What The US Tax Deal With Switzerland Means

Switzerland has been completely bullied by the United States into handing over its sovereignty because of the fact some banks helped US citizens avoid US taxes.

What this tax deal means is that the rumours about the demise of the United States’ foreign policy influence were completely and utterly over-exaggerated. The ability of the US Treasury to completely shutdown your country’s participation in the global financial system (See: Iran Sanctions and the effect on the Iranian economy) means that Tomahawk Cruise Missiles or Drone Strikes are hardly necessary if you go after the money first.

Switzerland is working separately on a tax deal with the European Union, of which it is not a member. And it has agreed to cooperate with the United States on the Foreign Account Tax Compliance Act, a wide-reaching United States initiative to find American assets hidden overseas.

FATCA is a whole other kettle of fish. The compliance costs for US citizens overseas are enough that many banks are closing the accounts of US expat workers!

With all of the furore over the GCSB Bill, there has been very little discussion or analysis on the impact of far higher co-operation amongst revenue collectors and the enormous affect that all of this anti tax evasion propaganda is having on global business.

Everyone has an obligation to pay the taxes they are liable for, but this sort of international bullying is so far off the reservation that worries about the GCSB Bill are completely misplaced.

The “rule of law” is an interesting turn of phrase. With Inland Revenue’s tendency to appeal everything to the Supreme Court and end up with positions that make foreign investors averse to New Zealand’s “tax policy risk”, everyone is forgetting that going after “rich pricks” or “big corporates” has real world costs – lower employment, lower economic growth and higher compliance costs.