Of the many motivations ascribed to western governments, direct profit taking isn’t usually high on the list.
But with the massive federal bailouts around the world, government has become an investor.
Within hours of the announcement Wednesday that Swiss authorities had agreed to to release names of potential U.S. tax evaders hiding money at Switzerland’s biggest bank, UBS AG, Bern’s government sold its stake in UBS.
It turned a profit of $1.1 billion on a 10-month investment.
As the Financial Times wrote, “The deal had been expected after this week’s settlement of a long and bitter tax dispute between the bank and the US authorities, and leaves UBS free of government influence and focused fully on its own affairs.”
Money and politics have always been good buddies. But rarely has profiteering played such a direct, immediate role in government decision making.
Given officialdom’s new role in the global economy, there’s an argument to be made for greater international cooperation - if not supervision.
Swiss authorities were guided, in part, by a policy developed at the Organisation for Economic Co-operation and Development (OECD) - a group of 30 western countries, including Switzerland and the U.S.
Last March, Switzerland signed onto the policy, which essentially says, “You give me my tax cheats, and I’ll give you yours.”
The decision followed a threat by OECD to include Switzerland on a blacklist of tax havens.
“At a time when governments around the world need to maximize tax revenues in order to address the global economic crisis, this is an extremely important breakthrough,” OECD Secretary General Angel Gurria announced After the Swiss capitulation.
This week, two governments profited - Switzerland, from the UBS sale and avoidance of messy litigation, and the United States, through the possible recovery of millions of dollars in unpaid taxes.
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