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December 10, 2007
Offshore Explorations: Switzerland
by Martin A. Sullivan

Full Text Published by Tax Analysts®

Document originally published in Tax Notes
on December 10, 2007.

Switzerland is the great reservoir of the world's money. More than $7 trillion has accumulated there from around the globe. This article attempts to identify which of these assets are likely to be linked to tax evasion.

Montreaux, Lake Geneva, Switzerland (Jon Arnold, JAI, Corbis)This article is the fourth in a series of quantitative investigations into the potential for tax evasion by individuals in offshore financial sectors. The prior three covered Guernsey (Tax Notes, Oct. 8, 2007, p. 93, Doc 2007-22218, 2007 TNT 196-8), Jersey (Tax Notes, Oct. 22, 2007, p. 294, Doc 2007-23208, 2007 TNT 205-9), and the Isle of Man (Tax Notes, Nov. 5, 2007, p. 560, Doc 2007-24135 , 2007 TNT 215- 8).

In this article we divide the huge Swiss financial sector into five parts: (1) on-balance-sheet bank business; (2) bank fiduciary deposits; (3) securities held in bank custody accounts; (4) insurance; and (5) investment funds (including mutual and hedge funds).

Most of the data in this article are from the plentiful statistics published by the Swiss National Bank. Data on insurance in Switzerland come from the Swiss Insurance Association. Other data sources examined but not used because they were not as useful for this study include the IMF's Coordinated Portfolio Investment Survey, statistics from the Bank for International Settlements, statistics from the European Fund and Asset Management Association, and Swiss Fund Data AG.

Relying on the research described in the following pages, we conclude that at the end of 2006, $606.8 billion of assets in Switzerland's financial sector were beneficially owned by nonresident individuals who can easily avoid tax on those assets in their home jurisdictions because of the shortcomings in cross-border information reporting.

This figure does not include $356.1 billion of fiduciary deposits in Swiss banks. (In this series, fiduciary deposits are taken into account in the jurisdictions where the underlying deposits pay interest.) Previously estimated comparable figures for Guernsey, Jersey, and the Isle of Man were $293.1 billion, $491.6 billion, and $150.5 billion, respectively. The estimates for the four jurisdictions combined total $1.54 trillion.


Over the last dozen years, the Swiss economy has gone through three distinct periods. First there was the boom of the mid- to late 1990s, then the stagnation from 2001 through 2003, and finally a resurgence of growth beginning in 2004. This fast-slow-fast pattern of the overall Swiss economy is shown in Figure 1. The Swiss financial sector accounts for about 15 percent of GDP and about 5 percent of the nation's workforce.

SIDEBAR: Switzerland Facts

Central Alpine region of Europe, bordering Italy, Austria, Liechtenstein, Germany, and France

Population (2006): 7,508,700

Size: 15,940 square miles (half the size of South Carolina)

Gross National Income (2005): $267.4 billion

Unemployment Rate: 4.5 percent

Per Capita GDP (2005): $35,650 (85 percent of U.S. figure)

Life Expectancy (2003): 80.6 years, compared with 77.5 years in the United States

Size of Financial Sector (2007): Financial sector accounts for almost 15 percent of GDP and employs approximately 200,000 — about 5 percent of the Swiss workforce

Status: Federal republic consisting of 26 cantons. Not part of the European Union. Switzerland and the Principality of Liechtenstein form a common economic and currency area with open borders.

Sources: The Federal Authorities of the Swiss Confederation, "The Swiss Portal" (; OECD statistics (; and Swiss Bankers Association, "Swiss Banking — Roadmap 2015," Sept. 2007 (


More threatening to the Swiss than the last recession has been their economy's lackluster growth over the longer term. It has barely kept pace with the slow-growing economies of Germany and France. As shown in Figure 2, while Switzerland has struggled, its smaller and more nimble European financial center rivals — most notably, Ireland and Luxembourg — have experienced remarkable growth.

