Daniel J. Mitchell

Because we live in an upside-down world, Switzerland is being persecuted for being a productive, peaceful nation that has a strong human rights policy with regards to privacy.

More specifically, politicians from high-tax nations resent the fact that investors flock to Switzerland to benefit from good policies, and they are pressuring the Swiss government to weaken that nation’s human rights laws so thatgovernments with bad fiscal systems have an easier time of tracking and taxing flight capital.

I’ve resigned myself to this happening for the simple reason that it is well nigh impossible for a small nation (even one as well-armed as Switzerland) to withstand the coercion when all the world’s big nations are trying to impose one-size-fits-all policies designed to make it easier to raise tax rates and expand the size and power of government.

Switzerland v IRSBut, as the Wall Street Journal reports, the Swiss aren’t going down without a fight.

Switzerland’s lower house of Parliament voted 123-63 against the measure, which would have enabled many of the Alpine nation’s banks to sidestep the Swiss banking secrecy laws and start handing information to the U.S. Department of Justice about any past help they may have given to Americans hiding undeclared wealth in Swiss accounts. Earlier Wednesday, the smaller, upper house of Switzerland’s Parliament voted 26-18 in favor of the proposed plan. But in the lower house, lawmakers had raised concerns about the heavy-handedness of the U.S. effort to have them sign off on legislation that might have exposed the country’s banks and bank employees to legal hazards. Lawmakers had also raised concerns about the lack of detail in the plan regarding potential fines for banks that would have opted to participate.

I heartily applaud the lawmakers who rejected the fiscal imperialism of the United States government.

As I stated in my recent BBC interview on tax havens, I believe in sovereignty, and the IRS should have no right to impose bad American tax law on economic activity inside Swiss borders (just as, say, China should have no right to demand that the United States help track down Tiananmen Square protestors that escaped to America).

But I’m not opening champagne just yet, in part because I don’t like the stuff and in part because I fear that this will be a temporary victory.

The Swiss have resisted American demands before, and on more than one occasion, only to eventually back down. And it’s hard to blame them when they’re threatened by odious forms of financial protectionism.

That being said, I’m going to enjoy this moment while it lasts and hope that somehow David can continue to withstand Goliath.

P.S. If you want to understand more about the underlying economic and philosophical implications of this issue, I heartily recommend this New York Timescolumn by Pierre Bessard of Switzerland’s Insitut Liberal.


Daniel J. Mitchell

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy at the Cato Institute.