Federal Council rejects the popular initiative "Yes to the protection of privacy"

Bern, 26.08.2015 - The Federal Council is recommending that the popular initiative "Yes to the protection of privacy" be rejected and approved the corresponding dispatch for the attention of Parliament during its meeting today. The initiative interferes significantly in tax and prosecution procedures and, as a result, would endanger the accurate levying of federal, cantonal and communal taxes. In addition, the initiative could have a negative impact on the fight against money laundering and terrorist financing.

The protection of privacy against illegal state intervention is an important principle in the rule of law. It enjoys constitutional status today in Switzerland and is fleshed out in legislation. There are necessary limits to the protection of privacy in tax law. For example, in order for income and wealth taxes to be correctly levied, taxpayers must disclose their income and asset situation to the tax authorities. However, privacy continues to be protected as the authorities are bound by tax secrecy and the information received may not be shared, aside from legally defined exceptions.

Implications of the initiative

The initiative does not aim to change anything to do with the taxpayer's duty to cooperate. Taxpayers continue to be under the obligation to supply the tax authorities with all the information required to identify taxation factors. However, the initiative calls for third parties to be allowed to give information to the authorities only under very restrictive conditions. Such information on taxpayers should only be available within the scope of criminal proceedings and only in cases in which a court confirms the suspicion of a serious tax offence.

As a result, tax authorities would only be able to obtain information from third parties in very exceptional cases. If taxpayers violate their duty to cooperate, it would no longer be possible for the authorities to obtain information from employers or from insurance companies. Accurate levying of taxes would no longer be guaranteed.

Today, the possibility for cantonal tax authorities to obtain information from banks does not exist. The initiative would not provide any innovations in this regard. In contrast, there is currently an obligation for banks to provide information in criminal proceedings concerning indirect taxes and in the context of special tax investigations by the Federal Tax Administration (FTA) involving serious tax offences. Acceptance of the initiative would result in a significant restriction of the current investigative measures.

The initiative covers domestic taxes only. It would thus have no impact on administrative assistance in tax matters and the exchange of information in favour of foreign partner countries. However, depending on interpretation, Switzerland's options to obtain corresponding information from abroad could be restricted.

The consequences for the fight against money laundering and the financing of terrorism in the financial sector depend on how the initiative is interpreted. If the restricted obligations of third parties to provide information were also to apply to the Anti-Money Laundering Act, the initiative would have a significant impact on this area as a result. The financial intermediaries would then be prohibited from notifying the Money Laundering Reporting Office Switzerland (MROS) about aggravated tax offences in relation to people who have their registered office or residence in Switzerland. Even reports of non-tax offences which have a tax connection could be affected. This would undermine in particular the amendments to the Revised Financial Action Task Force (FATF) Recommendations of 2012 which were decided by Parliament on 12 December 2014. Moreover, the exchange of information between the Swiss and foreign reporting offices combating money laundering and the financing of terrorism could be compromised. All of the above would have a negative impact on Switzerland's compliance with international standards.

Adequate protection of privacy

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

Initiative issue

The popular initiative "Yes to the protection of privacy" was submitted on 25 September 2014 and came into existence with 117,531 valid signatures. According to the initiators, protection in particular of financial privacy should be enshrined in the Constitution by virtue of the initiative. Financial privacy is, according to the initiators, an important component of the relationship of trust between citizen and state. On account of the recent political and legislative developments, this basic right that is contained in the Federal Constitution must be clarified and supplemented.

Address for enquiries

Fabian Baumer, Vice-Director, Federal Tax Administration FTA
Tel. +058 465 31 67, fabian.baumer@estv.admin.ch


The Federal Council

Federal Department of Finance