Even through pressure from foreign countries has forced Switzerland to change its banking-secrecy laws, Swiss private banking is in good shape. Customers value Switzerland for its security, political stability and stable currency, and have continued to pour in new money over the past two years. Tax evasion isn't as important as sometimes supposed; much of the money coming in is from regions with low tax rates, like the Middle East and Asia. With the super-rich likely to see their wealth rise significantly in the coming years, the future is bright for Swiss banks. But, this also hurts the United States by the super rich avoiding taxes by going to Swiss banks. Switzerland plays the role as savior to many US citizens that are rich to avoid paying taxes.
When you’re rich and you don’t want to pay taxes, how about you go to a Swiss Bank near you. The Swiss, have one of the most secretive banking systems around the world. The Cause and effects of banks in Switzerland are positive for the person and the country of Switzerland but negative for other country’s losing people from using their banks they avoid paying taxes. Switzerland was founded in 1291, but was officially considered a country in 1977.They didn’t however become an official United Nations member until 2002. Formally considered a confederation but, similar in structure to a federal republic. Switzerland has one of the most competitive economies in the world according to, https://www.cia.gov/library/publications/the-world-factbook/geos/sz.html. There unemployment rate is among lowest around the world, and the labor force has a lot of highly skilled workers.
In 1934, Switzerland passed the Federal Banking Act, imposing criminal penalties on bankers if they violated their prof...
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... accounts to avoid taxes. The Swiss Federal Council. (2013, May 29). Swiss government peels back bank secrecy rules. CNNMoney. Retrieved March 30, 2014, from http://money.cnn.com/2013/05/29/news/economy/swiss-bank-secrecy
Don't ask, won't tell. (2012, February 11). The Economist. Retrieved March 30, 2014, from http://www.economist.com/node/21547229
Ladd, R. S. (2011, Summer). Swiss miss: the future of banking secrecy laws in light of recent changes in the Swiss system and international attitudes. Transnational Law & Contemporary Problems, 20(2), 539+. Retrieved from http://go.galegroup.com.db19.linccweb.org/ps/i.do?id=GALE%7CA264482429&v=2.1&u=lincclin_pbcc&it=r&p=AONE&sw=w&asid=8079c8c57bf69f6fc300b491ae1cf020
Switzerland. (n.d.). Central Intelligence Agency. Retrieved March 27, 2014, from https://www.cia.gov/library/publications/the-world-factbook/geos/sz.html
The Bernie Madoff Ponzi Scheme is a well-known case and is known as one of the biggest Ponzi scheme’s. In summary the scheme occurred for many reasons that I will some up into 3 points; A lack in competency by regulatory agencies, a lack of regulation, and finally a breach in ethics by Bernie Madoff himself. To explain further, the regulatory agencies like the lawyers and SEC are supposed to prevent schemes such as this one from happening but because they lacked the skills to correctly assess the situation, interpreting the number of tips they had received regarding scheme that had been filed, and to act on those in an efficient manner. One of the tips was made by Harry Markopolos in 2000, of who correctly predicted that Madoff was guilty of fraud. Even after this tip from Markopolos, Madoff was not arrested until 2009. Many family members were also a part of the fraud along with some non-family members such as Frank DiPascali and a team known as the 17th floor team, who helped Madoff carry out his fraud. The idea behind Madoff’s fraud was that he would produce false statements of their investments and when people wanted to pull out their investments, the money wasn’t actually there, which rightfully rose more than a few eyebrows and ultimately led to his arrest.
With the floodgates open, it would be impractical and unsafe to deal with millions of dollars in cash. Under these circumstances, the implementation of a new and separate banking system is necessary, as the existing global financial institution will not be willing to go against international money laundering laws.