One response by the Swiss to this competitive pressure was the release of Swiss financial sector plan "Vision 2015" on September 13, 2007. The document is a joint production of the Swiss Bankers Association, the Swiss Insurance Association, and the Swiss Funds Association ("Vision 2015 — Switzerland Among the Top Three Centers of International Finance Worldwide," available at First, the report candidly lists setbacks of the recent past that have contributed to stagnant growth. They include lost opportunities in foreign exchange and commodities trading and management and administration of both conventional (mutual) funds and alternative (hedge) funds. The document presents a plan to allow Switzerland to join New York and London as one of the world's top three financial centers by 2015. The plan includes development of financial know-how through financial research and education, a pro- business regulatory approach, collaboration between business and government for the rapid development of legislation to facilitate new products, and internationally competitive taxation.

Banks are at the core of the financial sector of any economy, but in Switzerland they are overwhelmingly dominant. Their business spans commercial banking, investment banking, brokerage, and fund management. At the end of 2006 there were a total of 331 banks in Switzerland.

Towering above the rest are the two giant Swiss banks, UBS and Credit Suisse, both of which are among the world's 10 largest banks. As shown in Table 1, they account for a little more than two-thirds of Swiss bank assets and slightly fewer than half of all bank employees. The rest of the banking sector comprises mostly banks that specialize in private wealth management and banks that focus on domestic retail banking.

Figure 1. Economic Growth in Switzerland
(Average Annual Rates)

                              Table 1. Swiss Banks
                                 (End of 2006)

Bank Assets          Bank Employees
                                ----------------------    --------------------
                     Number of     Amounts
                      Banks     (in billions)  Percent    Number   Percent


 All banks              331       $2,620.8     100.0%     127,921   100.0%
 Big banks                2       $1,803.8      68.8%      62,931    49.2%
 Cantonal banks          24         $281.5      10.7%      16,536    12.9%
 Regional banks and      78          $70.5       2.7%       4,135     3.2%
   savings banks
 Raiffeisen banks         1          $93.5       3.6%       6,764     5.3%
 Commercial banks         7          $37.7       1.4%       2,612     2.0%
 Stock exchange banks    52         $100.0       3.8%      10,301     8.1%
 Other banking            4           $3.0       0.1%         255     0.2%
 Foreign-controlled     120         $196.2       7.5%      19,244    15.0%
 Branches of foreign     29          $19.4       0.7%       1,266     1.0%
 Private bankers         14          $15.3       0.6%       3,877     3.0%

 Source: Swiss National Bank, "Banks in Switzerland, 2006,"
 tables 1, 3, and 51,
available at Original
 figures are in Swiss francs; converted to dollars using Swiss franc/U.S.
 dollar exchange rate of 0.8205 on Dec. 31, 2006.

Banks' On-Balance-Sheet Business

Figure 3 shows the growth of total liabilities and total deposits at Swiss banks from 1990 through 2006. From the depths of the last recession in 2001 through 2006, bank deposits at Swiss banks have more than doubled, from $919 billion to $1.89 trillion.

Figure 2. Real Average Annual Growth Rate of GDP, 1995-2005

Figure 3. Swiss Bank On-Balance-Sheet Liabilities and Deposits,
1990-2006 (in billions)

Source:Swiss National Bank, "Banks in Switzerland, 2006,"
table 18, available at
Original figures are in Swiss francs; figures converted to dollars
with exchange rates shown in Appendix.

          Table 2A. Balance Sheet Assets of Swiss Banks, December 2006
                                 (in billions)


Type of Asset                                Currency
 ---------------------------------          ---------------------------------
 Liquid assets              $111.4          Swiss franc              $905.9
 Loans to banks             $723.0          U.S. dollar              $905.6
 Loans to customers         $517.7          Euro                     $353.6
 Mortgages                  $547.6          Other                    $455.8
 Securities and precious    $400.6          Germany                   $79.0
   metals trading
 Other assets               $320.6
Total                    $2,620.8          Total                  $2,620.8

[Table Continued]

Investment Location                        Borrowing Sector
 ---------------------------------          ---------------------------------
 Switzerland*               $895.1          Swiss Investments
 United States              $560.4             Households            $420.4
 United Kingdom             $488.2             Nonfinancial          $139.4
 Offshore centers           $186.7             Banks                  $56.8
                                               Investment funds and   $42.1
 Japan                       $77.4             Other financial         $9.4
 France                      $64.8             General government     $27.5
                            $269.4             Other                  $88.0
                                               Discrepancy**          $66.2
                                            Foreign investments    $1,771.0
Total                    $2,620.8          Total                  $2,620.8


 Source: Swiss National Bank, "Banks in Switzerland, 2006,"
 tables 4, 5, 18, 25, 32, and 33,
available at Original
 figures are in Swiss francs; figures converted to dollars using Swiss
 franc/U.S. dollar exchange rate of 0.8205 on Dec. 31, 2006.

