Banking Secrecy In Switzerland example essay topic

Switzerland's Financial Outlook Located in between Italy, France, and Austria, Switzerland is home to a population of 7,450,867 (World Factbook, 2004). In 1848 Switzerland became a federal state that now has 26 cantons and half cantons. Switzerland is a melting pot, consisting of various cultures imported from the several surrounding countries. Languages spoken include French, German, Italian, and Romansch (World Factbook, 2004). For the amount of diversity among its people, it is quite impressive that Switzerland has been the leading European country with the lowest unemployment rate for years (World Factbook, 2004). The Roman Catholic and Protestant faiths are the two prominent religions among the Swiss.

Switzerland is a member of several economic and finance organizations: European Free Trade Association, World Trade Organization, World Bank, International Monetary Fund Organization for Economic Co-Operation & Development, and the European Bank for Reconstruction and Development (The Columbia Electronic Encyclopedia, 2001). Despite Switzerland's many financial alliances, it is a country that has long practiced an axiom of neutrality. Switzerland refuses to join any alliance that will obligate her to take military action in the event of war, (which rules out NATO membership) unless the country itself is being threatened. Some would argue that the policy of neutrality that has helped Switzerland to continually show signs of a ongoing prosperity.

Nevertheless, Switzerland has long struggled to remain a non-participant during the wars that ravaged Europe in the twentieth century. Its citizens seem perpetually divided amongst themselves about the value of remaining a neutral country. Whatever the case may be, over recent years the country has demonstrated they have the potential for a strong and prosperous future. Major Industry Switzerland's economy is divided into three sectors: agriculture, industry and services. Fifty percent of the population is employed in services, with banking being the dominant service in the country and arguably, in all of Europe.

Switzerland's financial sector employs 220,000 people and contributed to 10.9% of gross domestic product in 2000 (Federal Department of Foreign Affairs, 2002). Forty percent of the population is employed in the machine, metal, and textile industry, which account for a large number of their exports. The other ten percent of the population works in agriculture. Due to the under whelming number of people left working in agriculture, it is strongly supported by the government. In recent years, advancements in medical technology have led to creation of many small pharmaceutical companies throughout Switzerland. The prominence of the banking industry in Switzerland it has made it a necessity for employers of financial institutions to hire software savvy administrators with a working knowledge of specific financial packages.

Thus, the country has become a focal point for jobs in the information technology field. However finding the training for an information technology job has not been an easy task for the Swiss. Since the information technology field is still a fairly new employment opportunity, Swiss education institutes and colleges lack programs and resources to train IT professionals. Therefore, many Swiss companies rely on foreign specialists. Currently, IT training only exists in universities and in a few specialized industry labs.

Approximately 100 professors and their assistants work in well-equipped Computer Science departments. The scientific network between these IT-research communities is supported by SAR IT, the Swiss Association for Research in Information Technology. Financial Events Banking is one of the most important services in Switzerland (Economist Intelligence Unit, 2002). Swiss banks are known for their long-standing practices in banking secrecy.

Many of Switzerland's neighboring countries have adopted a similar banking system as well. There are many misconceptions of what banking secrecy is and what Switzerland allows. Banking secrecy in Switzerland was first introduced in 1934. It was especially helpful to German Jews who were trying to keep their money from being confiscated by Nazis. However, private banks face a bleak future as pressure is put on them from other foreign nations not to provide a home for money of dictators, terrorists, and organized crime cells.

Swiss banking secrecy today is intended to protect account holders information from being accessed by third parties. It is often overlooked that Switzerland is one of the largest and most efficiently regulated financial centers in the world today with many measures in place to counter money laundering and stop assets being used to finance terrorist activities. Switzerland toyed with the idea of imposing a withholding tax in exchange for keeping the identities of their customers confidential. And in July of 2003 the European Union (EU) Savings Tax Directive was agreed upon.

Robert Vrijhof, of Weber Hartmann Vrijhof & Partners states that starting in 2005 a withholding rate of 15% will be charged for EU residents investing in Switzerland (2003). The rate then jumps to 20% for the next three years and 35% for every year after. Economic Events Because Switzerland has never been involved in any war, the country's economy has not suffered the destruction and reconstruction that many other countries have gone through. The country has had a long standing successful market based on trade and banking (The Columbia Electronic Encyclopedia, 2004). However, the weak foreign and domestic demand on its national products has kept the country's growth relatively slow during the late 1990's. Since then the economy has been on a strong rebound and already beat its growth in 1999 by two percent.

In addition, the United States is the largest foreign investor in Switzerland, and conversely, the primary destination of Swiss foreign investment. Tourism also significantly helps the economy balance its trade deficit. Sitting at 239.8 billion dollars in purchasing power, the country's gross domestic product is higher than any other European state. Gross domestic product per capita is 15-20 percent higher than that of European economies (World Factbook, 2004). The Swiss franc has held its value better than any other currency in the world.

Switzerland also sits at a low inflation rate of 0.5%. As of August 2004 the unemployment rate was 3.8%, which was actually their first increase in several years. It is estimated that 200,000 American jobs depend on Swiss foreign investments. Economic projections for the year 2004 show a growth of. 9% and 1.2% for the year 2005. Switzerland's developed economy plays a significant role within international commerce.

Political Events During the summer of 2002, Swiss Radio International (2001) broke the news that sixty-year-old Peter Friederich, Swiss Ambassador, to Luxemburg was arrested and taken into custody on Swiss soil. Friederich faces possible charges of money laundering and involvement with drug trafficking. Ulrike Lomas, for LawAndTax-News. com (2004), reports that 2.2 million Swiss franc, the equivalent to 1.77 million is US dollars, was deposited into his Luxemburg account by a Spanish citizen who is accused of being involved with a Spanish drug cartel. From there the money was quickly moved to Friederich's Swiss bank account among many other accounts in various countries.

Friederich's lawyers stand firm that Friederich received this money from the citizen to evade taxes, which is not a punishable offense in Switzerland. After two years of investigation the case in now in the process of going to the Federal Prosecutor's office. There a decision will be made on the official charges the ex-ambassador will face. Conclusion Over the years Switzerland has established quite a name for itself. A country that in the beginning had very little, the Swiss has used their resources wisely.

Their mantra of neutrality has left no ties to past wars, which has enabled them to capitalize on some of their greatest assets like workmanship and banking. Perhaps Switzerland's de facto government has contributed to her success as well. As a country that leads Europe in Gross Domestic Product and low unemployment rates, it is obvious why Switzerland is one of the most prosperous countries in the World today. Switzerland continues to show that the strongest stance may be that of least aggression.

Bibliography

Switzerland". (2004, September) The World Factbook.
Retrieved September 30, 2004, from web 'Switzerland: Economy.
The Columbia Electronic Encyclopedia. Retrieved September 30, 2004, from web "Economic structure" (2002, April).
Economist Intelligence Unit. Retrieved September 30, 2004, from web "Money Laundering Investigation into Former Swiss Ambassador Concludes".
2004, August).
The Low tax Network. Retrieved September 30, 2004, from web "Banking Secrecy".
n. d). Federal Department of Foreign Affairs. Retrieved September 30, 2004 from web ec fin / e /home / doc us / bank.