Greece Is Not Alone: Swiss-Enabled Tax Evasion Plagues British Economy, Too

It’s no secret that Greece is in a lot of hot water for its endemic failure to prosecute tax evasion. But it’s not the only country that struggles to rein in its wilier investors – a very different country, the United Kingdom, is dealing with the exact same issue.

What the two countries share is a common enabler: Switzerland, whose banks have long been illicit havens for savvy savers.

Greece is in dire straits, and tax evasion is a potent symbol of the republic’s greatest failures. As violent protests against austerity continue to break out in Athens and elsewhere, the beleaguered government is struggling to maintain order. It’s hard to see a light at the end of the tunnel. The euro itself is endangered by Greece’s high-level corruption, unwieldy public sector and overwhelming debt burden. Hundreds of billions of euros in bailout money from the EU creditors are helping to contain the problem, but barely.

The United Kingdom, too, is struggling to keep afloat. Its problems don’t come near the scale of Greece’s, of course, but the Brits have already suffered a double-dip recession that now threatens to become a triple. Stock market growth is sluggish, and the service sector – which accounts for a whopping 75 percent of GDP – is suffering under austerity and waning consumer confidence.

In both countries, the lower and middle classes have it tough. British unemployment is at 7.8 percent; in Greece, it just hit a record 26 percent.

But the wealthy have found ways to keep their savings safe – that is, unless finance officials in both countries keep recent promises to lay down the law.

Switzerland is an offshore banker’s paradise. Legal loopholes and favorable interest rates have attracted investors for decades, often enabling tax evasion that has stripped other countries of much-needed income.

Greece is sorely in need of uncollected tax revenues amounting to more than US$75 billion, which, if paid, could cover up to a sixth of the national debt. This adds to a growing sense among middle-class and poor Greeks that the government has failed to address the criminal activity at the root of Greece’s recent decline.

The UK, meanwhile, suffers from missing revenues from the estimated $64 billion stashed away in Switzerland that should be – but hasn’t been – subject to taxation.

The problem is one of accountability. Often, those who stash their cash with the Swiss are high-level businesspeople and politicians who pull enough strings in the government to avoid prosecution.

That could change. Greece’s pervasive tax evasion became a matter of public discussion in November, when journalist Kostas Vaxevanis published a list of about 2,000 overseas bank account holders that the government had failed to investigate for years. The list implicated some serious power players, even reaching former Prime Minister George Papandreou. Unable to play down the scandal, financial officials were forced to bite the bullet; they now claim to be investigating Swiss account holders.

And in the UK, Chancellor of the Exchequer (Finance Minister) George Osborne is working out an agreement with Switzerland that would allow him to tax that $64 billion in offshore accounts, which could raise about $8 billion in revenue.

Given a pattern of injustice – wealthy tax dodgers have been crafty about dodging the authorities for decades – it’s a bit early to be optimistic about these plans. But with public outrage at an all-time high in the midst of a continent-wide financial crisis, perhaps there’s no better time than now for officials to get serious about Swiss accounts.