 *Total for Switzerland is calculated as the difference between total foreign
 assets reported in table 32 and the aggregate total of $2,620.8 billion. This
 varies by a few percent from the "domestic" figure reported in table

 **Discrepancy refers to the difference between totals shown in table 33 and
 "domestic" assets reported in table 26.

       Table 2B. Balance Sheet Liabilities of Swiss Banks, December 2006
                                 (in billions)


Type of Liability                                Currency
 ---------------------------------          ---------------------------------
 Money market paper         $111.0          Swiss franc              $936.1
 Liabilities toward         $760.4          U.S. dollar              $770.8
   (deposits by) banks
 Liabilities toward       $1,127.6          Euro                     $444.0
   (deposits by)
 Medium-Term Notes           $28.3          Other                    $470.0
 Bonds                      $191.6
 Loans from mortgage         $38.6
   bond issuers
 Other Liabilities          $248.9
 Equity                     $114.4
Total                    $2,620.8          Total                  $2,620.8

[Table Continued]

Location of Investor                          Lending Sector
 ---------------------------------          ---------------------------------
 Switzerland*            $1,061.7           Swiss investors:
 United Kingdom            $367.3              Households            $300.6
 Offshore centers          $351.0              Nonfinancial          $131.0
 United States             $324.6              Banks                 $122.7
 Germany                   $121.5              Investment funds       $35.2
                                                 and financial
 France                     $53.1              Other financial        $74.6
 Luxembourg                 $41.2              General government     $19.4
 Other                     $300.4              Other                 $251.8
                                               Discrepancy**          $73.5
                                            Foreign investors      $1,612.1
Total                   $2,620.8           Total                  $2,620.8

 Source: Same as Table 2A.

 *Total for Switzerland is calculated as the difference between total foreign
 assets reported in table 32 and the aggregate total of $2,620.8 billion. This
 varies by a few percent from the "domestic" figure reported in table

 **Discrepancy refers to the difference between totals shown in table 33 and
 "domestic" liabilities reported in table 26.

Table 2A shows Swiss bank assets — where Swiss bank money gets invested. Of the $2.62 trillion total, lending to other banks was the largest category ($723 billion), followed by mortgage loans ($548 billion), loans to business and households ($518 billion), and investment in securities and metals ($401 billion). The last category is quite different from asset categorization in the United States, where commercial and investment banking are separate. In terms of currency, the Swiss franc and the U.S. dollar each account for $906 billion of investments; the euro is a distant third at $354 billion.

Where are the borrowers that Swiss banks lend to? About one- third ($895 billion) are in Switzerland. The leading foreign jurisdictions are the United States ($560 billion), the United Kingdom ($488 billion), Germany ($79 billion), Japan ($77 billion), and France ($65 billion). Offshore centers collectively account for $187 billion. Among domestic borrowers, the leading sectors are households ($420 billion), nonfinancial corporations ($139 billion), banks ($57 billion), and investment funds and financial corporations ($42 billion).

Table 2B provides a summary view of Swiss bank liabilities — that is, who is putting money into Swiss banks. Of the $2.62 trillion total, $1.89 trillion are deposits. Total deposits are divided between deposits by other banks ($760 billion) and deposits by other customers ($1.13 trillion). The Swiss franc is the most common currency ($936 billion), followed by the U.S. dollar ($771 billion) and the euro ($470 billion).

Investors and depositors in Swiss banks come from almost every country on the globe. The Swiss have $1.06 trillion in their nation's banks. The other leading sources are the United Kingdom ($367 billion), the United States ($325 billion), Germany ($122 billion), France ($53 billion), and Luxembourg ($41 billion). Offshore centers collectively account for $351 billion. Among Swiss investors, households account for $301 billion, nonfinancial corporations account for $131 billion, and banks and other financial businesses account for $233 billion.