After World War II, many nations were left with weak economy and financial instability. Offshore banking became a method to escape national regulation as many national regulators turned a blind eye on deposits in currencies other than their own. The offshore market became popular due to its ability to facilitate new finance innovations and keeping transaction costs low. Eurodollar market for example is a product of this trend. As offshore banking became competitive, the U.S. had to remove limits on national banking and the division between commercial and investment banking. Canada also benefitted from this new trend as it appeared to be very promising for international expansion. However, differing from the United States, Canadian Banking Act was in place to protect domestic banks from new foreign entrants and also effectively manage risk. With the increase of international investment, not only does funding needs were satisfied but new business information systems were also developed due to the increased need for more centralization and a variety of services. New regulations such as The International Banking Act of 1978 was formed to level the playing field between foreign and American banks by requiring mutuality from any country whose banks are seeking permission to enter the United States. The Gramm-Leach-Bliley Act also removed barrier for commercial banks, investment banks,
The phrase “tax haven” usually is associated with the islands of the Caribbean, the Alps of Switzerland, or a developing nation looking to improve its economy by encouraging businesses to come there, a place where the wealthy and multi-national enterprises can hide away their wealth from home states. They are seen as corrupt states, willing to help the already corrupted, but is the full truth? Could it be that tax havens play a key part in the development of not only a state, but the furthering of the international economy as well? The answer, while a complicated one, can be found. Through understanding key definitions and examining the effects that a tax haven can have on a state in which the haven is located and those around it, it will be seen that tax havens do play both a negative and a positive role within the international economy through the means of foreign direct investment.
In previous years the big financial institutions that are “too big to fail” have come to realize that they can “cheat” the system and make big money on it by making poor decisions and knowing that they will be bailed out without having any responsibly for their actions. And when they do it they also escape jail time for such action because of the fear that if a criminal case was filed against any one of the so called “too big to fail” financial institutions it...
Rahn, Richard W. "In Defense of Tax Havens." Wall Street Journal - Eastern Edition 18 Mar. 2009: A15. Academic Search Premier. EBSCO. Web. 1 Oct. 2011.
Binhammer, H. H. & Peter S. Sephton. Money, Banking and the Financial System. Nelson, 2001.
In the world of multinational corporations (MNCs) whose headquarters are based in the United States, the transfer of intellectual property and profits to tax haven countries has become a common and lucrative business practice. Through the use of foreign holding companies, or so-called “Controlled Foreign Corporation (CFC)”, MNCs have been able to generate higher profits while avoiding high U.S. corporate income tax rates on worldwide earnings. Overall, 83 of the 100 largest publicly traded U.S. corporations have subsidiaries in locations listed as tax havens or financial privacy jurisdictions, according to the Government Accountability Office (Hirsch 1). The underlining purpose behind the use of tax haven countries is so that foreign holding
Gregor Meerganz von Medeazza, Economic and Political Weekly, Vol. 41, No. 11, Money, Banking and Finance (Mar. 18-24, 2006), pp. 949-952
This system helps all of these banks provide financial secrecy which is that only you and your banker would legally be allowed to know the financial activity within your account. The financial secrecy, completely different from financial privacy, includes many regulations to maintain this asset of secrecy. For example, many banks would n...
Why all this secrecy? Well, the shocking amount of hidden money in in type of accounts is thought to be no less than $21 trillion. Much of this money is acquire through assets that raise their value and to even farther benefit avoid taxes in what is called tax havens. According to Leona Helmsley, a female that ran a chain of luxurious hotels and famous for once saying and quote “only the little people pay tax”. What do the predominantly wealthy people do to avoid taxes? Owners of offshore accounts found a different path that allowed them to keep their money, the idea of tax havens which is known to be promoted by those experts whose expertise are off the charts but nonetheless are still experts at using the flexibility of the system to their advantages. Offshore banking is a two-sided game in which white collar criminal camou...
Kopel, David , and Stephen D-Andrilli. "What America Can Learn From Switzerland." guncite. 13 Feb. 1990. Web. 12 Jan. 2014.
Another way to discourage dictators is to cut their funds. If Swiss banks pay closer attention to accounts to make sure embezzlement is not taking place, dictators will have no place to keep there millions of dollars in stolen money.
Because of the strong ethical component of this designation, its principles should be adopted by financial professions everywhere in the world, especially in post-2007 financial crisis days, partly started by a lack of moral principles and diligence. While for chocolate-lovers Switzerland is synonymous with a yummy heaven, for me the country, being the banking center of the continental Europe, equals to well-established traditions in the financial industry. If you want to learn something excellent, gain the knowledge from the best. Switzerland is one such place that will give me the opportunity to combine the values of both the highly-regarded education in finance and hands-on analysis of theories, applied in Swiss banking and financial systems.
Tax havens: Super-rich 'hiding' at least $21tn. (n.d.). BBC News. Retrieved April 4, 2014, from http://m.bbc.com/news/business-18944097