As Morgan Stanley so aptly put it in their legendary advertising slogan, “You must pay taxes. But there’s no law that says you gotta leave a tip.” History doesn’t tell us whether the bank was specifically referring to tax refund claims – it presumably wasn’t – but its slogan would certainly be apropos precisely with regard to them: According to statistics from Switzerland’s Federal Tax Administration, Swiss taxpayers overpay around CHF 6 billion each year due to double taxation alone.
That’s not surprising. The task isn’t trivial. Even Nobel laureate physicist Albert Einstein is alleged to have said that it takes a philosopher to understand an income tax form – it’s too difficult for a mathematician.
Thinking about Taxes Right from the Start
The quote from Einstein would also be good for advertising purposes. But in the midst of increasingly complex and ever-changing tax regulations, what’s needed today isn’t philosophers, but rather a company like SIX, which is capable of delivering high-quality comprehensive financial information and providing supplemental advanced services that enable banks to comply with current international tax regulations and create added value for their clients. The only downside is that Einstein can no longer take advantage of this.
But let’s take it step by step: “To really gain an awareness of the problematics, you have to picture taxes like an automobile’s gasoline consumption,” says Jacob Gertel, Senior Content Manager Legal & Compliance Data at SIX. “It’s something that is constantly incurred and translates into an expense at the end of the journey, but that often goes forgotten when choosing the route at the outset.” The first step toward changing that would be to continually keep “tax consumption” in mind and to depict it in the data “because that’s the only way to professionally approach choosing a route or making investment decisions,” Gertel explains.
Currentness Is Key
The Valordata Feed (VDF) from SIX supplies information on over 27 million financial instruments. SIX continually updates that information, including tax information. “Belgium, for example, introduced a change in transaction tax rates for domestic investors practically overnight,” Gertel recounts. “The king affixed his signature to the amendment on December 25, 2017, and the new rates entered into force on January 1, 2018. We were able to reproduce that in our data from day one.” This up-to-dateness is of paramount importance to the primarily Swiss and other European banks that subscribe to the VDF because they ultimately are co-responsible for ensuring that their clients properly pay taxes on trillions of francs and euros worth of investment assets.
The tax information in the VDF has to be very thorough in its detail, Gertel explains: “Buying a US stock is not the same from a tax standpoint as investing in a US equity fund. Also, every country taxes stock-exchange transactions, dividends and even assets, for instance, differently. Let’s take Belgium again. Stocks there are taxed as wealth, as they are in Switzerland, but they aren’t in the USA.” It almost goes without saying that the taxes levied on shares, a structured product, or a bond can vary considerably even within the same country.