Swiss Withholding Tax

Whether a depositor is a Swiss resident or a foreigner, Swiss banks will pay out only 65 percent of gross interest because they must deduct from payment and remit to Swiss tax authorities a 35 percent withholding tax. Swiss residents can apply for a full refund. Nonresidents may apply for a refund if their home country has a tax treaty with Switzerland. The refund can be full or partial depending on the treaty's terms. U.S. residents are eligible for a full refund.

The existence of withholding tax is a huge obstacle to would-be tax evaders. To get a refund from the Swiss government, U.S. individuals who are depositors must submit Swiss Tax Form 82-I, completed and signed before a U.S. notary public. The form requires inclusion of the individual's IRS taxpayer identification number.

It is unlikely that information about individuals is routinely shared with the IRS, but if the Swiss doubt the legitimacy of a refund claim, they have a right to request additional information, such as U.S. tax returns, from the depositor or directly from the IRS under terms of the treaty. (Article 26 of the Switzerland-U.S. tax treaty states that information will be exchanged that is "necessary for carrying out the provisions of the present Convention or for the prevention of tax fraud or the like in relation to the taxes which are the subject of the present Convention.")

                   Table 3. Fiduciary Accounts at Swiss Banks
                                 (in billions)


Currency                                   Type of Bank
 ---------------------------------          ---------------------------------
 Swiss franc                 $23.5          Big bank                  $62.6
 U.S. dollar                $181.1          Foreign controlled       $176.4
 Euro                       $105.6          All other                $117.1
 All other                   $45.9
                                            Private Banks             $37.6
Total                      $356.1          Total                    $356.1
[Table Continued]

Location of Investors:                    Location of Investments
    Where the Money Comes From                    Where the Money Goes

 ---------------------------------          ---------------------------------
 Switzerland                 $60.4          Switzerland               $3.1
 Offshore centers           $122.5          Luxembourg               $67.6
 Africa and Middle East      $41.0          Offshore centers         $56.3
 United Kingdom              $12.9          United Kingdom           $55.0
 United States                $6.9          Netherlands              $52.7
 Germany                      $6.6          France                   $32.5
 France                       $6.3          Belgium                  $24.4
 All other foreign           $73.2          All other foreign        $34.1
 Discrepancy*                $26.4          Discrepancy*             $30.5
Total                      $356.1          Total                   $356.1

 Source: Swiss National Bank, "Banks in Switzerland, 2006,"
 tables 36, 37, and 38,
available at Original
 figures are in Swiss francs; figures converted to U.S. dollars using Swiss
 franc/U.S. dollar exchange rate of 0.8205 on Dec. 31, 2006.

Figure 4. Fiduciary Deposits at Swiss Banks, 1998-2006
(in billions)

Source: Swiss National Bank, "Banks in Switzerland, 2006,"
table 36, available at
Original figures are in Swiss francs; figures converted to U.S.
dollars with exchange rates shown in Appendix.

U.S. trusts that wish to obtain refunds of Swiss withholding tax must file Form 82-E with the Swiss Federal Tax Administration. This form must be accompanied by IRS Form 6166, a letter from the IRS on U.S. Treasury stationery certifying the trust's U.S. residency. To obtain a Form 6166 for presentation to the Swiss, the U.S. trust must file a Form 8802, "Application for United States Residency Certification."

Income tax evasion on bank interest is not the only type of tax evasion potentially associated with Swiss bank accounts. The invested funds themselves may have been undeclared income, and on death of a depositor, the funds may go unreported for estate tax purposes. But it seems a little strange for a tax evader to (1) pay Swiss withholding tax or (2) go through all the hassle and potential exposure of applying for a refund when it is so easy to enjoy the privacy and expertise provided by Swiss banking through alternate means. There are two: the Swiss fiduciary account and the Swiss custody account (discussed below).

For the purposes of this study, we conclude that because of the 35 percent withholding tax, none of the $2.72 trillion of bank liabilities — including $1.13 trillion held by depositors other than banks — are potential tax evasion assets.

