South Korea and Switzerland have agreed to exchange information on bank accounts in order to crack down on tax evasion, the Korean Ministry of Strategy and Finance said Monday.
The ministry said the two countries recently agreed on general terms for the plan and will have a formal meeting in July to discuss the details, reports the Korea Times. It said that both parties will ink an accord as soon as they iron out differences on certain points.
The new system will help the government track down funds stashed in confidential Swiss bank accounts by individuals and companies as early as next year.
"Switzerland has been under heavy pressure from the international community. As an OECD member nation, Korea has been making the same requests," said Ko Kwang-hyo, director of the tax analysis division of the ministry on Sunday. Switzerland said in March 2009 that it would follow OECD standards.
Under the agreed terms, the Swiss banks will be required to inform the South Korean government ― on a case by case basis ― about how much is kept in specific bank accounts and when or how it was deposited. But this also means that the Korean government should provide evidence of criminality first, and know the account number before sending the inquiry.
Banking, especially investment banking and asset management for wealthy individuals, is one of Switzerland's key industries. The Internet has made saving illicit money in offshore banks, away from the eyes of tax authorities, easier than ever.
"Swiss bank accounts offer you the strictest privacy, total safety and they are tax-free," declares a Web site named Swiss-bank-accounts.com, which charges about $1,000 for opening an account. "You don't need to be a millionaire to open a Swiss account. You don't even need to come to Switzerland... Enjoy the benefits that were the privilege of kings and movie stars for over 200 years."
Last week, the Swiss government once again refused to automatically provide confidential bank client data to other nations searching for tax offenders, according to the Wall Street Journal. But international pressure has made it give in to some degree.
It will adopt various measures to ``regularise’’ undeclared funds in the banks through international negotiations Finance Minister Hans-Rudolf Merz said last week.
Some Korean politicians, including Lee Hye-hoon, the chairwoman of the taxation subcommittee of the National Assembly, thinks that the current deal does not do enough to catch all tax criminals because of its limitations. Still, it may be effective in scaring off future tax offenders, she said.