureincome of their citizens. However,the taxation is anonymous. Therefore,the protection of privacy and the discreettreatment of bank clients in Switzerlandare still guaranteed.The final withholding tax enablespeople to invest their assets in a safe andpolitically reliable financial centre in theheart of Europe, with legal security anda stable currency, yet at the same time, tosettle their tax obligations to their homecountries anonymously.As an alternative to anonymous taxation,clients have the choice of disclosingtheir bank data to the tax authorities of theUK or Germany. In such cases, they willbe subject to retrospective taxation on anindividual basis. Clients who are unwillingto accept either system will be obligedto close their accounts in Switzerland.Safeguard mechanismAs for new untaxed investments from theUK or Germany entering Switzerland,the system offers a safeguard mechanism,allowing the partner state to launch aspecific number of queries to Switzerlandeach year. As an additional facet ofSwitzerland’s new policy, this type ofexchange of tax information goes furtherthan the OECD standard; it does not setany specific pre-condition for the enquiryto be initiated. In response to such queries,Switzerland will provide the accountnumber of the particular citizen to therelevant partner state (assuming that thisperson holds a Swiss account). The doubletaxation treaty will then provide otheropportunities to the partner state to learnaccount details as well as further relevantinformation.Although Switzerland is ready andwilling to exchange tax information ona treaty basis, as prescribed by the internationalstandard set by the OECD, it isdecidedly not in favour of an automaticexchange of tax information. The automaticexchange of information generatesvast amounts of data which is often unusableand irrelevant. The final withholdingtax system deducts the tax where it is duewithout generating an additional administrativeburden for the partner state toanalyze superfluous data.The system has raised much recognitionand interest so far. Of course, thereare also adversaries to the final withholdingtax, who claim that it can be circumventedby using post-box companies,trusts and other “specialized vehicles.” Acloser look at the treaties, however, revealsthat this is not the case. Swiss banks arebound by strict money-laundering regulations,which oblige them to identify the ultimatebeneficiary behind such structures.The information exchange system providedin the treaties obliges Switzerlandto inform the partner state of the existenceof assets of their citizens in cases wherefunds are held in the name of a “specializedvehicle.”An efficient alternativeThe final withholding tax has had a successfulstart, and it is likely to be the leadingand preferred alternative to theautomatic exchange of information in thefuture. Both the UK and Germany haveindeed acknowledged that the agreed systemwill have a long-term impact that isequivalent to the automatic exchange ofinformation in the area of capital income.While the treaties have been signed withboth Germany and the UK, they will probablygo into force beginning in 2013 (subjectto parliamentary approval in bothpartner countries). DTHE POWEROF PRESENCE2012 RANGE ROVER EVOQUE$46,995STARTING AT$4.9%FINANCING UP TO 72 MTHPLUS $1370 Freight, $600 PDI, $399 Admin,$100 A/C tax, $29.20 Ontario Tire Stewardshipfee and $5 OMVIC feeAVAILABLE IN 2 AND 4 DOORSTOLL FREE NUMBER1-888-456-0274 LANDROVEROTTAWA.CAdiplomat and international canada 15