Fiduciary Deposits

Swiss fiduciary deposits are deposits made by Swiss banks on behalf of their customers in banks in other jurisdictions that have little or no withholding tax on bank interest. And because the deposits pay interest that is not Swiss-source, there is no Swiss withholding tax. Those deposits are highly conducive to tax evasion by individuals. As noted in a 1999 OECD working paper: "This scheme allows a nonresident desiring to evade taxes to be reasonably certain that a failure to declare the invested capital and/or the interest thereon to his country of residence will go undetected." (David Carey, Kathryn Gordon, and Philippe Thalmann, "Tax Reform in Switzerland," OECD Economics Department Working Paper No. 222, Aug. 1999.) Figure 4 shows how Swiss fiduciary deposits rose slowly from $241 billion in 1998 to $356 billion at the end of 2006.

Table 3 shows various categorizations of fiduciary accounts. The ownership of these accounts, compared with regular on-balance-sheet accounts, is more heavily weighted toward non-Swiss depositors from offshore centers. Top foreign locations for investment of those funds are Luxembourg ($68 billion), the United Kingdom ($55 billion), the Netherlands ($53 billion), and offshore centers ($56 billion).

We previously estimated a total of $154.4 billion of Swiss fiduciary deposits in three offshore centers — Guernsey, Jersey, and the Isle of Man — using primarily data from those countries' financial service commissions. We have no explanation at this time for the large discrepancy in the figures reported by the Crown dependencies and those reported by the Swiss National Bank.

    Table 4. Customer Security Holdings in Custody Accounts of Swiss Banks,
                                 December 2006
                                 (in billions)


Type of Security           Currency                     Sector
 ----------------------  ---------------------   ----------------------------
 Bonds         $1,037.9  Swiss franc  $1,935.7   Foreign private      $857.6
 Shares        $1,612.3  Euro           $990.4   Foreign commercial   $184.0
 Mutual funds  $1,150.6  U.S. dollar    $876.9   Foreign            $1,367.5
 Other           $316.1  Other          $313.8   Swiss private        $487.0
                                                 Swiss commercial     $257.6
                                                 Swiss institutional customers
                                                    Financial and     $445.2
                                                    Domestic          $165.7
                                                    Domestic          $352.1
Total         $4,116.8  Total       $4,116.8    Total              $4,116.8

 Source: Swiss National Bank, "Banks in Switzerland, 2006,"
 tables 38a, 38b, and 38c,
available at Original
 figures are in Swiss francs; figures converted to U.S. dollars using Swiss
 franc/U.S. dollar exchange rate of 0.8205 on Dec. 31, 2006.

 *Includes $42.1 billion of securities held by unclassified domestic
 institutional investors.

Figure 5. Securities Held in Swiss Bank Cusotdy Accounts,
1998-2006 (in trillions)

Source: Swiss National Bank, "Banks in Switzerland, 2006,"
table 38, available at
Original figures are in Swiss francs; figures converted to U.S.
dollars with exchange rates shown in Appendix.

Because fiduciary accounts are designed to take advantage of Swiss bank privacy law without incurring Swiss withholding tax, we assume for the purposes of this study that all $356.1 billion in Swiss fiduciary accounts are potential tax evasion assets. We do not, however, include them in our totals for Switzerland because in this series so far we have included Swiss fiduciary deposits in the totals of the jurisdictions where deposits ultimately reside (for example, Guernsey and Jersey).

Security Holdings in Swiss Custody Accounts

Security holdings in custody accounts at Swiss banks are more than twice as large as regular deposits and more than 10 times as large as fiduciary deposits. Figure 5 shows that the growth of custody accounts stagnated between 1998 and 2002, but from the end of 2002 through the end of 2006 they nearly doubled to reach $4.12 trillion.

Table 4 shows the composition of securities held in custody accounts. Of the total of $4.12 trillion, $1.61 trillion are equities, $1.15 trillion are mutual fund shares, and $1.04 trillion are bonds. A little less than half the securities ($1.94 trillion) are denominated in Swiss francs, with the remainder split among euros ($990 billion), the U.S. dollar ($877 billion), and other currencies ($314 billion).

