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Sunday, November 11, 2012

Flash News – France Invades Switzerland!

 

There are some interesting implications behind a story that is out this weekend. I found the details (that have come out so far) of interest.

 

 

The IRS of France, the National Directorate Of Tax Investigations (DNEF), has covertly sent agents into Switzerland to pursue tax evasion cases against French citizens. The Agents entered Switzerland claiming they were tourists. The Agents were not sightseeing in the Alps. They were doing what spies always do. They were covertly gathering information on enemies of France. In this case, the “enemies” are French citizens.

 

To be clear. This is 100% illegal activity in Switzerland.

 

Banking secrecy is still the law of the land in Switzerland. There have been several cases in the past few years where a Swiss bank employee has stolen information on private accounts. The lists of “names” were later sold to tax authorities in the US and Germany. Switzerland has vigorously prosecuted the individuals involved. Several have gone to jail; others are pending extradition and trial.

 

And now, agents of the French government, are breaking the same Swiss laws. The following thoughts come to my mind about this affair:

 

- How desperate are the French to do this? A covert operation in a foreign country? That’s over the top. If the French tax spies are doing this, what are the other arms of government doing? Are they spying as well? Listening in on phone calls to find out if the waiters are claiming their tips? How are the French going to react? Some, do doubt, with glee. Others, justifiably, with fear.

 

 

- I’m no fan of tax cheats. I have dozens of articles that have come down against banking secrecy, and the black money that is involved. But where do you draw the line? Illegal spying is, after all, illegal. Right?

 

 

- Is the DNFE alone in this type of activity? Does the US or the UK have illegal spies gathering information in foreign countries on their citizens?

 

 

- Does the French DNFE have spies in the USA?

 

 

- There are financial considerations to this. The first is the implications to the Swiss private bankers. The outlook for the Swiss banks was terrible before this development (UBS just hacked 10k heads – 2,500 in Switzerland), the outlook is worse again, after the revelation of state sponsored spying.  I would not load up on Swiss bank stocks just yet. The fact is, without banking secrecy the Swiss banks are uncompetitive in wealth management.

 

 

- The Swiss National Bank (SNB) plays into this drama. The SNB has been pegging its currency for more than a year now. In the process, it has accumulated 100’s of billions of Euro reserves. To hedge its bets, the SNB sold off those unwanted Euros and bought dollars, Yen, Sterling, Hong Kong and Singapore dollars. Basically, the SNB has been mucking up the entire global financial system in an effort to keep global economic problems from spilling over its borders.

 

There is going to be a pissing match between France and Switzerland over this story (there has to be). When the cross-border shouting starts, someone in France is going to point at Switzerland and claim it is a Currency Manipulator that is hurting France (it is). This scenario is one that will bring big pressure on the Franc, and another test of the SNB’s resolve to maintain the peg.

 

 

- The SNB had billions of excess Euros as a result of intervention. It bought German Bunds with the cash. In the process, the SNB pushed German rates below zero. This forced the SNB to diversify, and buy French government bonds. So now the SNB is sitting on a huge pile of French paper. And the French are spying on the country. I’m wondering if the SNB is so happy with all those French IOU’s it is sitting on.

 

 

- Eveline Widmer-Schlumpf is the President of Switzerland, she also is the Finance Minister; so she is very much on the hot spot. The Swiss will hate the idea of French spies acting covertly in their country and breaking the law (who wouldn’t?). Eveline can’t soft peddle the French spying. There has to be a next chapter to this story. I can’t wait.

 

 

Comments

  1. The government and its agencies are the cheats and fraudsters. It’s every patriot’s duty to withold as much as possible, same as a loving person would withold heroin from a junky.

  2. “Give enough rope to the capitalist and he is sure to hang himself ”
    “The best way to destroy the capitalist system is to debauch the currency.”

    I believe their bearded ones, though ahead of their time, were much wiser than the current Bernanke’s, Krugman’s, etc.

  3. Crase the system says:

    The whole system deserves to be aborted with extreme prejudice. Tax cheats are true patriots. Starve the beast.

  4. I watched a TV investigation report showing that UBS bankers have been contacting wealthy French for tax evasions purposes in a very systematic way for years (which is of course illegal). They had listings of all the famous/rich French people, and used several different advisers by category (one for businessmen, another for actors, still another for sport celebs…). They also used james bond like devices (laptops with secret codes…) and processes (never stay at the same hotel twice, never take the same taxi twice…). So I guess, if there is some truth in that report, it is understandable that the French IRS is now reciprocating.

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  6. “The whole system deserves to be aborted with extreme prejudice. Tax cheats are true patriots. Starve the beast.”

    “The government and its agencies are the cheats and fraudsters. It’s every patriot’s duty to withold as much as possible, same as a loving person would withold heroin from a junky.”

    This is nonsense. The “government” is the civil service and the political appointees. The former are just doing their jon. The latter are elected by you to represent you. What would you prefer, Anarchy? Cool but who builds roads and runs the military? Perhaps Monarchy?

    Government is a bit like “God”. If he/she didnt exist we would have to invent it.

    When you withold taxes from the system. you are merely shifting the burden onto another citizen who cannot avoid taxes as efficiently as you. In the last few years, that has meant that people making between $60k and $2mn per year have been shouldering the tax burden of people making $10mn and above per year. What part of that do you think is good?

    Neither of you has an ounce of patriotism in you. You should be ashamed to say what you have said around Veteran’s Day. Others have made greater sacrifices for you than you can even conceive of, and all you worry about it is yourself and your taxes.

    If you dont like it you know where the border is. Or you can work to change things to make them better. Either is a more justifiable position that the ones you expressed.

  7. It just shows, we are going back to basics. At the end of the day, there is a line being asked everywhere “what are you going to do about it, call the military?” …. that can be applied to Bundesbank gold, Greece, Spain, etc, etc …. political elites are all post-war softies, no balls, no spine … nothing will be done about it, bend-over everyone!

  8. You trust the sanctity of “the law” too much.

    It is a creation of government, and it can and will be changed to suit that organization’s purposes. Sometimes I get the feeling that you really fervently wish life COULD go back to the 1980s – that the state would function enevolently, that markets would remain free, that investing could return to a safe and secure exercise in buying financial instruments, currencies and bonds, that savings and retirement actually were relaible concepts…but it’s all over.

    It’s dog-eat-dog from now on. Governments are desperate. Hide your assets.

  9. I believe your email has been hacked.
    http://www.tradingfloor.com/traders/juhani-huopainen

  10. French tax authorities spying on French citizens in neighbouring countries is nothing new: in the early / mi-80s French custom officers were crossing the border to Luxembourg to write down French car plates in streets were banks were located and nearby car parks, and then passed the infomation on the tax office.

    This +/- stopped from the late 80s; given the disastrous state of the French economy and dreadful finances (France will need to find at least EUR10 bn in addition to what is in the 2013 budget), teh socialist governement is desesperate to find to the last cent, besides the fact that it is very popular with French media to tarck down the “rich” instead of tracking fdown the roots of an uncompetitve economy plagued with a public sector representing 55% of the economy. For the past 30 years France has developped devolution to regions at the cost of 2 million local civil servants – a way to buy votes with useless services and cronyism which are a drag on the wealth creating private sector – leading back to the middle ages of feudalism.

    I wrote several time about France being the real weak link of the euro (worse than Italy on many indicators): 2013 will be dire and will end up in 2014 into the wall…