Tax System Credibility vs. Banking System Reputation?: Tax Evasion from Sweden to Switzerland in the Early 1970s

In October 1972, Jacques Hentsch, a banker of a renowned Geneva private bank, was arrested at the airport in Gothenburg, Sweden, for holding over 400,000 kronor in cash in his luggage. The cash belonged to the bank's Swedish clients and was intended to be moved to Switzerland to avoid Swedish taxation. Undeclared export of capital was a crime under the currency act of the time, and the banker from Geneva ended up convicted to a four-month prison sentence. In this chapter, we investigate how tax evasion cases in the 1970s affected policy debates in Sweden and Switzerland. In Sweden, which had some of the highest tax rates at the time, these cases were seen as threats to the credibility of the tax system and were met with increased efforts to find and prosecute tax evaders. The intention was to maintain the tax system's integrity and its objective of economic redistribution. In Switzerland, cases such as Hentsch contributed to a domestic policy debate concerning the banking system's credibility. Governments of other countries too, not the least the US, were pressuring Switzerland to lift banking secrecy and to take a more collaborative approach to international legal assistance. Involving two countries with very different policies concerning tax evasion and public finance, the Hentsch case provides a unique opportunity to compare and contrast transnational tax policies. It thus offers valuable insights into the conflicting national styles of tax culture and resulting international tensions about tax evasion in the 1970s. In October 1972, Jacques Hentsch, a banker of a renowned Geneva private bank, was arrested at the airport in Gothenburg, Sweden, for holding over 400,000 kronor in cash in his luggage. The cash belonged to the bank's Swedish clients and was intended to be moved to Switzerland to avoid Swedish taxation. Undeclared export of capital was a crime under the currency act of the time, and the banker from Geneva ended up convicted to a four-month prison sentence. This chapter investigates how tax evasion cases in the 1970s affected policy debates in Sweden and Switzerland. It emphasises one dimension of tax evasion that is not always noticed in the existing literature, namely that tax evasion put a strain on different systems in the countries involved. The chapter outlines the development of tax systems, currency regulations and offshore banking after the Second World War with an emphasis on Sweden and Switzerland.