Swiss residents own 41 percent ($1.71 trillion) of these assets. Of that total, $487 billion of assets are owned by private customers, $258 billion by commercial customers, and $963 billion by institutional customers. Non-Swiss residents own 59 percent ($2.41 trillion) of securities in Swiss bank custody accounts. Of that total, $858 billion in assets are owned by private customers, $184 billion by commercial customers, and $1.37 trillion by institutional customers.

                  Table 5. Swiss Life Insurance, 2005
                             (in billions)


of which:
Premiums      Single Premiums     Reserve Assets

 Endowment           $4.2              $0.7               $50.0
 Annuity insurance   $1.0              $0.8               $16.9
 Unit linked life    $2.5              $1.6               $11.5
 Group pension      $15.0             $10.1               $91.3
Total              $22.6             $13.2              $169.7
 Non-group life      $7.7              $3.2               $78.4

Source: Swiss Insurance Association, "Facts and Figures
available at

Figure 6 Composition of Custody Accounts
Held by Non-Swiss Individuals in Swiss Banks, 2006
(in billions)

Source: Swiss National Bank, "Banks in Switzerland, 2006,"
table 38c, "Securities Holdings in Bank Custody Accounts - By
Domicile of the Custody Account Holder, Category and Business
Sector," available at

Because this is a study of individual tax cross-border tax evasion, we can disregard Swiss private customers (assuming residency here designates beneficial ownership and not, for example, the residence of Swiss lawyers making deposits on behalf of foreign investors). Also, we can disregard Swiss and non-Swiss commercial customers (under the assumption that small businesses that are not included under private customers are an inconsequential portion of "commercial customers"). Under the conventions adopted by this study, potential tax evaders investing in non-Swiss institutional investments (like mutual funds and life insurance) will be considered when the countries where those institutions reside are examined. Swiss nonbank financial institutions, like mutual funds and life insurance, which could house assets of potential tax evaders, are considered in the following sections.

That leaves $857.6 billion of securities in Swiss custody deposits owned by non-Swiss investors. Because there is no withholding and no routine reporting to the tax authorities of investors' home countries, the holders of those accounts could easily be involved in tax evasion. However, to the extent the securities represent investment in mutual and other investment funds, those assets could be double-counted in our study when examined in the jurisdictions where those funds are domiciled. Figure 6 shows the composition of that investment. Investment in mutual funds accounts for $394.3 billion of the total. We subtract that amount from the $857.6 billion total to arrive at $463.3 billion of potential tax evasion assets in Swiss bank custody deposits.


At the end of 2005, Swiss private insurance companies employed 45,606 people in Switzerland, and in 2005 they collected a total of CHF 53.5 billion in premiums. Of that total, private insurers collected CHF 29.8 billion for life insurance, CHF 20.8 billion for nonlife insurance, and CHF 2.9 billion for reinsurance.

All data in this section are from the Swiss Insurance Association, "Facts and Figures 2007," available at Despite the title, all the data are for 2005 or the end of 2005. Later we will extrapolate the data to 2006 to make them comparable with data from other sectors. All data presented here exclude the considerable insurance business done by foreign subsidiaries of Swiss insurance companies.

Because life insurance and annuity contracts are close substitutes for other financial investments like mutual fund shares, they may be used as vehicles for tax evasion. Table 5 below provides more detail on life insurance in Switzerland.

Group life insurance is not something a tax evader can hide, so we will exclude it from consideration here. That leaves $78.4 billion of assets in individual life insurance. From that amount, we must estimate the portion belonging to foreign residents.

The Swiss Insurance Association publishes international comparisons of per capita life insurance premiums. Switzerland, with premiums of $3,078 per capita, is at the top of the list. As we will now demonstrate, that figure suggests that a significant share of life insurance in Switzerland is foreign-owned. Using the domestic insurance markets of four neighboring countries as comparables, we can estimate the portion of Swiss life insurance that is sold to residents and the portion that is sold to foreigners. The average of per capita life insurance premiums in France ($2,477), Germany ($1,042), Austria ($1,095), and Italy ($1,450) is $1,515 (approximate because of rounding). We assume the excess of the Swiss figure over the four-nation average ($1,563, or 51 percent of the Swiss per capita amount) is life insurance purchased by non-Swiss residents. That percentage of nongroup reserve assets is $40 billion.

