Switzerland Became the First True Tax Haven in 1918
Switzerland was the first ‘true’ tax haven and became a tax haven immediately following World War I. As Switzerland remained neutral during the Great War they could maintain a low level of taxes as they didn’t have the high infrastructure costs other countries had. In contrast, many European governments raised taxes sharply to help pay for reconstruction efforts following the devastation of World War I. This resulted in an influx of capital into Switzerland for tax related reasons.
The country’s tradition of bank secrecy was first codified in the 1934 Federal Act on Banks and Savings Banks. This legislation made it a criminal act for a Swiss bank to reveal the name of an account holder. The secrecy provisions were enacted to halt attempts by Nazi Germany to investigate the assets of Jews and enemies of the state held in Switzerland. The Swiss government views the right to privacy as a fundamental principle and the confidentiality provisions in the Swiss law are similar to those between lawyers and their clients.
Swiss neutrality and national sovereignty have fostered a stable environment in which the banking sector has been able to develop and thrive. Currently, one-third of all worldwide offshore funds are kept in Switzerland. This amounts to US$2.7 trillion.
From 2018 both Switzerland and EU countries will automatically exchange information on the financial accounts of each others residents.
"You’d be stupid not to try to cut your tax bill and those that don’t are stupid in business"
- Bono: U2