Federal Council rejects popular initiative

The Privacy protection against unlawful state intervention is an important principle in a constitutional state. It already enjoys constitutional status in Switzerland today and is given concrete form in legislation. In tax law, there are necessary limits to the protection of privacy. For example, in order for income and wealth taxes to be levied correctly, taxpayers must disclose their income and wealth to the tax authorities. However, the protection of privacy is preserved, since the authorities are bound by tax secrecy and may not disclose the information received outside of exceptions regulated by law.

Effects of the initiative

The initiative does not intend to change the taxpayer's duty to cooperate. Taxpayers are still obliged to provide the tax authorities with all information required to determine the tax factors. However, the initiative requires that third parties should only be entitled to provide information to the authorities under very restrictive conditions. Such information about taxpayers should now only be possible in the context of criminal proceedings and only in those cases in which a court confirms the suspicion of a serious tax offense.

As a result, tax authorities would only be able to obtain information from third parties in rare exceptional cases. If taxpayers violate their duties to cooperate, it would no longer be possible for the authority to obtain information from the employer or an insurance company. The correct collection of taxes would no longer be ensured.

Already today, the cantonal tax authorities have no possibility to obtain information from banks. The initiative would not bring about any change in this regard. In contrast, banks are currently obliged to provide information in criminal proceedings relating to indirect taxes and in the context of special tax investigations by the Federal Tax Administration (FTA), which deal with serious tax offences. If the initiative were to be accepted, this would result in a significant restriction of the existing means of investigation.

The initiative relates exclusively to domestic taxes. It would therefore have no impact on tax administrative assistance and the exchange of information in favor of foreign partner states. Depending on the interpretation, however, Switzerland's ability to obtain corresponding information from abroad could be restricted.

The consequences for combating money laundering and terrorist financing in the financial sector depend on the interpretation of the initiative. If the limited obligations of third parties to provide information also apply to the Anti-Money Laundering Act, the initiative would have significant adverse effects in this area. Financial intermediaries would then be prohibited from submitting reports regarding qualified tax offenses to the Money Laundering Reporting Office Switzerland (MROS) with respect to persons resident or domiciled in Switzerland. Reports of non-tax offenses, but which are related to taxes, could also be affected. In particular, this would call into question the adaptations to the 2012 revised recommendations of the Groupe d'action financière (FATF) adopted by Parliament on December 12, 2014. Furthermore, the exchange of information between Swiss and foreign reporting offices for the purpose of combating money laundering and terrorist financing could be impaired. All of this would have a negative impact on Switzerland's compliance with international standards.

Sufficient protection of privacy

For these reasons, the Federal Council opposes the popular initiative. The privacy of tax-compliant individuals is sufficiently protected thanks to tax secrecy and would therefore not be affected by the initiative. However, if a person refuses to cooperate and thus violates the relationship of trust between the citizen and the state, the tax authorities should still be able to obtain information from third parties. Against this background, the Federal Council also sees no reason for a direct or indirect counter-proposal.

Initiative concern

The federal popular initiative "Yes to the protection of privacy" was submitted on September 25, 2014 and came into being with 117,531 valid signatures. According to the initiators, the initiative is intended to anchor the protection of financial privacy in particular in the constitution. According to the initiators, financial privacy is an important component of the relationship of trust between the state and the citizen. Due to recent political and legislative developments, this fundamental right contained in the Federal Constitution must be specified and supplemented.

Press release Admin.ch