Taxes: voluntary reports have skyrocketed

In many cases, the forecasts of the Confederation, the cantons and the municipalities turn out to be wrong when it comes to with regard to tax revenues, and it’s often difficult for the persons responsible to explain this. The administration can be excused, however, for the cash inflow resulting from voluntary amendments of tax returns (steuerliche Selbstanzeige). This is a possibility that has been open to taxpayers since 2010.

In 2019, 364 people - 358 natural and 6 legal entities - submitted a voluntary tax amendment in the canton of Zug. The 22 inheritance cases in which the heirs deposited a voluntary declaration can also be added to this segment. By comparison: the cantonal tax administration examined 241 dossiers in the 2018 tax year. "Compared to previous years, 2019 is an above-average year," says Guido Jud, head of the Tax Administration of the Canton of Zug. Jud emphasizes that this finding covers both the number of notifications and the amounts of taxes to be reclaimed - a total of CHF 13.2 million., This sum does not flow entirely to the coffers of the canton, however. The canton retains CHF 5 million, and the eleven Zug municipalities receive a total of CHF 4.4 million. The rest ends up in the federal treasury, along with tax revenues from other cantons. As the Tagesanzeiger recently reported, the Canton of Zurich has reclaimed additional taxes of CHF 660 million since 2010. By comparison: additional taxes of CHF 92.1 million were collected in the Canton of Zug in the same period.

The possibility of voluntary disclosure is a construct to which a taxpayer is only entitled once. The tax evader must report himself. In addition, there is the requirement that self-notification is only accepted if the authorities are not already aware of the illegal funds.

At the latest, many taxpayers became very nervous when the Organization for Economic Cooperation and Development (OECD) adopted standards for financial transactions. This globally-applicable Automatic Exchange Of Information about financial accounts (AEOI) must first be recognised by the various countries, and corresponding agreements are then negotiated with them. Switzerland has already reached an agreement with around 100 countries – but the UN consists of a total of 193 countries.

Once an agreement comes into force, the countries then exchange the following data: account number, name, address and date of birth. There is also the tax identification number and other information. This automatic exchange of information already applies with respect to all the countries of the European Union - with the exception of Romania and Bulgaria - as well as with many British Overseas Territories, such as the British Virgin Islands or the Cayman Islands, which were previously known as safe havens for tax refugees. The USA, is not on this list, however, as it relies on the FATCA model (Foreign Account Tax Compliance Act), which served as the basis for the OECD construct and has been developed further. The United States will be adapting its standard to the requirements of the OECD, but a time schedule has not yet been defined.

In this context, it is important to note that the international automatic exchange of information only applies to funds, not to real estate.

The head of the tax administration of the Canton of Zug expects that "the number of cases will tend to decrease in the future", as the introduction of the automatic exchange of information regarding foreign bank data has moved many affected persons "to correct their tax situation with a voluntary declaration".