The controversy over revelations about HSBC’s Swiss private banking arm continues to reverberate. For years, the “confidentiality” offered by banks in Switzerland and other havens was availed of, inter alia, by wealthy people hiding money from tax authorities. International pressure is ever-so-slowly eroding this cult of secrecy and increasing the sharing of information. The “Swiss Leaks” revelations show just how essential this is and underline the enormous extent of the problem being tackled.
Despite what we have all known – or suspected – about Swiss banks, what went on at HSBC is nonetheless extraordinary. The amount of money involved in the accounts under investigation, $100 billion, is not far off half of Ireland’s annual GDP. More than 100,000 people were involved from 200 countries. The evidence shows that as well as tax evasion, money flowing through HSBC funded arms dealers and drug traffickers.
Irish accounts were among those discovered in the HSBC information, which was initially shared by France with other governments and their tax authorities in 2010. The information was reported this week by journalists from 45 countries – including, in Ireland, by this newspaper – operating under the International Consortium of Investigative Journalists (ICIJ).
In Ireland, settlements were made in 20 cases, involving €4.5 million in payments. Three account holders were prosecuted, though the Revenue Commissioners here decided not to pursue HSBC itself. Debate has also taken off internationally about whether enough was done by tax authorities, some of which are now considering further investigation. In particular the lack of criminal sanction for the vast bulk of tax evaders and those who facilitate them is again being questioned in many jurisdictions. In cases of serious evasion it should be the norm, not the exception.
The controversy also highlights the particularly international nature of 21st century tax evasion. Rich people evading tax have used offshore havens for many years – the Isle of Man was a particular favourite for Irish people over many years, as well, of course, as the Cayman Islands, home of the Ansbacher accounts.
If the problem is international, then the solution must be, too. There has been significant moves, for example at EU level, to coordinate the sharing of information gleaned from bank accounts. This is making a difference and this information sharing will develop further in the years ahead, albeit slowly. But estimates still suggest that tens of billions of euro are lost to tax authorities every year due to cash hidden in offshore accounts. Coordinated international action against tax evasion can make a difference, if the will is there. After the Swiss Leaks controversy dies down, the danger is that politicians will again draw back from really addressing the problem.