Swiss Hostesses open the World Economic Forum 2016. Valeriano Di Domenico/Flickr. Some rights reserved.“Committed to improving the state of the world” is one of the aims of the World Economic Forum, which holds its annual meeting in Davos, Switzerland this week. The world’s rich and powerful will be well represented in this sleepy alpine town, but what actual progress will be made towards the goal of improving the state of the world? 

One simple step that could be taken, perhaps in the time allocated for a networking coffee break, would be to change the shameful banking policies of the host country, Switzerland, which disproportionately hurt the world’s poorest countries.

Switzerland has long been a haven for those looking to hide money from the authorities. Billions of dollars from around the world end up in Swiss banks each year, far out of view for most tax authorities. Last year’s SwissLeaks scandal exposed the scale of the system, as details of more than 106,000 HSBC client accounts from 203 countries were leaked to the media.

Switzerland has long been a haven for those looking to hide money from the authorities.

The leaks caused outrage in many countries; in the UK, there was a parliamentary inquiry and weeks of media attention. But governments that were under pressure to respond to the scandal seemed to have a consistent response: this can’t happen again, because there’s a new tool to help the taxman keep up with those who try to hide their wealth abroad. 

Known as Automatic Exchange of Information (AEoI), the system will require banks to provide information on accounts held by foreigners. The data will then be shared with the tax authorities in the country where the account holder pays taxes. This powerful new exchange will mean that tax authorities in the UK, for example, will be able to spot UK taxpayers who have not declared their accounts in Switzerland, France, or anywhere else that has signed up to the system. With this data at hand, the HSBC scandal should be difficult to repeat.

Though that may hold true for rich countries like the UK, it’s a very different story for governments of developing countries.

The cost of offshore tax evasion isn’t the same for poor and rich countries, alike.

The cost of offshore tax evasion isn’t the same for poor and rich countries, alike; while the sums of money may be smaller, the relative impact these sums have on poor countries is far more significant. #SwissLeaks Reviewed, a joint project of Christian Aid and the Financial Transparency Coalition, showed that when taken as a share of GDP, the amount of cash held in HSBC by developing countries was higher than that of developed countries, often much higher. For example, as a percentage of GDP, the Democratic Republic of Congo had nearly five times as much connected to HSBC Switzerland as Switzerland’s next-door neighbour, Germany. 

The impact of this lost capital, and the potential taxes owed on it, is huge. Capital is desperately needed to invest in infrastructure and drive economic growth; tax revenues could be used to provide vital public services such as healthcare and education, or invest in job opportunities for marginalised populations. With tax to GDP ratios in developing countries around half of those in developed countries, they can’t afford to have offshore wealth go untaxed.

Given all of this, you may be thinking that developing countries are pleased that AEoI is on the horizon. The reality, however, is far more disheartening.

Inexcusably, developing countries are being excluded from this powerful new tool, and Switzerland has gone even further by making their intentions explicit. The Swiss government has made clear that they will only look to give information to countries with which there is a political and economic necessity to do so. In other words, the Swiss will likely lend a hand for tax enforcement to rich and powerful countries, but poorer and weaker ones will be left out of the mix. It’s a policy position that cannot be justified and needs to be challenged.