Switzerland has a long-standing reputation for financial secrecy, but it is not the first country when it comes to a lack of financial transparency.
According to a biennial report released today by the Tax Justice Network, the country that tops the rankings for being the most complicit in helping individuals hide their wealth is the United States.
The index ranks each country’s legal and financial systems with a privacy score of zero to 100, where zero means full transparency and 100 means full secrecy. The United States scored 67 on the scale, down from 63 in the previous report.
With this result, “the supply of financial secrecy in the United States is now nearly double that of Switzerland,” fueling more financial secrecy around the world than Switzerland, Cayman Islands and Bermuda combined, according to the report.
Nonetheless, overall progress has been made, with the overall index falling 2% in the current survey, following a 7% drop in 2020.
“The reduction means less room for the kind of practices that have come under scrutiny as countries try to impose sanctions on Russian oligarchs – such as bank secrecy, anonymous ownership of real estate and the use of trusts to move wealth beyond the reach of the law,” according to the network.
One of the most harmful practices of the United States is its refusal to exchange information with the tax authorities of other countries, although more than 100 nations automatically share this information.
In 2020, the OECD said the exchange of such information has brought transparency to more than $11 trillion in previously hidden assets and wealth.
While the Foreign Account Tax Compliance Act (FATCA) and related intergovernmental agreements require all countries to share information about U.S. taxpayers’ accounts overseas, “hypocritically” the United States shares “little or no information back with countries on their residents,” the report said.
If the United States exchanged such information, it would reduce its financial secrecy by 40% and fall below Switzerland and Singapore in 3rd place.
President Joe Biden has urged the US Congress to pursue a more reciprocal automatic exchange of information on digital assets as part of his budget request for next year. The measures did not progress when President Barack Obama called for the same, so it remains to be seen whether Biden will succeed.
US-Swiss tax dispute
In 2013, the United States and Switzerland signed an agreement to resolve a tax dispute related to Swiss banks that allegedly helped Americans evade taxes.
The dispute began in 2009 when UBS obtained a deferred prosecution agreement from the United States. From then until 2012, Swiss banks had to find a balance between cooperating with US authorities and not violating Swiss privacy laws.
In the end, the Swiss banks paid more than a billion dollars in fines.
G7 Finance Ministers
The report comes on the eve of the meeting of G7 finance ministers in Germany from May 18-20.
The report says five of the G7 countries alone – the US, UK, Japan, Germany and Italy – are “responsible for more than halving global progress against secrecy financial,” according to the report.
“The G7 must make clear where it stands in the fight against financial secrecy by committing to a global asset registry,” said Alex Cobhamthe executive director of the Tax Justice Network.
Singapore less transparent
According to the report, Singapore has increased financial secrecy by around 14% since the last ranking, rising to third place and entering the top three for the first time, coinciding with a 9% increase in financial services that the city -State provides non-residents since 2020.
1. United States
4. Hong Kong
9. British Virgin Islands