By extrapolating this figure forward one year by multiplying it by 1.23 — the ratio of 2006 bank custody account assets ($4.12 trillion) to 2005 bank custody assets ($3.35 trillion, as shown in Figure 5) — we arrive at the figure of $49.1 billion of potential tax evasion assets from life insurance in 2006.

Swiss Funds

We were able to identify three sources of data on mutual and hedge funds in Switzerland:

    Table 6. Summary: Potential Tax Evasion Assets in Switzerland,
                              End of 2006
                             (in billions)


Potential Tax
           Sector                        Raw Data      Evasion Assets


 On-balance-sheet bank accounts          $2,620.8            $0
 Bank fiduciary deposits                   $356.1            $0
 Securities in bank custody accounts     $4,116.8          $463.5
 Life insurance                            $169.7           $49.1
 Mutual and hedge funds                    $363.1           $94.2
Total                                   $7,626.5          $606.8

(1) Swiss Fund Data AG (, a joint venture of the Swiss Funds Association and SWX Swiss Exchange, collects data on both funds domiciled and funds sold in Switzerland. It has more than 4,000 funds in its database, approximately 85 percent of the volume of authorized funds in Switzerland.

(2) The European Fund and Asset Management Association organizes its aggregate data by fund domicile, and its data on Switzerland are similar to those provided by the Swiss Funds Association. (See, for example, "The State of the European Investment Fund Industry at End June 2007," available at

(3) The Swiss National Bank also publishes aggregate data on investment funds in Switzerland. We used this third source because it appears to be more comprehensive and because the detail it provides allows us to make adjustments to avoid potential double-counting problems.

Investment funds owned by institutional investors, which might be accounted for elsewhere in this series, should be excluded. We want to identify investment fund shares owned by non-Swiss individuals. From Table D6-3 of the Swiss National Bank's "Monthly Statistics," we know assets in Swiss funds totaled CHF 363.09 billion ( To estimate the portion of those funds owned by foreign individuals, we looked at the composition of ownership of mutual fund shares held in custody at Swiss banks. Table 38c of "Swiss Banking, 2006" indicates that 34.3 percent of those funds, which include both Swiss- and non-Swiss domiciled funds, were held by foreign individuals. Assuming the composition of ownership of Swiss-domiciled funds and funds in custody accounts of Swiss banks is similar, we estimate that 34.3 percent, or CHF 124.54 billion, of Swiss-domiciled funds are owned by non-Swiss individuals.

Next we want to exclude funds invested in other mutual funds to avoid double-counting. Table D6-3 of the "Monthly Statistics" indicates that of the total of CHF 363.09 billion of assets in Swiss funds, CHF 28.20 billion, or 7.8 percent, were invested in mutual funds at the end of 2006. So we further adjust the fund total by multiplying by 0.922 to arrive at CHF 114.83 billion. With an exchange rate of 0.8205 at the end of 2006, that leaves us with $94.2 billion of potential tax evasion assets held in Swiss mutual funds.

Putting It All Together

All the calculations described in this article are summarized in Table 6. At the end of 2006, there were $607.4 billion of assets in Switzerland's financial sector beneficially owned by non-Swiss individuals who could easily be illegally avoiding tax on those assets in their home jurisdictions

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Exchange rates used to convert Swiss francs into U.S. dollars, shown in the following table, were downloaded from "FXHistory: Historical Currency Exchange Rates" at

 Year-End                                  Exchange Rate

 1990                                          0.7831
 1991                                          0.7383
 1992                                          0.6854
 1993                                          0.6752
 1994                                          0.7635
 1995                                          0.8666
 1996                                          0.7417
 1997                                          0.6871
 1998                                          0.7258
 1999                                          0.6261
 2000                                          0.6209
 2001                                          0.5978
 2002                                          0.7213
 2003                                          0.8053
 2004                                          0.8839
 2005                                          0.7602
 2006                                          0.8205

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