Life’s two certainties (being sold out by the Swiss may be one of them)
As yesterday’s New York Times reports. Lost in the universal focus on the credit crisis, we have seen a somewhat troubling change taking place in Switzerland’s longtime bank secrecy laws.
Switzerland’s tax authorities, under pressure from a growing United States investigation into the Swiss bank giant UBS, are expected to hand over confidential data on wealthy American clients of UBS to the Justice Department, two people briefed on the matter said Tuesday.
The move would represent a significant shift in Switzerland’s banking secrecy laws, whose tradition dates to the Middle Ages.
Swiss neutrality (which is irritable to some) and stability has enabled its banking sector to become a source of prosperity for the nation. Reasonable exceptions to their secrecy laws for actual criminal activity should be allowed, but forcing banks to share private information on its clients merely for ’suspicion’ of tax evasion (something often disputable due to folks scrounging through the complicated tax code to reduce liability) seems quite dangerous. Especially since Swiss tax law has a different view of tax evasion than the U.S.
Swiss law makes disclosure of client data or names a crime unless the Swiss authorities think that the client has committed a serious crime, like money laundering or tax fraud. Unlike in the United States, Switzerland does not consider tax evasion to be a crime, though both countries have largely similar definitions of tax fraud.
And the Swiss are capitulating! In direct contradiction to their own legal view of tax evasion. Even though some may argue that this is moot because the U.S. does not consider a financial transaction as something beholden to privacy rights, the Swiss do–and besides, the U.S. view is wrong. A person’s financial records should be considered as sacred as their medical records.
Every citizen should maintain a healthy distrust of its government, after all, we have seen federal bureaucracies used to abuse the rights of citizens in many ways by many different regimes. If the government has the power to search through someone’s private financial dealings in another country solely on suspicion, where does our right to privacy stand? In terms of what constitutes law-breaking in one country as opposed to another, can the U.S. impose its view of a crime on another sovereign nation? Here, the U.S. Justice Department wants to see foreign bank records of thousands for the suspicion of committing an act NOT considered a crime in the country in which those records are held (I know, it happens).
Under pressure in recent months from the Justice Department, Switzerland’s justice ministry, taxing authority and banking regulator have adopted the view that some American clients of UBS may have committed tax fraud.
Note what this says, “Under pressure…[from the DOJ],” Swiss officials “have adopted the view…” that sees, contrary to their own law, these folks as criminals–because the DOJ ’suspects’ that they are.
So where does this lead? If the DOJ can pressure a foreign authority into ignoring its own legal views, where does this leave the U.S. on other issues, namely environmental and other laws that seek to usurp national sovereignty (there are a few)? What’s worse, under U.S. tax law, a U.S. citizen can still be taxed on income he earns outside of its borders and cannot renounce his citizenship solely to avoid taxes (how they’d find out who knows)–which is in my opinion just wrong–leaving you with the IRS and DOJ chasing down every red cent of your money they feel entitled to. Add to that some of the invasive banking provisions of the PATRIOT Act, and you have further intrusion into people’s lives and business by a government that knows no boundary. This is not a “pro-rich” or pro-tax cheat view, but a pro-civil rights and sovereignty view.
-GH
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FCC Targets Long-Term Service Plans
Are you a mobile phone user, FiOS TV subscriber, or DirecTV customer who’s happy with your service and bound by a long-term contract? If so, then brace for higher prices thanks to a multifaceted regulatory assault on voluntary contracts.
On June 12, the FCC will hold a hearing to consider imposing regulations on early termination fees, which are the charges that customers who’ve entered into long-term service agreements must pay if they choose to end service prior to the culmination of their contract term.
The FCC isn’t alone in its push to regulate early termination fees. Bills that would limit wireless contract terms have been drafted in both the Senate (by Sens. Klobuchar and Rockefeller) 
and in the House (by Rep. Markey). And Verizon, among other carriers, faces a $1 billion class-action lawsuit arguing its early termination fees are illegal.
While the bills pending in Congress focus solely on early termination fees for mobile service, the Washington Post reports that the FCC’s upcoming hearing will encompass early termination fees offered by all kinds of consumer telecom services. In addition to wireless companies, many broadband and video providers including DirecTV, Verizon, RCN, and Comcast also offer long-term service plans with cancellation charges levied on customers who end service early.
In late 2007, when the early termination fee debate began heating up, many providers changed their policies to address complaints against wireless contract provisions. Now, AT&T Mobility, Verizon Wireless, and Sprint all prorate early termination fees for wireless subscribers, so users who cancel service in the middle of the contract term don’t have to pay the full $175 early termination fee. The three carriers have also begun allowing customers to change calling plans without affecting their contract end date.
Despite intensifying opposition to early termination fees, these fees are really nothing new. Aside from telecom services, consumers have long had the choice of signing long-term contracts that involve early cancellation charges. Renters typically sign 12-month apartment leases, and are usually required to pay a breakage fee if they back out of their lease early. Similar contract clauses are often found in fitness center memberships and automobile leases. Are all these incarnations of early termination fees fair game for government regulation, too?
Dictating the terms of telecommunications service contracts runs the risk of depressing investment in network modernization, ultimately harming consumers. At a time when Sprint is building a high-speed wireless network from the ground up, Verizon is laying fiber to millions of homes across the nation, and DirecTV is expanding its fleet of geosynchronous orbital satellites, government-imposed revenue volatility would delay next-generation telecom services that promise faster broadband speeds and more high-def programming.
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