Suddenly, it’s not so fashionable to have your money in Swiss banks. That’s sooo February 2009. This season, all of the trendy tax evaders are heading somewhere else.
In the wake of increased activity by IRS to track down previously undisclosed assets (joined by the taxing authorities in countries like the UK and Germany), banks in Switzerland are reporting that the assets just aren’t pouring in like they used to. The slowdown started midyear, not coincidentally the time when the US government was exerting pressure on Switzerland to relax its banking secrecy laws.
In support of this trend, two BoA/Merrill Lynch analysts, Derek De Vries and Marc Brehm, have reported that at least one Swiss Banking Group, the Julius Baer Group, “was slightly more cautious than we expected on net new money.” In other words, Baer isn’t drawing the number of new accounts globally that they once were.
And the pendulum swings both ways. If it’s no longer attractive for Americans to do business in Switzerland, then many Swiss have countered that they will pull out of the US. Wegelin & Co., Switzerland’s oldest bank, is recommending that clients “exit from all direct investments in US securities… on the grounds of the threat of inheritance tax coupled with uncertainty as to whether one might not, one way or another, be turned into a US person.” Their gist, and I’m not making this up, is that our state of “moral and fiscal decline” means that it doesn’t make sense to invest in the US anymore.
So it’s time to panic, right? Not at all. Pulling out of investing in US-controlled securities is an interesting recommendation but not a terribly viable one. Like it or not, even in the midst of a recession, the US economy is a huge part of the global scene.
It’s kind of like how you’ll continue to see Paris Hilton in the papers. Even if you don’t like her, she adds value to an event – even if it’s just added publicity.
In other words, they don’t have to like us but I think the Swiss will still invite us to their parties.