For decades, many Israelis have been opening bank accounts in Switzerland and transferring quite a few assets to them. Under the cloak of Switzerland's tight banking secrecy laws, money unreported to the tax authorities could also be deposited. This phenomenon is of course not confined to Israelis; foreign residents from many countries have taken advantage of tax shelters to transfer unreported money. This loophole, however, has now been closed. In recent years, many banks, including Israeli banks, have been investigated on suspicion of helping their customers evade taxes, and the conventions between countries for exchanging information about accounts held by foreign residents have been picking up momentum, making keeping unreported funds an impossible task.
A study recently published by the US National Bureau of Economic Research (NBER) tried to map the extent of the use of tax shelters by residents of various countries. Among other things, the study used data from central banks, and cross-referenced them with data for assets of the citizens of those countries. The study estimates that 10% of GDP is found in the various tax shelters. At the same time, the study highlights the major differences between countries. "Scandinavian countries own the equivalent of only a few percent of GDP in offshore wealth, but this figure rises to about 15% in Continental Europe, and to as much as 60% in Russia, Gulf countries, and a number of Latin American countries," the study authors write.
The study also mentions Israel. The results show that Israelis feature prominently in Switzerland. According to the study, 2.5% of all foreign-owned assets in Switzerland belong to Israeli customers, while Israel's share in global growth is less than 1%. The study also examined tax shelters in other countries, but Israel did not stand out in these data, and the proportion of foreign-owned assets in these countries belonging to Israelis was lower than Israel's share of the global economy. Assets owned by Israelis in Switzerland are estimated at $55 billion.
At the Israeli offices of Swiss company ZWEI Wealth Experts, it was predicted that despite the end of the era of complete banking secrecy in Switzerland, the country would continue to be a capital for private banking, and Israeli money deposited there would continue to grow. "Switzerland has been, and will remain, an important place for money management. The country benefits from political and economic stability, and is topographically located at an important crossroads," ZWEI Israel head of business development and marketing Meir Baron told "Globes."
"Up until the voluntary disclosure procedure was introduced, the money kept in Switzerland was a hostage, and it was certainly impossible to argue about matters such as commissions. Now that the money has been declared, the customer has many options," Baron explains.
Former UBS chief economist Prof. Klaus Wellershoff founded ZWEI three years ago. The company provides consultation to its clients. The company's first business outside Switzerland was in Israel. "In my opinion, the Israeli money currently kept in Switzerland is only beginning," Baron declares. "There is enormous financial wealth in Israel resulting from inter-generational transfers and money obtained here from various exits."
Published by Globes [online], Israel Business News - www.globes-online.com - on October 17, 2017
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