SWITZERLAND Law and Practice Contributed by: Joseph Merhai, Thomas Pasquier and Laurent Schenker, Aegis
ranges from one-third to three times the evaded tax, depending on the degree of fault. Attempted tax eva - sion is also punishable, usually at a reduced level. The competent authority depends on the tax involved. As a rule: • cantonal tax authorities are competent for cantonal and communal taxes and, in practice, also for the administration and sanctioning of direct federal tax within their sphere of competence; and • the FTA is competent for federal indirect taxes, in particular VAT, WHT and stamp duties. The same authority that conducts the back-tax pro - cedure is often also competent for the related tax- evasion procedure, which explains the close connec - tion between the recovery of unpaid taxes and the imposition of administrative penalties. 6.2 Criminal Penalties In Switzerland, tax evasion is generally not treated as an ordinary criminal offence in the strict sense, but rather as a tax misdemeanour of an administrative criminal nature, punishable primarily by a fine (see 6.1 Tax Penalties ). By contrast, tax fraud constitutes a criminal offence and may be prosecuted under the applicable tax legislation and, depending on the cir - cumstances, also under the Swiss Criminal Code. The sanctions may include imprisonment of up to three years and/or a fine. Where the circumstances are especially aggravat - ing, Swiss administrative criminal law provides for enhanced sanctions. A person who, acting profes - sionally or with the assistance of third parties, secures a particularly significant unlawful advantage or causes particularly significant prejudice to the pecuniary inter - ests or other rights of the public authorities through serious tax or customs offences may be punished by a jail sentence of up to five years or a fine. In addition, certain serious tax offences may have con - sequences beyond tax criminal law. Under Swiss anti- money laundering rules, a qualified tax offence may constitute a predicate offence to money laundering. This may notably be the case where tax fraud leads
to an evaded tax amount exceeding CHF300,000 per tax period. Accordingly, the key distinction under Swiss law is that ordinary tax evasion is generally sanctioned by fines, whereas tax fraud and other aggravated forms of conduct may lead to jail sentences. 6.3 Interaction Between Tax and Criminal Procedures Under Swiss law, tax offences such as tax fraud are not prosecuted by the tax administration itself. Where the competent tax authority considers that the rel - evant facts indicate a tax offence, the public prosecu - tor is competent. The public prosecutor then assumes responsibility for the criminal proceedings, which are conducted under the Swiss Code of Criminal Proce - dure. Once seized, the public prosecutor investigates the facts, may order coercive measures where neces - sary, and will then decide whether to discontinue the case, issue a penalty order or refer the matter to the competent criminal court for judgment. Co-ordination is ensured through this allocation of responsibilities. The tax authority remains competent for the administrative side, including the assessment of back taxes and, where applicable, proceedings relating to tax misdemeanours such as tax evasion. By contrast, the judicial authorities take over the crimi - nal side where the conduct qualifies as a tax offence. In the case of tax misdemeanours, however, the same cantonal or federal tax administration is usually com - petent both for the back-tax procedure and for the sanctioning procedure. This cumulation of functions may create procedural tension, as the taxpayer is subject to a duty to co-operate in the administrative back-tax procedure, while criminal law procedural guarantees (such as the privilege against self-incrimi - nation) apply in the “criminal” context. For this reason, it is often considered preferable that, where possi - ble, the criminal procedure be conducted first, before the administrative back-tax procedure is finalised. In practice, however, the two procedures are often con - ducted in parallel. Accordingly, the Swiss system does provide for a referral mechanism where tax authorities identify facts
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