The Center for Tax Competition researches the impact of strong tax competition and the preservation of financial privacy on individual freedom and property.

Banking confidentiality: a moral imperative

Banking confidentiality is moral because it is a consequence of a right to privacy that goes without saying in other fields.

Too often, Swiss banking confidentiality is defended by people who accept the ideological premises of its opponents. They acknowledge that tax avoidance is regrettable, but claim that it is better for that money to go to Switzerland than somewhere else. They claim that banking confidentiality is wrong, but Swiss banks need it, for instance to “preserve jobs”.

What is wrong, however, is not tax avoidance, but taxes that are confiscatory, arbitrary and more often than not financing spending that should not be done by the state. It is therefore legitimate to seek to protect one's income from taxation, be it by moving, by placing one's money where it is most protected, or by using the various possibilities of tax avoidance. Furthermore, tax avoidance also sets a limit to the states' taxing power, and often forces them to lower everyone's taxes.

Banking confidentiality is therefore certainly not immoral on the grounds that it makes tax avoidance easier. On the contrary, it is moral because it is a consequence of a right to privacy that goes without saying in other fields.

The attacks against banking confidentiality fall back on the myth of the “good citizen with nothing to hide”. This good citizen should have nothing to fear from the spread of surveillance cameras, the abolition of banking confidentiality, or the expansion of the state's power to control him, search him, read his mail, listen to his phone calls, etc.

However, we do not wander naked on the streets, we put curtains on our windows, we hold dear medical confidentiality and we do not publish our wages. That doesn't imply our “having something to hide”, or our being ashamed of our bodies, of what is going on in our homes, of our medical affections or our incomes. It simply means that we value the respect of our privacy and our right to decide for ourselves which information about ourselves we wish to share with whom — and therefore also avoid others using information about us to harm us.

Besides, there is another reality too often forgotten: states are not always right, and their laws are not always just. Most states around the world are not ruled by the rule of law, that they have laws that do not always respect human rights. Even states claiming to protect freedom do not always do it today, and might do it even less tomorrow. It is illustrative in this regard that a state like the U.S. went as low as to use outrageous threats against a Swiss bank.

Banking confidentiality was passed into Swiss law in 1934, at a time when savers living under dictatorships then spreading in Europe sought a possibility to protect their money while avoiding persecutions in their home-countries. Let's hope we are not there yet.

February 2009