Transatlantic cable
November 2013
26
www.read-eurowire.comTax havens
Switzerland and the United States reach
agreement on Swiss banks that
enabled Americans to shield wealth
in o shore accounts
A watershed deal requiring Swiss banks to pay up to billions of
dollars in nes and disclose information about their American
clients was announced on 29
th
August by the Justice Department
in Washington, and presented by Swiss authorities on the
following day.
According to formulas worked out by Switzerland and the US,
Swiss banks must provide the details on accounts in which
American taxpayers have an interest; inform on other banks that
transferred money into secret accounts, or that accepted money
when secret accounts were closed; disclose all cross-border
activities; and close the accounts of Americans who are evading
taxes.
By some estimates, Switzerland is home to more than $2 trillion
in overseas deposits. Lynnley Browning, a Reuters business
journalist based in New York, reported in the
International
Herald Tribune
that the agreement covers much of the Swiss
banking industry, with its tradition of bank con dentiality.
Swiss banks that follow the programme will be eligible to
enter non-prosecution agreements that sidestep guilty pleas
or criminal penalties. (“Swiss Agree on Penalties for Banks That
Aided Tax Cheats”, 28
th
August)
US Attorney General Eric H Holder, Jr seized his opportunity
to exert some very direct pressure. “This programme will
signi cantly enhance the Justice Department’s ongoing e orts
to aggressively pursue those who attempt to evade the law by
hiding their assets outside of the United States,” Mr Holder said
in a statement; adding that it “is intended to enable every Swiss
bank that is not already under criminal investigation to nd a
path to resolution.”
Switzerland and the US have been in negotiations over the
tax evasion issue since 2009. A previous attempt by the Swiss
government to arrange a deal failed in June when Parliament
balked, on concerns about privacy and the absence of
transparency in the negotiations.
Legislators then called on Eveline Widmer-Schlumpf, the Swiss
nance minister and president of the Federal Council, to work
out an agreement with Washington.
“A stumbling block may still exist,” Ms Browning cautioned.
Both sides to the deal are pledged to use information
exchange channels outlined in existing treaties, but the US
has not yet rati ed a 2009 treaty protocol that would ease
that disclosure.
An American with a Swiss sense of the right to privacy –
Senator Rand Paul, Republican of Kentucky – is blocking
approval, arguing that it would give the Internal Revenue
Service (IRS) too much power to poke into the a airs of
citizens.
Under the terms of the deal reached in August, American
clients of Swiss banks who have not already entered
voluntary disclosure programmes set up by the IRS will be
strongly encouraged to do so.
Telecom
Apple and Samsung are still duelling
over the top spot in smartphones –
but their competition is stirring
Microsoft Corp on 3
rd
September announced that it is buying
Nokia’s devices and services business in a $7.2 billion deal that
includes access to the Finnish company’s patents. That some $5
billion of the total goes for the Nokia unit that makes mobile
phones, including its line of Lumia smartphones, highlights an
unmistakable trend: competition in the smartphone market is
intensifying, with Microsoft (Redmond, Washington) only the
latest entrant into a group bent on knocking the market leaders
o their perch.
“The smartphone market is still a rising tide that’s lifting many
ships. Though Samsung and Apple are the dominant players, the
market is as fragmented as ever. There is ample opportunity for
smartphone vendors with di erentiated o erings.”
This view, expressed by IDC analyst Kevin Restivo to the
International Herald Tribune
, rests on rapidly gathering evidence.
Apple, of the US, and Samsung, of South Korea, between
them still account for more than 90 per cent of the pro t
in smartphones, analysts say. But the
Tribune
’s Eric Pfanner
con rmed that more companies all the time are emboldened to
try to challenge them.
Mr Pfanner saw some familiar names among the companies
testing themselves against the two leaders in the mobile
phone-making business, among them Nokia; Sony, of Japan; and
HTC, of Taiwan. Relative newcomers include LG (South Korean),
and Lenovo, ZTE and Huawei (all three Chinese). (“Chipping
Away at the Smartphone Leaders”, 25
th
July)
Individually, none of these companies poses a threat to the top
two. But, according to Boston-based Strategy Analytics, the next
three top players (LG, ZTE and Huawei) showed strong growth
over the past year. IDC (Framingham, Massachusetts) had Lenovo
replacing Huawei in the top ve and also showing solid growth.
Both research rms a rmed the increasing hold of Asian
companies over the smartphone business, with Apple the only
non-Asian brand among the leading contenders. Mr Pfanner
observed that, as recently as the rst quarter of 2011, three
Western companies – Apple, Nokia and Canada’s BlackBerry –
topped the IDC list. Now, of course, Microsoft’s move on Nokia
will thrust another important player into the line-up.
The two top- ve lists re ect the growth of sales in China,
which has surpassed the US as the world’s biggest
smartphone market, and in other developing countries. And
much of the growth in coming years is expected to occur
in the area of lower-priced smartphones, in which Chinese
makers are strong and from which Apple is notably absent.
An irony of “the eastward shift” noted by Mr Pfanner is that
it is facilitated largely by the Android operating system from
Google, of the United States. Analysts say buyers are more
willing to look at alternatives to Apple or Samsung because
the di erences among smartphones are becoming less
pronounced. The proportion of phones running Android
keeps growing, and technical speci cations are converging.
According to Mr Pfanner, that makes price, where LG and the
Chinese smartphone makers have an edge, an increasingly
important selling point.